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Proposed Rule2026-09524

Begin Actual Construction in the New Source Review (NSR) Preconstruction Permitting Program

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Published

May 13, 2026

Issuing agencies

Environmental Protection Agency

Abstract

The U.S. Environmental Protection Agency (EPA) is proposing revisions to the New Source Review (NSR) air permitting regulations. These regulatory revisions would distinguish between construction of a stationary source and construction of non-emitting components or structures, while clarifying and codifying that the latter can occur before an owner or operator obtains an NSR air permit for a new major stationary source or major modification of an existing major stationary source. The revisions will update the definition of "begin actual construction" and add a definition of "pollutant-emitting activities" in the Federal NSR regulations for both Nonattainment New Source Review (NNSR) and Prevention of Significant Deterioration (PSD); revise the definition of "begin construction" and "commence construction" in the Federal minor NSR regulations applicable in Indian country; and address the applicability procedures for "begin actual construction" in the NNSR regulations.

Full Text

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<title>Federal Register, Volume 91 Issue 92 (Wednesday, May 13, 2026)</title>
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[Federal Register Volume 91, Number 92 (Wednesday, May 13, 2026)]
[Proposed Rules]
[Pages 26958-26976]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09524]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 49, 51, and 52

[EPA-HQ-OAR-2025-0618; FRL-12757-01-OAR]
RIN 2060-AW84

Begin Actual Construction in the New Source Review (NSR)
Preconstruction Permitting Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The U.S. Environmental Protection Agency (EPA) is proposing
revisions to the New Source Review (NSR) air permitting regulations.
These regulatory revisions would distinguish between construction of a
stationary source and construction of non-emitting components or
structures, while clarifying and codifying that the latter can occur
before an owner or operator obtains an NSR air permit for a new major
stationary source or major modification of an existing major stationary
source. The revisions will update the definition of ``begin actual
construction'' and add a definition of ``pollutant-emitting
activities'' in the Federal NSR regulations for both Nonattainment New
Source Review (NNSR) and Prevention of Significant Deterioration (PSD);
revise the definition of ``begin construction'' and ``commence
construction'' in the Federal minor NSR regulations applicable in
Indian country; and address the applicability procedures for ``begin
actual construction'' in the NNSR regulations.

DATES: Comments must be received on or before June 29, 2026.
Public hearing: If anyone contacts us requesting a public hearing
on or before May 18, 2026, the EPA will hold a virtual public hearing
on May 28, 2026. See SUPPLEMENTARY INFORMATION for information on
requesting and registering for a public hearing.

ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2025-0618, by any of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>
(our preferred method). Follow the online instructions for submitting
comments. You can also find a plain language summary of the rule on the
Federal eRulemaking Portal.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#640549050a00491649000b070f0110240114054a030b12">[email&#160;protected]</a>. Include Docket ID No. EPA-
HQ-OAR-2025-0618 in the subject line of the message.
<bullet> Fax: (202) 566-9744.
<bullet> Mail: U.S. Environmental Protection Agency, EPA Docket
Center, Docket ID No. EPA-HQ-OAR-2025-0618, Mail Code 28221T, 1200
Pennsylvania Avenue NW, Washington, DC 20460.
<bullet> Hand Delivery or Courier (by scheduled appointment only):
EPA Docket Center, WJC West Building, Room 3334, 1301 Constitution
Avenue NW, Washington, DC 20004. The Docket Center's hours of
operations are 8:30 a.m. to 4:30 p.m., Monday through Friday (except
Federal holidays).
Instructions: All submissions received must include the Docket ID
No. EPA-HQ-OAR-2025-0618 for this rulemaking. Comments received may be
posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any
personal information provided. For detailed instructions on sending
comments and additional information on the rulemaking process, see the
SUPPLEMENTARY INFORMATION section of this document. For information on
EPA Docket Center services, please visit us online at <a href="https://www.epa.gov/dockets">https://www.epa.gov/dockets</a>.

