A debate is boiling in South Memphis over whether the potential economic benefits of an artificial intelligence facility outweigh the pollution-related health impacts to residents. Many low-income communities elsewhere may soon find themselves grappling with the same question.
Residents of Boxtown, a predominantly Black community bordering the facility, are fighting to protect their health after Elon Musk’s company xAI rapidly built an artificial intelligence supercomputer facility in the neighborhood and powered it with unpermitted gas turbines.
Colossus, which xAI built in a record 122 days, contains over 230,000 NVIDIA graphics processing units (or GPUs, the chips needed for powering AI queries) and requires vast amounts of energy to operate. The Southern Environmental Law Center (SELC) flew thermal image drones over the facility and found that xAI had 35 unpermitted methane gas turbines onsite – enough energy to power 280,000 homes – without proper pollution controls.
Methane gas turbines release chemicals like formaldehyde and smog-forming pollution, which can cause asthma, heart disease and cancer. Since xAI started operating in July 2024, it has become one of the largest emitters of smog-producing nitrogen oxides in the area, which have increased rates of asthma and respiratory illness in Memphis and Shelby County writ large.
“We were really hoping we could convince the health department that what was happening was wrong [given] they’re the frontline regulators,” said Patrick Anderson, senior attorney for SELC. “It got to a point where there were more and more turbines (peaking at 35) and we decided we had to do something.”
In June, SELC sent a formal notice to xAI on behalf of the NAACP with its intent to sue over the use of unpermitted gas turbines at Colossus. That month the Shelby County Health Department released a report finding no environmental concerns around the facility’s pollution levels, and then granted Clean Air Act permits for xAI to operate 15 temporary turbines – a decision SELC has moved to appeal.
A history of environmental injustice
Founded by formerly enslaved people after the passage of the Emancipation Proclamation in 1863, Boxtown was later annexed from the City of Memphis in the 1960s as part of an “urban renewal” program. Since then, the community has become home to a number of industrial plants.
“In this area, you’ve got a coal oil refinery, you’ve got a couple of chemical plants, you’ve got large-scale food processing plants, which have a lot of particulate matter coming out of them in their processes,” said Scott Banbury, conservation director for the Sierra Club’s Tennessee chapter. “All that added together makes for a lot of pollution.”
As a result, Shelby County currently has an “F” rating for air quality from the American Lung Association and is often cited as an “asthma capital” of the nation, with more children hospitalized for asthma-related issues than anywhere else in the state. The county is also on track to exceed national smog limits this year.
What about the economic benefits?
Despite strong opposition from local residents, xAI has the support of Memphis Mayor Paul Young and the Memphis Chamber of Commerce, with benefits such as economic investment, tax revenue and up to 500 high-paying jobs that the facility claims to bring to the area being cited as the key reasons. xAI has also committed to making improvements to local schools and cleaning up trash in neighborhoods.
Last month, xAI representatives told local reporters that “an average of 1,600 people have worked on the Colossus campus” over the past eighteen months. Half of xAI employees and contractors were hired from the Memphis area.
The biggest potential economic benefit is through Memphis’ Community Benefit Ordinance, which sets aside 25% of xAI’s city property tax – up to $100 million – for direct investment into communities located within five miles of the data center.
For context, xAI projects it will make $1 billion in gross revenue by the end of this year. That number is projected to rise to $14 billion by 2029. While its only operating data center is Colossus in South Memphis, xAI is slated to open a second facility in the coming weeks.
“We’re being told that billions of dollars of investment is coming, but that’s not true,” said State Representative Justin Pearson, who represents South Memphis in the Tennessee legislature and lives in the area. “The company and its technology may be worth billions of dollars, but there aren’t billions of dollars of investments coming into these cities and into these towns, particularly across the South.”
The City of Memphis estimates it will receive $13 million in tax revenue from xAI during its first year, with $3 million of that revenue allocated to zip codes within the five-mile radius. But Boxtown community members who are hardest hit by the facility’s pollution are concerned that the money will go to other neighborhoods.
Residents also feel like they are being asked to sacrifice their health for economic benefits that they likely won’t see – especially when considering the additional financial burden of increased doctor’s visits, hospitalizations and missed days of work.
“The amount of tax money is not worth our lives,” said Rep. Pearson. “You could increase taxes by a penny and get significantly more than what xAI is bringing to our city, [which is] less than nearly a one percent increase to the city budget.”
Instead, community and environmental groups are calling for regulators to do more to protect their health. Local environmental justice organization Memphis Community Against Pollution has raised $250,000 for an independent environmental impact study to further support this work.
“We’re seeing a failure of the people and institutions that are supposed to protect and defend the communities,” Rep. Pearson said. “We’re seeing exploitation of an already vulnerable community by really ultra-powerful, ultra-wealthy interests.”
On the frontlines of a nationwide battle
What’s happening in Memphis isn’t unique. Over the next two years, communities across the nation will see AI facilities spring up. Google is planning to build an AI data center in Pennsylvania. Meta has one planned for Louisiana. Apple is building one in Texas. These companies also have the full support of the White House, which is promoting the rapid buildout of data centers as part of its AI Action Plan.
Many states are providing tax and regulatory incentives for AI companies to build facilities. Arizona is considering letting companies power facilities with small, on-site nuclear reactors, with the governor vetoing a bill that would eliminate permit requirements for reactors.
As more public officials court AI companies with the aim of bringing data centers to their states and districts, Rep. Pearson advised public officials to educate themselves on data center energy sources and local permitting processes so they can keep constituents informed.
“I really think we are in a moral crisis where our nation must decide who and what we are willing to sacrifice for technocrats and billionaires to build technology across America,” Rep. Pearson said.
Kaitlyn Ridel is a Contributing Writer with NCRC’s Communications team.
Photo credit: Pixabay via Pexels.
