xAI, MLGW and the NDAs: the real story on Memphis's water

UPDATE, October 16th: The Sheriff’s Office has since sent me a June 2024 email chain. In it, the Greater Memphis Chamber sent an NDA from xAI’s property company to twelve officials at Memphis Police, the Sheriff’s Office, Tennessee Homeland Security, Homeland Security Investigations and the FBI – and a Sheriff’s lieutenant wrote, “We will also have the NDA’s signed prior to the visit.” No signed copy came with it. For Memphis Police, the City told me on October 15th it found no responsive records. The whole story is here: About Those NDAs – How Could the Mayor Not Know?

UPDATE, October 18th: Below, I wrote that the contract the City actually signed in May 2025 may say something stronger than the draft. I now have the signed contract, and it says less. If xAI hasn’t started substantial construction within a year of closing, the City can buy the land back for $1 less than xAI paid – after xAI removes what it built. That buy-back is the City’s only remedy. The City gave up the right to sue for damages or to make xAI build, and there’s no clause about xAI abandoning the plant.

I’ve seen so many people talk about how xAI is using all of our water, or polluting it. But, the truth is, I can’t find any information that backs up either one of those claims.

The xAI files

Every essay in this series is pinned to a question on the board at rachelandthecity.com/the-xai-files.

The friction between hearing something and believing it to be true or false – when a 90-second web search could answer the question – is so real.

Anyway, let’s talk about that gray water plant xAI is building – because it’s genuinely one of the best things Memphis and the surrounding region is getting out of the whole deal.

All of this is about Memphis. Across the state line, xAI’s Mississippi company applied in November 2025 to pump up to about 2 million gallons a day from an old well at the Southaven plant – about three times what that well was allowed before its permit expired in 2011. That’s its own story.

I just got back the City’s records I requested on the plant’s permits, so let’s walk through the plant, what xAI promised about it, the water claims, and the one water issue that is real.

The plan is to take treated wastewater from the T.E. Maxson sewage plant – water that otherwise gets dumped in the Mississippi River – and clean it up enough to cool TVA’s power plant and xAI’s data center. The plans are to clean up to 13 million gallons a day.

Once it runs, Colossus 1’s cooling water stops coming out of Memphis’s drinking water supply.

On September 1st, MLGW’s president Doug McGowen told the Memphis City Council the plant “will take the place of” the water Colossus 1 uses now, and that xAI’s Tulane Road site uses a closed loop with “only domestic water from MLGW.” That’s why I said in my October 7th essay that once the plant is built, the water issue is moot.

WHERE THE PLANT CAME FROM

This plant wasn’t xAI’s idea. McGowen has told the council the City, MLGW and TVA started working on it back in 2017 or 2018 – and MLGW’s own public update from May 2025 says it was “originally discussed between MLGW, CoM, and TVA to reduce consumption of aquifer water for power generation at the Allen Generation Plant.”

McGowen told the council this April that they came up with a design and estimated it would cost about $200 million. Then COVID hit, and after that nobody knew where the money would come from – so it sat on the shelf.

Then xAI showed up in 2024. McGowen says he and the mayor had one ask – don’t put wells in the ground, buy your water from MLGW, and join us in building the plant. MLGW’s update says, “To speed construction, xAI offered to build a facility (at xAI expense).”

So, what can we extrapolate from that?

Mayor Young knew about xAI before it got any water – he was quoted in the Chamber’s announcement on June 5th, 2024, five days before MLGW signed xAI’s water agreement. And wells were on the table – MLGW’s board minutes from that month say MLGW told xAI it was “not advisable for them to put wells in the ground.”

So the ask was don’t build the wells, buy water from MLGW, and build the wastewater plant.

As a side note, in a video posted October 9th, Mayor Young was asked about NDAs, and he said he was not aware of any being signed by an elected official.

But before the public ever heard about xAI, the Greater Memphis Chamber invited eight City employees to a “highly confidential” meeting on a project code-named “FALLOUT” – a meeting the Commercial Appeal has reported was about xAI.

The meeting was Thursday, March 28th, 2024, 1 to 2 p.m., in the Chamber’s 10th-floor boardroom at 100 Peabody Place.