FOR FURTHER INFORMATION CONTACT: For information about this proposed
rule, contact Andrew Kormos, Permitting & Program Support Division,
Office of State Air Partnerships, Environmental Protection Agency, Post
Office Box 12055, Research Triangle Park, NC 27711; telephone number:
(919) 541-4566; email address: <a href="/cdn-cgi/l/email-protection#c7aca8b5aaa8b4e9a6a9a3b5a2b087a2b7a6e9a0a8b1">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:
Participation in virtual public hearing. To request a virtual
public hearing, contact the public hearing team at 919-541-9782 or by
email at <a href="/cdn-cgi/l/email-protection#357a667465454057595c565d5054475c5b52755045541b525a43">[email&#160;protected]</a>. If requested, the hearing will be
held via virtual platform on May 28, 2026. The hearing will convene at
10 a.m. Eastern Time (ET) and will conclude at 4 p.m. ET; additional
hearing hours may be added at the discretion of the EPA. The EPA may
close a session 15 minutes after the last pre-registered speaker has
testified if there are no additional speakers. The EPA will announce
further details at <a href="https://www.epa.gov/nsr/nsr-regulatory-actions">https://www.epa.gov/nsr/nsr-regulatory-actions</a>.
If a public hearing is requested, the EPA will begin pre-
registering speakers for the hearing no later than one business day
after a request has been received. To register to speak at the virtual
hearing, please use the online registration form available at <a href="https://www.epa.gov/nsr/nsr-regulatory-actions">https://www.epa.gov/nsr/nsr-regulatory-actions</a> or contact the public hearing
team at 919-541-9782 or by email at <a href="/cdn-cgi/l/email-protection#08475b4958787d6a64616b606d697a61666f486d7869266f677e">[email&#160;protected]</a>. The last
day to pre-register to speak at the hearing will be May 25, 2026. Prior
to the hearing, the EPA will post a general agenda that will list pre-
registered speakers in approximate order at: <a href="https://www.epa.gov/nsr/nsr-regulatory-actions">https://www.epa.gov/nsr/nsr-regulatory-actions</a>.
The EPA will make every effort to follow the schedule as closely as
possible on the day of the hearing; however, please plan for the
hearings to run either ahead of schedule or behind schedule.
Each commenter will have approximately four minutes to provide oral
testimony. The EPA recommends submitting the text of your oral
testimony as written comments to the rulemaking docket.
During the hearing, the EPA may ask clarifying questions but will
not respond to comments made during oral testimonies. Written
statements and supporting information submitted during the comment
period will be considered with the same weight as oral testimony and
supporting information presented at the public hearing.
Please note that any updates made to any aspect of the hearing will
be posted

[[Page 26959]]

online at <a href="https://www.epa.gov/nsr/nsr-regulatory-actions">https://www.epa.gov/nsr/nsr-regulatory-actions</a>. While the EPA
expects the hearing to be conducted as set forth earlier, please
monitor our website to determine if there are any updates. The EPA
reserves the right to delay the date of the public hearing for any
reason including scheduling conflicts. If this occurs, the comment
period will be extended by the delayed number of days. The EPA does not
intend to publish a document in the Federal Register announcing
updates. All updates and announcements will be communicated on the web
page listed above.
If you require the services of a translator or special
accommodations, please pre-register for the hearing with the public
hearing team and describe your needs by May 20, 2026. The EPA may not
be able to arrange accommodations without advanced notice.
Docket. The EPA has established a docket for this action under
Docket ID No. EPA-HQ-OAR-2025-0618. All documents in the docket are
listed in <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Although listed, some
information is not publicly available, e.g., Confidential Business
Information (CBI) or other information the disclosure of which is
restricted by statute. Certain other material, such as copyrighted
material, is not placed on the internet and will be publicly available
only as PDF versions that can only be accessed on the EPA computers in
the docket office reading room. Certain databases and physical items
cannot be downloaded from the docket but may be requested by contacting
the docket office at 202-566-1744. With the exception of such material,
publicly available docket materials are available electronically at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2025-0618. The EPA's policy is that all comments received will be
included in the public docket without change and may be made available
online at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal
information provided, unless the comment includes information claimed
to be CBI or other information the disclosure of which is restricted by
statute. Do not submit electronically to <a href="https://www.regulations.gov">https://www.regulations.gov</a>
any information that you consider to be CBI or other information the
disclosure of which is restricted by statute. This type of information
should be submitted as discussed below.
The EPA may publish any comment received to its public docket.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. The EPA
will generally not consider comments or comment contents located
outside of the primary submission (i.e., on the Web, cloud, or other
file sharing system). For additional submission methods, the full EPA
public comment policy, information about CBI or multimedia submissions,
and general guidance on making effective comments, please visit <a href="https://www.epa.gov/dockets/commenting-epa-dockets">https://www.epa.gov/dockets/commenting-epa-dockets</a>.
The <a href="https://www.regulations.gov">https://www.regulations.gov</a> website allows you to submit your
comment anonymously, which means the EPA will not know your identity or
contact information unless you provide it in the body of your comment.
If you send an email comment directly to the EPA without going through
<a href="https://www.regulations.gov">https://www.regulations.gov</a>, your email address will be automatically
captured and included as part of the comment that is placed in the
public docket and made available on the internet. If you submit an
electronic comment, the EPA recommends that you include your name and
other contact information in the body of your comment and with any
digital storage media you submit. If the EPA cannot read your comment
due to technical difficulties and cannot contact you for clarification,
the Agency may not be able to consider your comment. Electronic files
should not include special characters or any form of encryption and
should be free of any defects or viruses. For additional information
about the EPA's public docket, visit the EPA Docket Center homepage at
<a href="https://www.epa.gov/dockets">https://www.epa.gov/dockets</a>.
Submitting CBI. Do not submit information containing CBI to the EPA
through <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Clearly mark the part or all of
the information that you claim to be CBI. For CBI information on any
digital storage media that you mail to the EPA, note the docket ID,
mark the outside of the digital storage media as CBI, and identify
electronically within the digital storage media the specific
information that is claimed as CBI. In addition to one complete version
of the comments that includes information claimed as CBI, you must
submit a copy of the comments that does not contain the information
claimed as CBI directly to the public docket through the procedures
outlined in Instructions section above. If you submit any digital
storage media that does not contain CBI, mark the outside of the
digital storage media clearly that it does not contain CBI and note the
docket ID. Information not marked as CBI will be included in the public
docket and the EPA's electronic public docket without prior notice.
Information marked as CBI will not be disclosed except in accordance
with procedures set forth in 40 Code of Federal Regulations (CFR) part
2.
Our preferred method to receive CBI is electronic transmission
using email attachments, File Transfer Protocol (FTP), or other online
file sharing services (e.g., Dropbox, OneDrive, Google Drive).
Electronic submissions must be transmitted directly to the Office of
State Air Partnerships (OSAP) CBI Office at the email address
<a href="/cdn-cgi/l/email-protection#d3bcb2a2a3a08cb0b1ba93b6a3b2fdb4bca5">[email&#160;protected]</a> and, as described above, should include clear CBI
markings and note the docket ID. If assistance is needed with
submitting large electronic files that exceed the file size limit for
email attachments, and if you do not have your own file sharing
service, please email <a href="/cdn-cgi/l/email-protection#aec1cfdfdeddf1cdccc7eecbdecf80c9c1d8">[email&#160;protected]</a> to request a file transfer
link. If sending CBI information through the postal service, please
send it to the following address: U.S. EPA, Attn: OSAP Document Control
Officer, Mail Drop: C404-02, 109 T.W. Alexander Drive, P.O. Box 12055,
Research Triangle Park, North Carolina 27711, Attention Docket ID No.
EPA-HQ-OAR-2025-0618. The mailed CBI material should be double wrapped
and clearly marked. Any CBI markings should not show through the outer
envelope.
Preamble acronyms and abbreviations. Throughout this preamble the
use of ``we,'' ``us,'' or ``our'' is intended to refer to the EPA. We
use multiple acronyms and terms in this preamble. While this list may
not be exhaustive, to ease the reading of this preamble and for
reference purposes, the EPA defines the following terms and acronyms
here:

