Updated EPA Rules Put XAI's 'Colossus' AI Data Center In Legal Limbo

Elon Musk’s AI xAI may have acted illegally when using methane gas turbines to generate power at its sprawling data center in Memphis, Tennessee, following a recent rule change by the Environmental Protection Agency (EPA).

The startup, which created X’s chatbot Grok, began work on its Colossus 1 data center in the summer of 2024 at a reported cost of roughly $4 billion. The facility, which has been earmarked to one day house over a million GPUs, has drawn criticism from local residents and environmental campaigners over air pollution.

Now, the EPA has moved to close a potential loophole in its regulations governing methane gas turbines. Under the updated guidance, operating such turbines requires air permits even when they are used on a portable or temporary basis. According to The Guardian, xAI has been using a regulatory loophole that allowed methane turbines to operate without permits as long as they were not stationed in the same location for more than 365 consecutive days. At one point, the data center was reportedly using 35 methane turbines.

Pollutants emitted by these types of turbines, such as nitrogen oxides (NOx), benzene, and formaldehyde, have been linked to negative health outcomes and are associated with respiratory conditions like asthma, cardiovascular disease, neurological disorders such as dementia, and a higher risk of cancer.

xAI did eventually receive permits for 15 turbines to operate at the Colossus 1 site and is now operating 12.

It remains unclear whether, or how, the federal government will penalize companies that failed to obtain the proper permits for methane turbines prior to the updated guidance. However, the EPA’s clarification brings such operations firmly under federal law, according to The Guardian. xAI has not yet publicly commented on the reports.

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While federal enforcement remains uncertain, other parties appear ready to pursue legal action. Environmental nonprofit the Southern Environmental Law Center has indicated it may take the AI firm to court. Amanda Garcia, a senior attorney at the organization, told The Guardian that the EPA’s ruling “makes it clear that companies are not—and have never been—allowed to build and operate methane gas turbines without a permit and that there is no loophole that would allow corporations to set up unpermitted power plants.”

Concerns over facilities like xAI’s aren’t limited to pollution The rapid expansion of AI data centers, driven by companies such as OpenAI and Meta, has also been accused of driving up electricity prices due to their immense power consumption, although some research has challenged that claim.