Powering Data Centers and the Permitting Problem

On June 16, the Department of Justice unveiled a new aggressive strategy to protect electricity production for data centers from Clean Air Act citizen enforcement in a Mississippi dispute over gas turbines powering an xAI data center that supports Grok’s artificial intelligence. The Justice Department moved to intervene in and dismiss a lawsuit that the NAACP filed against xAI in April. The lawsuit alleges that xAI has been operating gas-fired turbines without appropriate Clean Air Act permits and seeks civil penalties and an injunction shutting down the turbines until they have Clean Air Act permits.

Typically, when the Justice Department intervenes to stop a citizen suit against an alleged violator, it does so under the theory that it is “diligently prosecuting” the alleged violation itself. Following the Clean Air Act’s citizen suit provision, 42 U.S.C. § 7604, the department usually argues that the private lawsuit is unnecessary because the government is handling it. But this case is different: Here the Justice Department is arguing that the lawsuit must be dismissed, even though the the department is not prosecuting xAI itself, because the lawsuit “threatens American national, economic, and energy security by seeking to shut off the power supply for artificial-intelligence innovation that supports the Department of War’s military operations.”

So, why is the Justice Department raising this novel argument here? It contends that “Grok’s continued operation and availability ‘is a matter of paramount national security’” because Grok is one of just three AI models that can support “mission critical operations,” including enabling U.S. forces to target thousands of targets during the war in Iran. According to the government, limiting the electricity to xAI’s facility would undercut those critical capabilities.

This case sits at the confluence of three crucial trends in energy infrastructure permitting: (a) the increased demand for new energy infrastructure to power new geopolitically significant industries such as artificial intelligence; (b) the wide range of legal obstacles increasingly employed to attack parts of these growing supply chains; and (c) the efforts of successive presidential administrations to wield more discretion to ease construction of favored infrastructure and block disfavored infrastructure.

Data Center Demand and the Growing Electric Grid

The xAI case shows the drastic steps that artificial intelligence companies are taking to surmount a key hurdle for new hyperscale data centers: ensuring adequate support from the electric grid. This same obstacle is currently delaying many of the other technologies often touted as destined to transform the U.S. economy, from reshoring manufacturing to electrifying transport and home heating.

The world’s leading artificial intelligence companies, including Google, Anthropic, OpenAI, and xAI, are racing to secure computing power to improve their models. Increasingly, this power will be provided by hyperscale data centers—facilities the size of a major corporate or industrial campus that may consume as much power as a city of a hundred thousand to a million residents. As these facilities begin to come online, they have rapidly changed the trajectory for electricity consumption in the United States, which was relatively stagnant for 20 years and is now beginning to rise sharply.

Artificial intelligence is just one of several industries now straining against the limits of the electric grid. Renewable developers are waiting to connect new solar, wind, and storage projects. Manufacturers are seeking power for reshored factories, chip fabrication, and critical-minerals processing. Federal and state policies have also encouraged electrification of vehicles, heating, and appliances. These changes require not only new generation but also transformers, transmission lines, interconnection studies, and regulatory approvals.

A common challenge for all these industries is that they are dependent on the United States rapidly building out its electric grid—building hundreds of new power plants and dozens of new long-distance power lines to get electricity from the places it is produced to where it is needed. In recent years, this challenge has repeatedly flummoxed growing industries. When new renewable energy sources seek permission to connect to the grid, they often wait years for permission to connect and more than 80 percent of projects are abandoned before they receive that permission.

Rather than wait for the grid to be able to meet their demand, some hyperscale data center developers, like xAI in this case, are choosing to provide their own power source. The NAACP says that xAI is operating more than two dozen mobile gas turbines to power its hyperscale facility, with a “combined generating capacity of at least 495 MW—enough to power 400,000 homes.” Mississippi regulators determined that the temporary turbines did not require Clean Air Act permits under Mississippi’s Environmental Protection Agency (EPA)-approved state implementation plan so long as they remained mobile and temporary. The NAACP argues that this no-permit-required determination misreads the Clean Air Act because the turbine fleet functions as a stationary source. And, as described above, the Justice Department has intervened to have the suit dismissed on the theory that the federal government is the primary enforcer of the Clean Air Act, the federal government has discretion not to enforce the statute, and restricting that discretion would potentially violate Article II of the Constitution by restricting the president’s executive enforcement power.