APA Administrative Procedure Act
BACT Best Available Control Technology
CAA Clean Air Act
CBI Confidential Business Information
CFR Code of Federal Regulations
EPA Environmental Protection Agency
FIP Federal Implementation Plan
FR Federal Register
LAER Lowest Achievable Emissions Rate
NAAQS National Ambient Air Quality Standard or Standards
NSR New Source Review
NNSR Nonattainment New Source Review
OAQPS Office of Air Quality Planning and Standards, EPA
OSAP Office of State Air Partnerships, EPA
OMB Office of Management and Budget
PBI Proprietary Business Information
PRA Paperwork Reduction Act
PSD Prevention of Significant Deterioration
RFA Regulatory Flexibility Act
SIP State Implementation Plan
TIP Tribal Implementation Plan
UMRA Unfunded Mandates Reform Act

[[Page 26960]]

U.S.C. United States Code

Table of Contents

I. Executive Summary
II. Background
A. The New Source Review Program
B. The EPA's Initial NSR Implementing Regulations
C. The EPA's Initial Policy Guidance on Allowed and Prohibited
Construction Activities
D. The 1980 PSD Regulations and Current Definition of ``Begin
Actual Construction''
E. Subsequent EPA Policy Guidance on ``Begin Actual
Construction''
F. The EPA's Request for Comment in 1996
G. Tribal NSR Rule
H. Draft EPA Guidance Memorandum in 2020
I. The EPA's September 2025 Letter to Maricopa County Air
Quality Department
J. Need for Regulatory Action
III. Legal Authority
IV. Proposed Changes
V. Policy Rationale and Implications for Proposing Changes to
Regulations
VI. Request for Comments
VII. Statutory and Executive Order Reviews
A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
B. Executive Order 14192: Unleashing Prosperity Through
Deregulation
C. Paperwork Reduction Act (PRA)
D. Regulatory Flexibility Act (RFA)
E. Unfunded Mandates Reform Act (UMRA)
F. Executive Order 13132: Federalism
G. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
H. Executive Order 13045: Protection of Children From
Environmental Health and Safety Risks
I. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution, or Use
J. National Technology Transfer Advancement Act (NTTAA)
VIII. Statutory Authority

