Due diligence: Questions surround Musk’s XAI plans

Environmental advocates are raising questions about Elon Musk's fast track plans to locate a supercomputer in Memphis. (Photo by Apu Gomes/Getty Images)

(This story was originally published by The Institute for Public Service Reporting Memphis.)

Is Memphis moving too fast in its negotiations with Elon Musk?

The question troubles environmentalists like Sarah Houston as Musk fast-tracks plans to open an energy-intensive xAI supercomputer here later this summer.

“Data centers like this come with a lot of questions,’’ said Houston, executive director of the nonprofit group Protect Our Aquifer. Houston and others are concerned about xAI’s impact on Memphis’ resources.

The artificial intelligence plant already under development in southwest Memphis will require enough electricity to power 100,000 homes and consume up to 1.5 million gallons of water a day to cool equipment.

Negotiations between Musk, the Greater Memphis Chamber, and city-owned Memphis Light, Gas & Water have moved swiftly and behind closed doors since the tech billionaire and his team first approached local officials in March.

Supporters view xAI as a catalyst for Memphis to become a technology hub that could infuse hundreds of new jobs and millions of investment dollars into the local economy. That includes the potential for other Musk-owned businesses to set up shop here.

But a litany of questions has unfolded about xAI’s energy use and environmental impact since negotiations became public last month. In response, Musk’s swiftly evolving plans have incorporated measures to allay those concerns.

Among them is a plan to build a 150-megawatt substation to reduce the chance of any future power brownouts or blackouts. Talks also are underway to build a gray water facility that would use treated wastewater rather than precious drinking water to cool xAI’s equipment.

Still, critics say the discussions spearheaded by the chamber and MLGW are proceeding with too little public input.

“This is a terrible idea for Memphis. MLGW’s CEO is not elected, and neither is anybody in the Chamber of Commerce last time I checked,” said state Rep. Justin J. Pearson, D-Memphis, whose district includes the industrial swath of land where xAI is located. “It’d be really wonderful if people who are unelected did start to talk to people who are elected to represent the communities that they’re seeking to do business in, because they would have heard from our community that we don’t want this.”

Environmentalists urge caution. They point to Texas, where two Musk-founded companies received wide criticism in 2022 for proposing to dump treated wastewater into Texas’ Colorado River.

“It’s just like, they need to be forced to do the right thing,’’ said Chap Ambrose, a Texas computer programmer and environmental activist who lives next door to two Musk-owned companies, SpaceX and Boring.

Knoxville-based activist Stephen Smith, who is no fan of Musk, says he sees a huge opportunity for Memphis if it takes the time to carefully structure this deal. That includes holding Musk, best known for development of Tesla electric vehicles and rocket manufacturer SpaceX, accountable to the public.

“The negatives could very well turn into positives,’’ said Smith, executive director of the Southern Alliance for Clean Energy.

Water concerns

The announcement of xAi immediately triggered concerns about Memphis’ drinking water — sourced directly from the Memphis Sand Aquifer, which contains some 57 trillion gallons of millennia old, pristine water, a point of civic pride and the envy of many other cities.

There’s little chance of depleting that.

Even if xAI requires 1.5 million gallons of water a day — MLGW’s highest estimate —that would add only 1% to the city’s total daily draw on the aquifer.

“I’m not concerned with the quantity, I’m concerned with the quality,’’ said Daniel Larson, director of the University of Memphis’ Center for Applied Earth Science and Engineering Research or CAESER.

Larson and others say a more realistic concern is that xAI’s demand for water could accelerate contamination of the Memphis Sand Aquifer.

The proposed xAI center would draw water from the Davis Wellfield in southwest Memphis, an industrial area that includes TVA’s Allen power plant and the city’s wastewater treatment plant.

CAESER studies have found large quantities of arsenic in the shallow aquifer above the Davis Wellfield. Studies also have identified cracks or breaches in the thick layer of clay separating the shallow and larger Memphis Sand aquifers.

“With an increased demand of one million or 1.3 million gallons of draw down, the question becomes what happens to the known contaminates just above our drinking water, like arsenic?’’ said Protect Our Aquifer’s Houston.

The greater risk of contamination could be alleviated by development of a gray water system that would use treated wastewater, rather than water from the aquifer, to cool xAI’s equipment.

MLGW is developing plans to build a gray water treatment facility to serve xAI and other industrial customers. Musk and his team are considering building their own gray water system, possibly by January, according to the Daily Memphian.

Amanda Garcia, a lead attorney with the Southern Environmental Law Center, remains skeptical. “I’m concerned about a lack of commitment on the part of xAI in their use of reclaimed water,” she said. “We’ve seen other industrial users come in and say, ‘Oh, we’re going to use reclaimed water,’ and then back out of that commitment.”

Deficient community outreach

Garcia’s concerns highlight a disconnect between xAI and the larger Memphis public. Companies that move to Memphis often forgo direct communication with neighborhoods surrounding their operations, and xAI is no exception.

