Musk’s xAI faces tougher road expanding Memphis area after EPA update

The Environmental Protection Agency this week closed a loophole that Elon Musk’s xAI used to quickly stand up its first data center in Memphis, Tennessee.

Musk’s AI initiative has created a type of off-grid power plant for the Colossus plant, using a cluster of gas-burning turbines. By classifying the turbines mounted on trailers as “off-road engines”, the company has managed to prevent air pollution as much as possible.

EPAs updated The rule explains that such turbines cannot be defined as non-highway engines and that companies must obtain Clean Air Act permits before installing them, especially if their total emissions would rise above “major source thresholds” of pollution.

The Shelby County Health Department in Memphis had previously allowed xAI to designate its turbines as non-highway engines and begin using them without any public comment and environmental impact review as required in a standard permitting process.

Representatives from the county’s health department and xAI did not respond to requests for comment.

The federal regulator’s move could slow xAI’s expansion in the Memphis area as xAI is building facilities. Nvidia’s Graphics processing units and graphics processing units to develop AI models and services in the emerging generative AI market currently led by OpenAI Google.

At its Memphis data center, which first opened in 2024, xAI runs inference and training for Grok models and applications, including a chatbot and image generator tightly integrated into the company’s social network, X.

Although xAI had previously told Memphis regulators that its turbines would feature state-of-the-art pollution controls known as selective catalytic reduction technology, its supplier Solaris Energy Infrastructure He told CNBC in June that xAI had not installed such controls on its “temporary” turbines.

SEI, a Houston-based energy services provider, has seen its stock price rise in recent months, due in part to xAI’s expansion plans. SEI did not respond to a request for comment.

Pollution from turbines has been a major source of local strife.

Last year, residents of the majority-Black community of Boxtown in South Memphis testified at public hearings about a rotten egg-like odor in the air and the impact of worsening smog on their heart and lung health.

Research by scientists at the University of Tennessee in Knoxville also found xAI’s use of turbines contributes to air pollution problems around Memphis, he said.

Environmental advocates, including the NAACP, said they would sue to stop xAI from using the turbines without permission. But they did not complain after the county agreed and allowed xAI to treat the turbines as temporary, off-highway engines.

Southern Environmental Law Center attorney Amanda Garcia, who represents the NAACP, said in an email that her firm will monitor xAI operations to ensure they do not violate permit conditions and that they operate within the limits of existing EPA rules at facilities in nearby Mississippi.

XAI recently raised $20 billion from investors including Nvidia. CiscoGrok and X apps are currently being investigated in multiple jurisdictions after allowing users to easily create and distribute deepfake violent and sexualized images of women and even children.

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