Invited from the City of Memphis (required):

Antonio Adams, Chief Operating Officer
Robert Knecht, Public Works Director (retired July 2024)
John Zeanah, Director of Memphis and Shelby County Planning and Development, which is both a City and a County job
LaPacus Faulkner, Deputy Fire Marshal
Joe Oakley, Memphis Police Deputy Chief
Scott Morgan, an environmental official with a City email address

Invited from the City of Memphis (optional):

Angelo Lamar and Eric Robinson – the invite doesn’t give their roles.

Also invited:

Two people each from the Chamber (Gwyn Fisher, who organized it, and Troy Parkes), MLGW (Alonzo Weaver and Fred DeMagistris), and the County and Port (Wasim Khokhar, the County’s air permit manager, and Randy Richardson of the Port Commission) – and one from TVA, Eugene Michael Johnson.

The invite says “Several of you have met with this project already (a lot),” and that they were “now moving to the next phase.”

Mayor Young said, “I am not aware of any elected officials that have signed NDAs.”

What about city employees? Has anyone asked them?

The records out so far don’t show whether any of the City employees on that list signed an NDA or not.

But Forbes reported in 2024 that the Chamber offered a group of law enforcement agencies a tour of xAI’s new facility – on the condition that they sign NDAs with xAI’s property company – and that both Memphis Police and the Sheriff’s Office delivered signed ones.

When I asked the Sheriff’s Office for its copy, it told me on October 8th that “There are no records responsive to your request.” I’ve asked for an answer item by item. My request to the police is due around October 16th.

Oh, and about MLGW – when he was asked about MLGW, Mayor Young said, “I don’t know.” MLGW’s president signed an NDA with xAI’s property company in May 2024. I have a copy of it, and it’s been reported in the press. So, either Mayor Young is oblivious to it or…

Anyway.

So a plant MLGW and TVA wanted for years – and couldn’t pay for – became xAI’s to build.

Then on February 4th, 2025, the City asked a council committee to sell xAI the land for the plant, and xAI sent Mark Carroll to pitch it. He told them he’s an engineer and a licensed wastewater treatment operator, and then he said, “This is my brainchild. I’m the lead designer and will ultimately be the operator.”

Here’s what he promised, next to what the records show.

His slide said the plant “will reduce aquifer withdrawal by approximately 9%.”

At full size, the plant could take more than 10 times the water Colossus 1 uses today off the aquifer – and about half of it can go to TVA, to take its own plant off the aquifer.

His slide said the plant would start up as early as summer 2026, and by spring 2027 at the latest. The State’s permit took effect February 1st, 2026, and every monthly report filed under it from February through August says the same thing – “Construction ongoing,” with “no processes active, thus no data.”

The City’s records I just got back show that as of August, it hadn’t issued a right-of-way permit for the pump station at Maxson or for the pipes that would carry the water – the pipe plans were “Currently being reviewed. Not approved at this time.” McGowen told the council on September 1st that construction restarts January 1st, 2027, with the plant done in 2028.

One reason that I think this might be taking longer than originally planned is that xAI originally thought they could build it for $80 million – even though MLGW and TVA had already estimated about $200 million before xAI ever showed up. And now McGowen is saying that they were actually correct – it will be closer to $200 million. That much more money says to me – that means more time.

Back to the permit.

The State’s own reason for issuing the permit was the aquifer – it wrote that the plant “will preserve up to 13 million gallons per day of aquifer water.” But when people asked for conditions to make sure that actually happens, the State said protecting groundwater isn’t within the reach of this kind of permit.

On the permit’s face, there’s no number on how much water the plant has to take or deliver – every flow line just says to report it. The State set the plant’s financial security at zero dollars, reasoning that each customer keeps an MLGW connection as a backup. And all of the plant’s water testing is self-reported – the State turned down requests for independent checks.

The State gave a reason for each of those. But it means nothing in the permit requires the plant to take a single gallon off the aquifer. The promise is still a promise.

McGowen told the council this April the plant was a “commitment on their part, not a contractual commitment.”

At first I thought the same thing a lot of people do – why didn’t MLGW just make xAI sign a contract for the plant?

But let’s think that through. If I went to MLGW for power for my company, and they said, “Sure – once you build something we’ve wanted for years.”

That’s not how a public utility is supposed to work. MLGW says so itself. In a letter to TVA that Forbes reported on in October 2024, MLGW wrote that it “cannot discriminate or withhold or refuse service which can reasonably be demanded and furnished.”