To date, representatives with xAI have not held any townhall-style meetings with their neighboring communities. Media also cannot reach xAI directly. The company told the Memphis Chamber of Commerce that reporters can post their questions on X.

No representative responded to the Institute for Public Service’s questions posted on the public social media platform.

The lack of direct access means Memphians must learn about xAI through MLGW updates or an anonymous source that works exclusively with The Daily Memphian, which posts many of their xAI updates behind a paywall.

Houston said it would be up to organizations like Protect Our Aquifer to sustain pressure on xAI and Memphis officials to “keep the community informed and engaged on how we can truly ensure that this company follows through on a lot of really great things they said in the media. Because that’s not the track record the ownership (of XAI) has shown in the past.”

State representative Pearson says Musk can’t be trusted. He’s equally skeptical of local decision-makers securing the xAI deal, saying they haven’t given residents of Southwest Memphis — an area already disproportionately burdened by industrial pollutants — much thought.

“Our resources are continuously extracted for the benefit of companies. And our community is not feeling any of those benefits,” Pearson said.

Checkered record

Critics’ concerns include the checkered environmental history of Musk companies in other parts of the country.

Business Insider reported earlier this year that Tesla’s “gigafactory” in Austin took advantage of a new Texas law that allowed the company to exempt itself from the city’s environmental regulations. While Musk promised an “ecological paradise” when Tesla first moved to town, the company appears to be free to skirt regulations meant to ensure one.

Two other Musk-founded companies received an outpouring of criticism last year for attempting to dump treated wastewater into Texas’ Colorado River, which flows southeast through the state, into the Gulf of Mexico, and is separate from the Colorado River that drains the southwestern United States.

When Chap Ambrose, a computer programmer, watched The Boring Company slowly come to life in the cow pasture across the way from his house in the rural countryside east of Austin, he was initially excited.

He was a fan of Musk. He signed up for the yet-to-be released Cyber Truck and subscribed to the Musk-founded Starlink internet service. That was in 2021.

Today, Ambrose serves as an informal watchdog over The Boring Company. The company specializes in building underground tunnel infrastructure meant to alleviate surface-level traffic, among other functions.

Ambrose and some of his neighbors took issue with The Boring Company and another nearby, Musk-founded company, Space Exploration Technologies Corp., attempting to dump treated wastewater in the Texas Colorado River.

The Boring Company had applied for a permit to treat wastewater and release it onto its land or into the river, the Washington Post reported. The firm planned to build its own wastewater treatment plant without connecting to a treatment system run by the nearby city of Bastrop, The Post reported. Under public pressure it reportedly later dropped the plan and agreed to connect to the city system.

Monitoring the two companies is tedious, Ambrose said. “(It) continues to be an exercise of documenting and learning how these things work and how the regulations are split up across half a dozen different agencies. [You learn] who you have to talk to, where and what they care about, and what other people care about,” he said.

Following a series of complaints, the company received its first fine earlier this year from the Texas Commission on Environmental Quality, just under $12,000 for ineffective erosion control at construction sites and illegal dumping of storm water.

Ambrose’s advice for Memphians concerned about xAI’s potential impacts in Southwest Memphis is simple.

“Learn what will be cheap and easy for xAI, and what regulations stand in the way,” said Ambrose. “That will give you a start.”

Megapacks

Doug McGowen, president and CEO of MLGW, told members of the Memphis City Council on July 9 that xAI plans to build a 150 megawatt substation.

McGowen’s update included another way that xAI would impact Memphis’ occasionally strained power grid: Megapacks — a proprietary development by Tesla. Megapacks are shipping contained-sized battery packs.

The Southern Alliance for Clean Energy’s Smith said the use of Megapacks would ease concerns about the need for brownouts.

“With the battery packs, they have developed this software that seamlessly integrates into the electric grid. You can charge those battery packs up at night or off-peak times, and then you can deploy them over an extended period of time during peak,” Smith said.

Megapacks  could significantly reduce the strain on MLGW’s  system during times of peak demand. And, from Smith’s view, a commitment from xAI to enhance the power grid’s capabilities could ultimately help MLGW break up with the Tennessee Valley Authority, which would be the biggest benefit possible with xAI, he said.

For myriad reasons, Smith has long advocated for MLGW to leave TVA. TVA produces the electricity that MLGW buys and distributes. Smith says  TVA is the biggest obstacle to investing in renewable sources of energy in the southeast region.

“xAI has the potential to breakthrough a lot of antiquated thinking,’’ Smith said.

“If the mayor, if Doug McGowen, if City Council say, ‘Welcome to our community. Yes, we want you to figure out a way for it to work for both on the water and the energy side and be a sustainable leader. But we also want to partner with you to think bigger about what is possible in Memphis.’”

On July 22, Musk posted on X the xAI supercomputer powered up, and training with supporting employees had begun.

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