In a ruling that strengthens federal oversight of industrial emissions, the U.S. Environmental Protection Agency has effectively closed a regulatory loophole that allowed xAI to power its massive “Colossus” data center in Memphis with gas turbines without federal air quality permits.
The decision centers on the company’s use of large methane-fueled turbines to supply power to its computational hubs, which support its expanding suite of artificial intelligence products. xAI had classified these units as “non-road engines,” a category typically reserved for temporary or movable generators. This classification was the legal basis for operating the turbines under a local rule permitting generators to run for up to 364 days without a federal permit.
Last year, the Southern Environmental Law Center challenged this setup, arguing that xAI’s permanent installation of turbines, eventually totaling 35 units, required proper Clean Air Act permits. The EPA’s updated performance rule now confirms that temporary installation does not exempt such equipment from federal regulations, discrediting the distinction xAI relied upon.
Even after xAI started getting local permits for more turbines, the new federal guidance effectively takes control away from local authorities and hands it to the EPA. The change cuts into a common industry workaround rolling in gas turbines to get around grid bottlenecks and keep power-hungry data centers running. It works, but at the cost of high carbon dioxide and nitrogen oxide emissions.
It’s still not clear what this means right now for the Colossus facility, often cited as one of the biggest privately funded data projects in the area. xAI hasn’t said whether it’s scaling back operations or switching to other power sources, and media requests are met with an automated reply: “Legacy Media Lies.”
Less than a year after Elon Musk, as head of DOGE, pushed to pare back EPA contracts with public backing from Administrator Lee Zeldin, the regulatory shift occurred. The agency’s latest ruling signals that federal oversight is back in force, particularly for high-profile tech infrastructure with heavy emissions footprints.
It’s still an open question whether this case points to a broader reset in how AI data centers are powered. But regulators are sending a signal that racing to build the next wave of AI doesn’t mean environmental rules can be ignored.
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