Musk’s xAI Accused of Polluting Without Permits While Chasing Billions

xAI, the AI startup founded by Elon Musk, is facing a potential lawsuit over alleged violations of the Clean Air Act at its Colossus data center near Memphis, Tennessee.

The Southern Environmental Law Center (SELC), on behalf of the NAACP, has issued a formal notice of intent to sue, claiming xAI installed and operated at least 35 natural gas turbines without obtaining necessary air permits.

According to SELC, the turbines—capable of generating 421 megawatts—could emit more than 2,000 tons of nitrogen oxides (NOx) annually, contributing to Memphis’s already poor air quality.

“XAI’s decision to install and operate dozens of polluting gas turbines without any permits or public oversight is a clear violation of the Clean Air Act. Over the last year, these turbines have pumped out pollution that threatens the health of Memphis families. This notice paves the way for a lawsuit that can hold xAI accountable for its unlawful refusal to get permits for its gas turbines,” SELC Senior Attorney Patrick Anderson said.

Thermal images taken in April confirmed that at least 33 turbines were active. While the Greater Memphis Chamber claimed the turbines were temporary and being removed, recent aerial surveys in June showed 26 turbines still in place, including three new ones.

SELC says the Memphis metro area is already grappling with worsening ozone pollution, commonly known as smog. Air monitoring data from the past four years confirms that the region is consistently violating national smog standards, with no signs of improvement. In 2024, the American Lung Association once again gave Shelby Count a failing grade—an “F”—for its high ozone pollution levels.

xAI is reportedly finalising a $4.3 billion equity funding round and plans to raise an additional $6.4 billion over the next year.

The aggressive fundraising comes as the company faces mounting operational costs, particularly in building out its AI infrastructure.

Morgan Stanley is said to be helping xAI secure $5 billion in debt to support the development of its data centers.

While some competitors are turning to project-based financing, xAI is pursuing a combination of equity and debt to fund expansion.

Despite raising $14 billion since its launch in 2023, sources told Bloomberg that only $4 billion remained at the start of this year’s first quarter—and most of that is expected to be spent by the end of Q2.

However, a potential $650 million supplier rebate could help offset some costs.

According to figures shared by Morgan Stanley, the startup recently said it is projecting more than $13 billion in annual earnings by 2029.