Will New York State Kill Data Centers, Making the Same Mistake It Did With Fracking

Are the same political interests that followed Gov. Andrew Cuomo’s lead more than a decade ago and banned hydraulic fracturing across New York State now doing their best to effectively kill a promising industry with the potential to bring investment, construction, tax revenue, and economic activity to struggling Upstate communities?

We’re talking about data centers, which Gov. Kathy Hochul has paused in other communities like Buffalo, are falling in line with, I dare say, a left-leaning political agenda led by DSA types that could seriously follow a similar path to the ban on fracking, which would be another crippling blow to many communities across the state, especially Niagara Falls.

Multi-billionaire Terry Pegula (Bills, Sabres) made a fortune via investments in fracking upon discovery of deep layers of natural gas in the Marcellus Formation in Pennsylvania and the application of the hydraulic fracturing recovery process. It didn’t happen in New York because of the fracturing ban that is still in place.  In a limbo state, if you will.

Let’s put our case on the table.  Artificial intelligence and the data centers that power it are not passing trends.  They are becoming essential infrastructure for finance, medicine, research, communications, and nearly every modern industry. And New York State is in a temporary pause mode, like hydraulic fracturing before it.

Economically, the state should not allow the same pattern to prevent responsible data center development.

For years, communities across New York State’s Southern Tier watched neighboring Pennsylvania develop its natural gas resources.  Pennsylvania gained investment, jobs, landowner income, and government revenue while New York floundered and kept its resources underground.

Fracking presented legitimate environmental concerns, and reasonable safeguards were necessary.  But New York never created a practical regulatory path for responsible development.  A temporary pause ultimately became a permanent prohibition.

Fracking alone did not cause Upstate New York’s economic problems or population losses.  However, rejecting an entire industry eliminated one possible source of jobs and private investment when many communities desperately needed both.

As employment opportunities disappeared, families followed them.  Young people graduated from New York schools and colleges, only to build their careers in Pennsylvania, North Carolina, Texas, Florida, and other growing states.  Many Upstate communities were left with declining populations, abandoned properties and shrinking tax bases.

New York is now in danger of making a similar mistake with data centers, even though AI and the computing power behind it are clearly here to stay.  Gov. Hochul has imposed a statewide moratorium affecting new data centers capable of consuming 50 megawatts or more while the state conducts a Generic Environmental Impact Statement.  The Public Service Commission has begun defining the scope of that review, including energy demand, water consumption, air quality, noise, and community impacts.

Those issues deserve serious examination.  Residential ratepayers should not be forced to finance utility improvements built exclusively for massive private companies.  Communities should know how much water and electricity a project will consume.  Developers should demonstrate financial capacity and protect taxpayers against abandoned or speculative projects.

But let’s put it this way. Responsible regulation is different than closing the door entirely.

The moratorium has been described as lasting approximately one year, but the executive order does not contain a firm expiration date.  The permit pause remains in effect until the environmental review and associated findings are completed.  If that process is delayed, projects could remain trapped in uncertainty well beyond a year.

Data center developers will not wait indefinitely.  Unlike natural gas, which cannot be moved from one state to another, AI infrastructure and data center projects can be relocated.  Many states, Pennsylvania, Ohio, and Virginia, to name a few, and other states are actively competing for these investments.

Amazon has announced plans to invest at least $20 billion in Pennsylvania data center campuses.  Meanwhile, New York is telling developers to wait while it writes new rules, considers special electricity charges, discusses eliminating tax exemptions, and encourages host communities to seek investments of at least $1 million for every megawatt of power consumed.

The recommended contribution would equal $50 million for a 50-megawatt project.  For a large campus eventually requiring 250 to 300 megawatts, the benchmark could reach $250 million to $300 million.

Although the framework is currently voluntary, it creates a negotiating expectation that could be added to grid-upgrade costs, property taxes, PILOT payments, environmental remediation, power-generation requirements, and other community benefits.  If New York State makes projects economically impossible, developers will simply build somewhere else.

Niagara Falls demonstrates why a one-size-fits-all moratorium is a mistake.

The city has industrial property, brownfield land, significant electrical infrastructure, a skilled union workforce, and a history connected to hydroelectric power.  It also has neighborhoods that have experienced population loss, disinvestment, and the decline of traditional industry.  Niagara Falls could help connect Upstate energy resources with the growing computing needs of New York’s statewide economy,

A responsibly designed digital campus could return underused property to productive use, create years of construction employment, generate tax revenue, support organized labor and attract related technology and infrastructure investment.  It could also help New York keep more of the infrastructure supporting AI, finance and advanced computing within the state.

Data centers may not produce as many permanent jobs as traditional manufacturing plants, but permanent employment is only one measure of economic value.  These projects require enormous construction expenditures, electrical equipment, engineering, security, maintenance, telecommunications, and specialized contractors.  They can expand the tax base and finance improvements to roads, utilities, and infrastructure, producing many jobs of support.

New York can and should establish strong guardrails without pretending that every project creates the same environmental or economic risks.  AI and data centers are here to stay.  The real question is whether New York will shape their growth responsibly or watch that growth occur elsewhere.

Projects redeveloping urban brownfields should receive expedited consideration.  Facilities using closed-loop cooling should not be treated like projects consuming enormous quantities of freshwater.  Developers willing to finance their own grid upgrades should not be delayed because of concerns about shifting costs to residential customers.

Projects with advanced interconnection studies, community support, labor agreements, and demonstrated financial backing should receive transitional protections instead of being sent back to the beginning of the regulatory process.

The state should also establish a firm deadline for completing its environmental review.  Without a definite expiration date, a temporary moratorium can quietly become a permanent barrier--the same pattern New York experienced with fracking.

New York is not literally closed for business.  The state continues to support major semiconductor research and advanced-manufacturing investments.  New York City is home to Wall Street and major finance, media, advertising, and technology companies that will increasingly depend on AI and advanced computing.  The state should not allow the infrastructure supporting those industries to be built almost entirely somewhere else.

The choice does not have to be between unlimited development and no development.  New York can protect water, maintain electric reliability, defend ratepayers and require meaningful community benefits while approving responsible projects.  Sensible guardrails should make development better, not make development impossible.

What New York cannot afford is another decade of watching investment cross the state line while Upstate communities continue losing business, families, and young people and New York City’s most important industries become increasingly dependent on digital infrastructure located elsewhere.

The lesson from fracking is not that environmental concerns should be ignored.  The lesson is that endless uncertainty is itself an economic decision.

AI and data centers are here to stay.  New York must regulate them responsibly, but it must provide responsible projects with a clear path forward. If Albany fails to do that, New York City and communities across the state may once again be left watching neighboring states build the future that could have been built here.