I. Executive Summary

As currently written, the EPA's regulatory definitions of the terms
``begin actual construction'' and ``begin construction'' in the NSR
regulations prohibit certain on-site construction activities on an
emissions unit which are of a permanent nature. These activities
include the installation of building supports and foundations, laying
underground pipework, and the construction of permanent storage
structures. The EPA has also construed the term ``emissions unit'' in
these NSR regulations to include any installations necessary to
accommodate that unit.\1\ This regulatory language and its
interpretations have resulted in uncertainties, delays, and regulatory
burdens that are not intended and do not represent the best reading or
further the purposes of the Clean Air Act (CAA).
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\1\ Definition of ``Emissions unit''--40 CFR 51.165(a)(1)(vii),
51.166(b)(7), and 52.21(b)(7).
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The EPA is proposing revisions to the Agency's NSR air permitting
regulations to remove some of these restrictions to allow construction
of components that do not emit air pollutants, such as utility service
infrastructure for a site, concrete pads, and some types of buildings
and building components, before obtaining an NSR air permit. These
changes aim to foster economic growth by providing greater flexibility
for owners and operators building or modifying stationary sources of
air pollution to engage in certain construction activities prior to
obtaining an NSR permit, while still ensuring the same degree of public
health and welfare protection provided through the NSR permitting
requirements. The proposed revisions are intended to clarify terms that
apply to State and local air agency permitting programs included in
State Implementation Plans (SIPs) and to Federal permitting programs
administered by the EPA or a delegated permitting authority.
The proposed revisions are primarily contained in regulations
applicable to major stationary sources subject to the PSD program or
the NNSR program. As such, the EPA is proposing to revise the
definition of ``begin actual construction'' and add a new definition
for ``pollutant-emitting activities'' in 40 CFR 51.165, 51.166, 52.21,
and 40 CFR part 51 appendix S. To be consistent across the NSR program,
the EPA is also proposing to add the prohibition on beginning actual
construction without a permit and relevant definitions to the NNSR
applicability procedures of 40 CFR 51.165 and 40 CFR part 51 appendix
S. Finally, the EPA is proposing to revise the definition of ``begin
construction'' and ``commence construction'' in the Tribal NSR
regulations at 40 CFR 49.152 and rename the term ``begin construction''
to ``begin actual construction,'' which are terms that apply to minor
sources and minor modifications at existing major sources of air
pollution located in Indian country. The proposed definitions of
``begin actual construction,'' ``pollutant-emitting activities,'' and
``commence construction'' and the rationale for these proposed
revisions to the NSR regulations can be found in section IV of this
preamble.

II. Background

A. The New Source Review Program

In the CAA Amendments of 1977, Congress established the NSR
preconstruction air permitting program to require stationary sources of
air pollution with air emissions above certain thresholds to obtain
permits prior to beginning construction. This component of the CAA is
designed to, among other purposes, ensure that development will occur
in a manner consistent with the preservation of air quality.\2\
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\2\ 42 U.S.C. 7470(3); see, e.g., New York v. EPA, 413 F.3d 3,
13, 23-24 (D.C. Cir. 2005) (per curiam) (discussing multiple
purposes of the program).
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The NSR permitting program applies to construction of new
stationary sources and major modifications of existing major stationary
sources, regardless of the designation of the area for the National
Ambient Air Quality Standards (NAAQS) where the source is located
(i.e., attainment, unclassifiable, or nonattainment area). New
stationary source construction and major modifications at existing
major stationary sources that emit ``regulated NSR pollutants'' over
certain thresholds are subject to major NSR requirements, while new
stationary source construction of lower-emitting sources and
modifications that increase emissions at existing sources in lower
amounts may be subject to minor NSR requirements or be excluded from
NSR permitting altogether.\3\
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\3\ Definition of ``Regulated NSR pollutant--40 CFR
51.165(a)(1)(xxxvii), 51.166(b)(49), and 52.21(b)(50).
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Major NSR permits for sources located in attainment or
unclassifiable areas are referred to as PSD permits. As part of the CAA
statutory framework for PSD applicability, ``no major emitting facility
. . . may be constructed in an area to which this part applies unless .
. . a permit has been issued for such proposed facility'' that meets
specified requirements.\4\ Major NSR permits for sources located in
nonattainment areas that emit pollutants above the specified thresholds
are referred to as NNSR permits. Similar to PSD permits, NNSR permits
are required for the construction and operation of major stationary
sources in a nonattainment area. More specifically, the NNSR provisions
in the CAA state that ``[SIP] provisions shall require permits for the
construction and operation of new or modified major stationary sources
anywhere in the nonattainment area'' in accordance with specific
requirements.\5\
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\4\ 42 United States Code (U.S.C.) 7475(a)(1); CAA section
165(a)(1).
\5\ 42 U.S.C. 7502(c)(5); CAA section 172(c)(5).

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[[Page 26961]]

