Federal regulators say Elon Musk’s flagship artificial intelligence complex in the Memphis area did more than crunch data. According to a recent ruling, the xAI “Colossus” facility used methane gas turbines in a way that effectively turned the site into an unpermitted power plant, generating extra electricity in violation of clean air rules. The finding caps a year of mounting pressure from South Memphis residents who argue the project exported profits while importing pollution into neighborhoods that were already struggling.
At the center of the fight is a simple question with far reaching implications for the AI boom: when a data center quietly starts making its own power, at what point does it become a utility, with all the environmental obligations that status carries. The Environmental Protection Agency’s answer, delivered after a close look at Colossus, is now reshaping how Musk’s xAI and other tech giants will be allowed to fuel their next wave of supercomputers.
The EPA’s ruling and the “secret power plant” problem
Regulators have concluded that xAI’s Colossus complex relied on dozens of methane gas turbines that were supposed to be temporary generators but in practice ran long enough, and hard enough, to require full permits. The Environmental Protection Agency found that the Colossus data center illegally used gas turbines without the necessary approvals, determining that the operation crossed the line from backup generation into sustained power production that should have been regulated as a major source of pollution, according to an EPA summary. That finding aligns with a broader federal determination that Elon Musk’s artificial intelligence company operated dozens of methane gas turbines illegally at its Memphis data centre, a facility that sits near communities already burdened by asthma, respiratory diseases and cancer, as detailed in a separate federal ruling.
The EPA’s move did not come out of nowhere. For months, local advocates and national civil rights groups had warned that xAI’s turbines were not just keeping the lights on for servers but effectively generating extra electricity in a way that sidestepped the safeguards that apply to conventional power plants. A detailed investigation described how Elon Musk’s xAI datacenter in Memphis was found to be generating extra electricity illegally, a decision framed as a “Win for Memphis” activists who had long argued that the Colossus facilities were adding pollution to already overburdened communities, according to reporting by Dara Kerr. Another account of the same ruling emphasized that Elon Musk’s xAI datacenter was generating extra electricity illegally and that regulators concluded the turbines had been operating for more than 364 days, a duration that undercuts any claim they were merely short term or portable units, as described in a companion regulatory account.
How a loophole let Colossus run like a power plant
The controversy around Colossus hinges on a once obscure carve out in federal air rules that treated certain gas turbines as “temporary” equipment, even when they were deployed at industrial scale. xAI leaned on that interpretation to install natural gas burning turbines that could feed its Memphis data center without going through the more stringent permitting process that applies to permanent generators. A detailed breakdown of the project explains that Elon Musk’s xAI used natural gas burning turbines to build out its Memphis operations, but that an updated rule now means the company will not be able to rely on the same approach for future data centers because the Environmental Protection Agency has clarified that such units count toward “major source thresholds” of pollution, as described in a recent analysis. The agency has now formally updated its turbine regulations, stating that temporary gas turbines must obtain permits, a shift that closes the loophole xAI used and that was outlined in an EPA request for comment…