The Anticommons Challenge of Building Out the New Grid

The xAI case also illustrates a key challenge that has become more pressing as a growing queue of critical projects are forced to wait for U.S. national electrical infrastructure to catch up. This dispute is about the Clean Air Act, but that is just one hurdle; major electric infrastructure projects often require navigating many hurdles at state, federal, and local levels. Take power lines as an example. Over the years important projects have been delayed by challenges under the federal National Environmental Policy Act, Endangered Species Act, and National Historic Preservation Act. Interstate power lines also need approval from each state they cross. Conversely, a normal power plant would be a stationary source, subject to Clean Air Act permitting. Even when the state approves it as a federally approved permitting body, the facility could be subject to a citizen suit. And of course, building any industrial project means complex negotiations with local landowners and jurisdictions.

The net effect is that any new project must navigate dozens of approvals and ensure that all stay approved while it seeks to bring a project to completion. And that challenge has grown less manageable in recent years as energy infrastructure has increasingly been caught up in political fights. As pipelines, power lines, and now data centers have become the subject of electioneering, the chances of one approval being revoked suddenly have grown more and more plausible. Think of the Dakota Access Pipeline. The Obama administration first approved the pipeline, finding it had no significant environmental impact but then, after protests increased, withheld an easement that it needed to complete construction and announced additional environmental review without withdrawing its original finding. Or think of the Trump administration’s orders to stop work on already-permitted offshore wind farms on the basis of national security objections.

Presidential administrations are finding new and innovative ways to exercise discretion to shape industry investment. But the crucial asymmetry is that, because projects need dozens of approvals to go forward, it is far easier for a president to stop disfavored infrastructure investments than it is for the president to see an infrastructure investment through to completion. President Obama was able to prevent the Keystone XL pipeline from being built but failed to build high-speed rail. This is what I have called the “jurisdictional anticommons”—the idea that when development is subject to the whim of too many actors, of courts and policymakers in multiple jurisdictions, infrastructure may be underprovided. Any single court or policymaker can stop a project; keeping it moving requires every one of them to agree.

Clearing the Roadblocks

So the Justice Department’s motion could be seen as an effort to clear one small roadblock in the path of important energy projects. The motion argues that when the state government decides a permit isn’t necessary, and the federal government agrees, it may terminate a lawsuit brought by a private citizen under the Clean Air Act. The challenge for the federal government is that the Clean Air Act expressly grants the federal government a different method of displacing a citizen lawsuit when the EPA or the state is “diligently prosecuting” a lawsuit “to require compliance” with the Clean Air Act. Neither the EPA nor the state of Mississippi has brought such a suit here. So the federal government must argue that it has a broader authority to terminate a suit that it derives from the Clean Air Act’s intervention provision, Rule 41, and Article II.

The Justice Department argues that it has this wider discretion because “the diligent-prosecution bar reinforces, rather than divests, the United States’ inherent discretion to decide the statute should not be enforced in a particular case.” So the Justice Department thinks it need not depend on the Clean Air Act’s express diligent-prosecution bar. Instead the EPA can rely on a separate Clean Air Act provision that it, “if not a party, may intervene as a matter of right at any time in the proceeding.” The Justice Department argues that such an intervention makes the United States a plaintiff and then invokes Rule 41’s pre-answer dismissal procedure.

The government draws an analogy to the government’s recently confirmed authority to intervene in and dismiss a False Claims Act case brought in its name even after declining its initial opportunity to take over the case. See United States ex rel. Polansky v. Exec. Health Res., Inc., 599 U.S. 419 (2023). But this case is more challenging for the government than Polansky in multiple respects. First, the False Claims Act, unlike the Clean Air Act, expressly allows the government to “dismiss the action notwithstanding the objections of the person initiating the action.” Second, in False Claims Act cases, unlike Clean Air Act cases, plaintiffs need not prove they have suffered any concrete injury, so it makes more sense that the federal government can dismiss them.

Finally, the courts may balk at the government’s argument given its potentially sweeping consequences for citizen suits, which are an important spur to enforcement of many environmental laws. The Supreme Court has said that the Clean Air Act and Clean Water Act’s citizen suit “provisions share the common central purpose of permitting citizens to abate pollution when the government cannot or will not command compliance.” The Justice Department’s proposed interpretation, that it has “inherent discretion to decide the statute should not be enforced in a particular case,” would substantially constrain the Clean Air Act’s ability to achieve that purpose. 

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Ultimately, the Justice Department’s assertion of discretion over this Clean Air Act prosecution is a very narrow measure in the wider challenge of building out an electric grid sufficient to support the transformations often prophesied for the nation’s industry and economy. Wider reforms to ease infrastructure permitting will likely take a broader focus and require bipartisan support. The thorniest part of these permitting reform negotiations will likely turn on the wider problem illustrated by this narrow case: Legal challenges have been one of the most powerful tools for environmental groups seeking to enforce statutory safeguards, and one of the central obstacles for developers trying to build energy infrastructure on investment timelines. Data centers have now entered the same permitting politics that have long governed pipelines, power lines, and power plants.