The air pollutant(s) emitted, the amount of those emissions, and
the air quality designation of the area where the source is located or
proposed to be built determines the specific permitting requirements.
For example, the CAA requires major stationary sources subject to PSD
to meet emission limits based on Best Available Control Technology
(BACT) requirements specified by CAA section 165(a)(4), while major
stationary sources subject to NNSR are required to meet Lowest
Achievable Emissions Rate (LAER) requirements pursuant to CAA section
173(a)(2).
A new stationary source is subject to major NSR requirements if its
potential to emit a regulated NSR pollutant exceeds statutory emission
thresholds.\6\ If such emissions exceed the applicable threshold, the
NSR regulations define the source as a ``major stationary source.'' \7\
An existing major stationary source triggers major NSR permitting
requirements when it undergoes a ``major modification,'' which occurs
when a source undertakes a physical change or change in method of
operation (i.e., a ``project'') that would result in (1) a significant
emissions increase from the project, and (2) a significant net
emissions increase from the source (i.e., the increase in emissions
from the project and a source-wide ``netting'' analysis that considers
creditable emission increases and decreases occurring at the source as
a result of other projects over a 5-year contemporaneous period).\8\
For this two-step process, the NSR regulations define what emissions
rate constitutes ``significant,'' i.e., more than de minimis, for each
NSR pollutant.\9\
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\6\ For PSD, the statute uses the term ``major emitting
facility'' which is defined as a stationary source that emits, or
has a potential to emit, at least 100 tons per year (tpy) of ``any
air pollutant'' if the source is in one of the listed source
categories or at least 250 tpy if the source is not. 42 U.S.C.
7479(1); CAA section 169(1). For NNSR, the applicability threshold
for a major stationary source is 100 tpy, although lower thresholds
may apply depending on the degree of nonattainment and the
pollutant. 40 CFR 51.165(a)(1)(iv)(A).
\7\ Definition of ``major stationary source''--40 CFR
51.165(a)(1)(iv), 51.166(b)(1)(i), and 52.21(b)(1)(i).
\8\ Definition of ``major modification,'' ``project,'' and ``net
emissions increase''--40 CFR 52.21(b)(2)(i), (b)(52), and (b)(3).
\9\ Definition of ``significant''--40 CFR 51.165(a)(1)(x),
51.166(b)(23), and 52.21(b)(23).
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In many cases, these requirements of the major NSR program (or
equivalent requirements) are adopted through rulemaking by a State,
local, Tribal, or other authorized reviewing authority, and the
reviewing authority submits a SIP revision including these program
requirements to the EPA for approval (the EPA is proposing in this
action to revise the regulations at 40 CFR 51.165 and 51.166 that
provide the minimum requirements of these programs). Upon the EPA
approving the State or local permit program in the SIP, the reviewing
authority becomes the NSR ``permitting authority'' for sources within
its jurisdictional boundaries and the approved rules become federally
enforceable. When a State, local, Tribal, or other agency lacks an EPA-
approved program, either the EPA issues the major NSR permits based on
its regulations at 40 CFR 52.21, or a State, local, or Tribal reviewing
authority issues the major NSR permits on behalf of the Agency by way
of a delegation of Federal authority to implement this provision.
New sources and modifications that do not require a major NSR
permit may instead require a minor NSR permit prior to construction.
Minor NSR requirements are approved into a SIP, Tribal Implementation
Plan (TIP), or Federal Implementation Plan (FIP) to achieve and
maintain the NAAQS.\10\ The CAA and the EPA's regulations are less
prescriptive regarding the minimum minor NSR program requirements.
Therefore, reviewing authorities generally have flexibility in
designing their minor NSR programs. Minor NSR permits are almost
exclusively issued by State, local, and other authorized reviewing
authorities, although the EPA issues minor NSR permits for most areas
of Indian country where Tribes have not developed TIPs or requested
delegation to administer minor NSR air permitting programs for their
jurisdictions.\11\
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\10\ 42 U.S.C. 7410(a)(2)(C); CAA section 110(a)(2)(C).
\11\ Tribes that developed TIPs or requested delegation to
administer the minor NSR program within their jurisdictions include
the St. Regis Mohawk Tribe in New York, the Mohegan Tribe of Indians
in Connecticut, the Mashantucket Pequot Tribe in Connecticut, the
Gila River Indian Community in Arizona, and the Southern Ute Indian
Tribe in Colorado.
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B. The EPA's Initial NSR Implementing Regulations

In June 1978, the EPA promulgated implementing regulations for the
PSD program enacted by the 1977 CAA Amendments (the ``1978 PSD
Regulations'').\12\ The 1978 PSD Regulations contained a ``source
applicability'' provision that specified that ``[n]o major stationary
source or major modification shall be constructed unless the
requirements of paragraphs (j) through (r) of this section, as
applicable, have been met. . . .'' \13\ The 1978 PSD Regulations did
not include a definition of the term ``constructed,'' but the term
``construction'' was defined to mean ``fabrication, erection,
installation, or modification of a source.'' \14\ The term ``source''
was then defined to mean ``any structure, building, facility,
equipment, installation, or operation (or combination thereof) which is
located on one or more contiguous or adjacent properties and which is
owned or operated by the same person (or by persons under common
control).'' \15\ The EPA did not promulgate similar implementing
regulations for the NNSR program at that time.
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\12\ 43 FR 26380, 26388 (June 19, 1978). The first set of
regulations implementing the NNSR program enacted by the 1977 CAA
Amendments were promulgated in January 1979. See 44 FR 3274 (January
16, 1979).
\13\ 40 CFR 52.21(i)(1) (1978) (emphasis added); 43 FR 26406.
\14\ 40 CFR 52.21(b)(7) (1978); 43 FR 26404.
\15\ 40 CFR 52.21(b)(4) (1978); 43 FR 26404.
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Furthermore, the 1978 PSD Regulations defined the term ``commence''
as applied to construction of a major stationary source or major
modification to mean that the ``owner or operator has all necessary
preconstruction approvals or permits and either'' has:

(i) Begun, or caused to begin, a continuous program of actual
on-site construction of the source, to be completed within a
reasonable time; or
(ii) Entered into binding agreements or contractual obligations,
which cannot be cancelled or modified without substantial loss to
the owner or operator, to undertake a program of actual construction
of the source to be completed within a reasonable time.\16\
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\16\ 40 CFR 52.21(b)(8) (1978); 43 FR 26404.

