SpaceXAI is facing a fine of up to $6.1 million after starting work on its data centers in Mississippi without the correct permits.

Elon Musk’s company revealed that it has been issued with a notice by the Mississippi Department of Environmental Quality (MDEQ) which alleges that “disturbing construction activities at sites occurred prior to coverage under Mississippi’s Large Construction Stormwater General Permit.”

It said: “MDEQ is seeking civil penalties of up to $25,000 per day, with preliminary claimed exposure of approximately $6.1 million across three sites.”

The notice, detailed in an SEC filing yesterday, was issued to MZX Tech LLC, a SpaceXAI subsidiary.

The company said it is “cooperating with MDEQ violated federal ​law and state regulations by constructing and operating a gas-fired power plant in Southaven, ⁠Mississippi, without required permits and is in discussions to resolve the matters through a single agreed order.”

The three sites referenced are data centers that form part of a cluster built by SpaceXAI, now styled as SpaceXSI, in the vicinity of Memphis, Tennessee, though they sit over the state boundary in Mississippi. Two of the data centers, Macrohard and Macroharder, are up and running, while the third Minihard, remains under construction. The company’s fourth Memphis site is in the city itself.

SpaceXAI set for legal showdown over court turbines

SpaceXAI’s data centers have rarely been far from controversy since the company started its build-out in Memphis in 2024.

This week, a judge rejected an attempt by the Department of Justice (DOJ) to block a lawsuit that has been launched against the company by the National Association for the Advancement of Colored People (NAACP), which alleges that xAI violated federal ​law and state regulations by building and operating a gas-fired power plant in Southaven, ⁠Mississippi, without first obtaining the required permits.

The US government’s Environmental Protection Agency (EPA) had attempted to shut the case down in its role as enforcer of the Clean Air Act, the legislation SpaceXAI has allegedly violated. However, US District Judge Debra Brown said this did not give it authority to unilaterally dismiss a case.

"The EPA’s role as a primary enforcer of the Clean Air Act does not mean that the federal government retains complete control over all Clean Air Act litigation," said Brown.

The government had argued that the civil penalties ​and ⁠an injunction to halt turbine operations, both remedies being sought by the NAACP, would threaten national security and economic interests. The precise reasoning for this isn’t clear. The company’s CEO Musk, a long-time backer of President Donald Trump, has donated some $445 million to support Republican party candidates in the upcoming midterm elections.

“The DOJ tried to bypass the District Court with their efforts to dismiss our case, and it did not work in their favor," said Abre' Conner, NAACP Director of Environmental and Climate Justice. "Our case has always been about holding polluters accountable and making sure that entities follow the law. The court made clear today that the law applies to everyone, including the federal government. We look forward to continuing our fight against pollution in the courtroom."

DCD has contacted SpaceXAI for comment.

SpaceX revenue up on AI cloud success

Musk is unlikely to care too much about any pending lawsuits given that SpaceXAI’s data centers have helped drive the company’s growth.

SpaceX’s Q3 earnings, revealed this week, showed the rocket firm-turned-neocloud made $14.58 billion for the three months ​to September 30, up 151 percent and beating analysts’ estimates.

AI revenue accounted for $7.6 billion of this. The last year has seen SpaceXAI, which initially built its data centers to train and run its chatbot, Grok, strike major cloud deals with Anthropic and Google to rent out its GPUs.

“We are in an inflection moment for SpaceX across launch, connectivity and superintelligence,” Musk told investors on the company’s earnings call.

Spending on SpaceXAI accounted $16.4 billion of the company’s $19.6 billion capex layout in the quarter. Capex levels are set to remain similar moving forward, the company said.