The City had more room – it was selling xAI the land. The draft contract it posted before the council voted lets the City take the land back if xAI abandons the plant or “in bad faith, unreasonably delays” it – but there’s no dollar penalty in it. The contract actually signed in May 2025 may say something stronger. I asked the City for it on July 21st. They’ve pushed the date back six times, and the new one is October 21st.

Either way, using too much water was never an issue – in this particular case, at this particular data center.

MLGW said in late September that xAI is using about 794,000 gallons a day – about 62 percent of the 1.28 million gallons a day it’s allowed. MLGW pumps about 120 million gallons a day on average, according to its latest water quality report, so that’s under 1 percent. MLGW’s vice president did say xAI will probably be one of its five or six biggest water customers by the end of the year – and both of those things are true.

And the aquifer isn’t running dry. The U.S. Geological Survey measures water levels at monitoring wells in the Memphis aquifer, and five of them are higher today than they were in 2000 – by about 8 to 31 feet. Four of the five dipped a few feet in 2024, the year Colossus came online, and came back up in 2025 – and they swung that much before xAI got here, too.

So, let’s talk about the pollution claims.

Under the State’s permit for the recycled water, xAI’s used cooling water goes into the sewer, and the State told the public the permit “prohibits CTC Property LLC from discharging.”

They have a water tap from MLGW, they pull the water in, they use it to cool their GPUs – then most of it goes up as steam from the cooling towers, and the rest goes down the drain, just like the water in your own sink.

The real risk to the aquifer is the holes in the clay layer that protects it, and what’s sitting on top of those holes – and that was true long before xAI got here. And I’ll tell you why this matters in just a moment.

I’ve also seen people complain that xAI pays less for its water than we do. But that’s just normal for a company that buys in bulk – restaurants probably pay less for hamburger buns than you do.

SO – BASICALLY THE WATER ISSUE IS MOOT – RIGHT?

Well, there is one issue with the water – and that’s the Megapack battery yards.

I wrote on September 5th that xAI built fields of Tesla Megapacks on top of the aquifer, and that if one catches fire, the water used to put it out could run into the ground. Remember those holes in the clay layer?

Here’s what the research on these batteries shows.

Tesla’s current Megapacks run on lithium iron phosphate cells – the Memphis records out so far don’t name the exact model at Colossus. Those cells have no cobalt, nickel or manganese in their cathodes, and those are the scary numbers in most battery fire studies.

The Megapack fires on record stayed small – one to four units, never a whole yard. The worst, at a California solar farm in August 2025, reached four of its 84. Tesla’s own guide tells firefighters to let a burning Megapack burn itself out – water on it, the guide says, only slows it down. And after a battery fire in Chaumont, New York, where crews used a lot of water near private wells, eleven drinking wells were tested and no fire contaminants were found.

But the Chaumont wells were tested for metals and solvents – not fluoride, even though New York’s own report says fluorides were “presumed present.” And the part of these batteries that gives off fluoride, lithium and fluorinated chemicals in a fire – the salt and the glue inside the cells – is the same as in the nickel-and-cobalt kind.

Lab burns, and Dutch tests of water from burned electric cars, have found both fluoride and PFAS. But at the grid battery fires on record, no groundwater or runoff test has checked for both.

And the fire code Memphis uses requires spill containment for the old liquid-filled lead-acid batteries – but not for lithium-ion. As of October 10th, the State’s water permit database lists one active water permit for the whole Colossus 1 campus – a construction stormwater permit.

Nobody’s saying the aquifer is at risk today. But the fire protection industry’s own design guide says a firewater risk assessment should be considered near drinking water sources – and the records out so far don’t show whether one was done for these yards, or what it says about the aquifer.

That’s the water question worth asking.

If you like facts-first info on all this, consider leaving a tip on Venmo or PayPal – this stuff takes a lot of time to put together. And check out everything I’ve written with citations and receipts at the xAI Files.

xAI, MLGW and the NDAs: the real story on Memphis’s water

The xAI files

WHERE THE PLANT CAME FROM

SO – BASICALLY THE WATER ISSUE IS MOOT – RIGHT?

Sources

The xAI files

WHERE THE PLANT CAME FROM

SO – BASICALLY THE WATER ISSUE IS MOOT – RIGHT?

Sources

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