This definition remains as the definition of ``commence'' in the major
NSR regulations currently.
In neither the regulatory text nor in the accompanying preamble to
the 1978 PSD Regulations did the EPA provide an explanation of the
phrase ``shall be constructed.'' Moreover, the EPA did not identify
what sort of physical on-site construction activities an owner or
operator could permissibly undertake prior to receiving a PSD air
permit. In an attempt to clarify these concepts, the EPA issued two
guidance documents in 1978.

C. The EPA's Initial Policy Guidance on Allowed and Prohibited
Construction Activities

In October 1978, the EPA issued a memorandum titled: ``Source
Construction Prior to Issuance of PSD Permit'' (the ``October 1978
Memo'').\17\

[[Page 26962]]

In the October 1978 Memo, the EPA clarified to what ``extent a company
can legally construct, prior to PSD permit issuance, a building which
will house both PSD-affected and non-PSD affected facilities.'' The
October 1978 Memo stated that ``[i]n general, a structure which is to
house independent facilities, some of which are subject to PSD and some
which are not, may be constructed before a PSD permit is issued only if
the building is a necessary part of the PSD-exempt project and if it is
in no way modified to specifically accommodate the PSD-affected
facilities.'' The October 1978 Memo provided two examples. In the first
example, the October 1978 Memo stated that a facility involving the
construction of steam boilers and diesel engines which are to be housed
in the same building ``. . . may begin construction on the building
which will hold the boilers and diesel [engines], before the PSD permit
is issued, as long as the drains, piping, footings for the diesel
[engines], and any other installations necessary to accommodate the
diesel [engines] are not installed until the permit is issued'' because
the steam boilers were exempt from PSD requirements while the diesel
engines were not. In the second example, a case involving municipal
waste treatment plants, the October 1978 Memo stated the following: ``.
. . the question on whether construction of all parts of the treatment
facility must await permit issuance depends on the reliance of the
treatment facility on the incinerator [which is subject to PSD review].
That is, if the sludge incinerator is an integral part of the
wastewater treatment facility (the facility would not be built without
an incinerator), the PSD permit must be obtained before any work can
begin on any portion of the treatment plant.''
---------------------------------------------------------------------------

\17\ U.S. Environmental Protection Agency. (1978). Memorandum by
Edward Reich, Director, Division of Stationary Source Enforcement.
Source Construction Prior to Issuance of PSD Permit, available at:
<a href="https://www.epa.gov/sites/default/files/2015-07/documents/source.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/source.pdf</a>.
---------------------------------------------------------------------------

To support this conclusion, the EPA expressed concern that it would
be ``extremely difficult to deny issuance of a permit when it results
in a completed portion of a project having to remain idle.'' \18\ The
EPA reasoned that ``in order to avoid any equity arguments at a later
time, it is better to prevent any construction now rather than have a
`white elephant' on our hands later on.'' \19\
---------------------------------------------------------------------------

\18\ Id. at 2.
\19\ Id.
---------------------------------------------------------------------------

On December 18, 1978, the EPA issued a second memorandum on this
topic titled: ``Interpretation of `Constructed' as it Applies to
Activities Undertaken Prior to Issuance of a PSD Permit'' (the
``December 1978 Memo'').\20\ This memo sought to clarify ``where on the
continuum from planning to operation of a major emitting facility does
a company or other entity violate PSD regulations if it has not yet
received a PSD permit.'' The December 1978 Memo abandoned what it
described as the EPA's prior approach of ``mak[ing] the determination
on a case-by-case basis, after considering all of the facts of the
individual situation,'' and established national policy for defining
allowable and prohibited activities before a source is considered
``constructed'' in the context of PSD permitting. The allowable
activities were planning, ordering of equipment and materials, site-
clearing, grading, and on-site storage of equipment and materials. The
December 1978 Memo also clarified that ``[a]ny activities undertaken
prior to issuance of a PSD permit would, of course, be solely at the
owner's or operator's risk.'' Furthermore, the December 1978 Memo
stated that ``[a]ll on-site activities of a permanent nature aimed at
completing a PSD source for which a permit has yet to be obtained are
prohibited under all circumstances.'' The EPA further explained that
``[t]hese prohibited activities include installation of building
supports and foundations, paving, laying of underground pipework,
construction of permanent storage structures, and activities of a
similar nature.''
---------------------------------------------------------------------------

\20\ U.S. Environmental Protection Agency. (1978). Memorandum
from Edward Reich, Director, Division of Stationary Source
Enforcement. Interpretation of ``Constructed'' as it Applies to
Activities Undertaken Prior to Issuance of a PSD Permit, available
at: <a href="https://www.epa.gov/sites/default/files/2015-07/documents/cnstrctd.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/cnstrctd.pdf</a>.
---------------------------------------------------------------------------

While the December 1978 Memo established the EPA's initial policy
on this matter and provided specific examples on activities prohibited
before permit issuance, it also noted that the term ``constructed,'' as
used in the CAA, is open to further interpretation by the Agency.

D. The 1980 PSD Regulations and Current Definition of ``Begin Actual
Construction''

In August 1980, the EPA codified the Agency's 1978 policies in the
NSR regulations, promulgating the definition of ``begin actual
construction'' using some of the text reflected in prior policy
guidance memorandums (the ``1980 PSD Regulations'').\21\ This
regulatory definition has not been amended since and thus still exists
as the current definition for ``begin actual construction'' in both the
PSD and NNSR regulations. The definition delineates the point at which
physical construction activities can begin at a facility. The
definition is important for both regulatory compliance and operational
planning, as it determines the point in time when a facility begins
construction of a stationary source and may no longer proceed with
construction-related activities until it obtains its NSR permit. The
existing definition for ``begin actual construction'' can be found at
40 CFR 52.21(b)(11) and other parts of the EPA's NSR regulations.\22\
---------------------------------------------------------------------------

\21\ 45 FR 52676, 52736 (August 7, 1980).
\22\ Definition of ``begin actual construction''--40 CFR
51.165(a)(1)(xv), 51.166(b)(11), appendix S to part 51, and section
II.A.17.
---------------------------------------------------------------------------

Furthermore, the 1980 PSD Regulations also amended the ``source
applicability'' provision, introduced a definition for ``emissions
unit,'' and amended the definition of ``construction.'' The revised
``source applicability'' provision, titled ``Review of Major Stationary
Sources and Major Modifications--Source Applicability and Exemptions,''
prohibited beginning actual construction without a permit.\23\ The term
emissions unit was defined as ``any part of a stationary source which
emits or would have the potential to emit any pollutant subject to
regulation under the Act.'' \24\ The term ``emissions unit'' has since
been expanded and is now used in various places throughout the 1980 PSD
Regulations, including in the definition of ``begin actual
construction.'' Lastly, in the 1980 PSD Regulations, the revised
definition of ``construction'' is ``any physical change or change in
the method of operation (including fabrication, erection, installation,
demolition, or modification of an emissions unit) which would result in
a change in actual emissions.'' \25\ While revising the definition of
``construction'' in 1980, the EPA also substituted the newly introduced
term ``emissions unit'' for ``source,'' which had been used in the 1978
PSD Regulations definition of ``construction.'' \26\
---------------------------------------------------------------------------

\23\ 40 CFR 52.21(i)(1) (1980); 45 FR 52738 (August 7, 1980).
\24\ 40 CFR 52.21(b)(7) (1980); 45 FR 52736 (August 7, 1980).
\25\ 40 CFR 52.21(b)(8) (1980); 45 FR 52736 (August 7, 1980).
\26\ The EPA in 1980 also replaced the defined term ``source''
(as had been used in the 1978 PSD Regulations) with the term
``stationary source.'' In so doing, the EPA removed the elements
``equipment,'' ``operation,'' and ``combination thereof'' that had
appeared in the old definition of ``source,'' elements which the
D.C. Circuit determined to be unlawful in Alabama Power Co. v.
Costle, 636 F.2d 323, 395-96 (DC Cir. 1979). See 40 CFR 52.21(b)(5)
(1980); 45 FR 52736 (defining ``stationary source'' to mean ``any
building, structure, facility, or installation which emits or may
emit any pollutant subject to regulation under the Act.'').

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[[Page 26963]]

E. Subsequent EPA Policy Guidance on ``Begin Actual Construction''

In April 1981, the EPA issued a ``begin actual construction'' site-
specific determination through a letter regarding the ``City of
Detroit/General Motors Corporation; Central Industrial Park Project,''
in which the Agency determined that ``the cited demolition activities
do not fall within the Federal definitions of `begin actual
construction' and are thus not prohibited by the Federal PSD or
nonattainment regulations in question'' (the ``April 1981
Letter'').\27\ More specifically, the EPA determined that the ``PSD
regulations do not prohibit the site clearing activities . . . without
a permit, since the actions do not fall within the Federal definition
of `begin actual construction.' '' The letter further explained that
the latter definition is consistent with the December 1978 Memo and was
not affected by the 1980 PSD Regulations addition of the term
``demolition'' to the definition of ``construction.''
---------------------------------------------------------------------------

\27\ U.S. Environmental Protection Agency. (1981). Letter from
Valdas Adamkus, EPA Region 5 Acting Administrator, to Joseph Polito,
Esq., ``City of Detroit/General Motors Corporation; Central
Industrial Park Project,'' available at: <a href="https://www.epa.gov/sites/default/files/2015-07/documents/indspark.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/indspark.pdf</a>.
---------------------------------------------------------------------------

In March 1986, the EPA signed an additional memorandum related to
``begin actual construction'' titled ``Construction Activities Prior to
Issuance of a PSD Permit with Respect to `Begin Actual Construction' ''
(the ``March 1986 Memo'').\28\ The March 1986 Memo reiterated the
December 1978 Memo policy and discussed the relevant 1980 PSD
Regulations. The March 1986 Memo stated that, as used in the definition
of ``begin actual construction,'' the term ``emission unit'' should be
construed to ``include any installations necessary to accommodate that
unit.'' Furthermore, the March 1986 Memo stated the following:
---------------------------------------------------------------------------

\28\ U.S. Environmental Protection Agency. (1986). Memorandum
from Edward Reich, Director, Stationary Source Compliance Division,
Office of Air Quality Planning and Standards (OAQPS). Construction
Activities Prior to Issuance of a PSD Permit with Respect to ``Begin
Actual Construction,'' available at: <a href="https://www.epa.gov/sites/default/files/2015-07/documents/begin.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/begin.pdf</a>.

[B]efore issuance of the PSD permit, construction is prohibited
on any emission unit or any installation designed to accommodate the
emission unit. If the emissions unit (including any accommodating
installation) is an integral part of the source or modification
(i.e., the source or modification would not serve in accordance with
its original intent, except for the inclusion on the emission unit),
the PSD permit must be obtained before construction on the entire
---------------------------------------------------------------------------
source commences.

Subsequent EPA guidance documents and letters reiterated and
elaborated on the prior interpretations of the term ``begin actual
construction'' and provided guidance to the EPA Regions and State air
agencies. For example, a 1993 memorandum identified construction of a
retaining wall and excavation for a specific scenario as a prohibited
activity before obtaining an NSR permit (the ``May 1993 Memo'').\29\
More specifically, the May 1993 Memo stated that ``[i]f the
construction activity is an integral part of the PSD source or
modification, the source must obtain a PSD permit prior to undertaking
that construction.'' The May 1993 Memo reasoned that ``[c]onstruction
of a retaining wall is considered an activity under `begin actual
construction' because it is of a permanent nature.'' Although the EPA
had previously recognized site clearing and grading to be allowed prior
to obtaining a permit, in this case the Agency considered ``excavation
activities'' to be prohibited because they ``are costly, they
significantly alter the site, are an integral part of the overall
construction project, and are clearly of a permanent nature.'' In the
May 1993 Memo, the EPA reiterated the Agency's concern that a
``permitting authority would be placed in a very difficult position
when denying issuance of a permit when it results in a completed
portion of a project having to remain idle.''
---------------------------------------------------------------------------

\29\ U.S. Environmental Protection Agency. (1993). Memorandum
from John Rasnic, Director, Stationary Source Compliance, OAQPS.
Construction Activities at Georgia Pacific, available at: <a href="https://www.epa.gov/sites/default/files/2015-07/documents/cnstrctn.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/cnstrctn.pdf</a>.
---------------------------------------------------------------------------

Additionally, a 1995 letter provided a response to the Minnesota
Pollution Control Agency stating that the ``EPA agree[d] with Minnesota
that site clearing and grading are not prohibited by [the regulatory
definition of `begin actual construction']'' but that this definition
``prohibited (permanent and/or preparatory) preconstruction activities
. . . [and] would include any construction that is costly,
significantly alters the site, and/or [is] permanent in nature'' (the
``December 1995 Letter'').\30\ The December 1995 Letter also stated
that exemptions to ``allow construction of footings for emissions units
without a PSD permit in cold weather states . . . is not authorized
under the Act or the Federal PSD rules.'' In support of this
conclusion, the EPA reasoned that ``absent a prohibition on any costly,
significant or permanent preconstruction,'' sources could ``defeat''
the ``preconstruction requirement or its enforcement by making a
costly, substantial, and/or permanent investment'' and then ``later
argue that retrofitting of PSD requirements or a denial of the permit
would unreasonably interfere with their investment.''
---------------------------------------------------------------------------

\30\ U.S. Environmental Protection Agency. (1995). Letter from
John Seitz, Director, EPA OAQPS, to Mr. Charles Williams,
Commissioner, Minnesota Pollution Control Agency, available at
<a href="https://www.epa.gov/sites/default/files/2015-07/documents/19951213.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/19951213.pdf</a>.
---------------------------------------------------------------------------

F. The EPA's Request for Comment in 1996

In 1996, the EPA proposed numerous changes to the Agency's NSR
rules (the ``1996 Proposed Rule'').\31\ These did not include any
amendments to the definition of ``begin actual construction.'' But at
that time, the EPA took note of the fact that ``[s]everal industry
members'' of the CAA Advisory Committee's Subcommittee on NSR Reform
had ``recommended that the EPA change the NSR regulations to enable
sources to engage in a broader range of activities prior to receipt of
an NSR permit in cases involving modifications to existing sources.''
\32\ These members, the EPA stated, had ``asserted that it was
unnecessary and inappropriate to prohibit preliminary activities to
achieve the statutory purpose of requiring a permit before construction
begins,'' and that ``such prohibitions caused delay and added expense
for no good purpose.'' \33\ Recognizing that there was a ``wide
difference of opinion on these issues,'' the EPA solicited comment on
the matter.\34\
---------------------------------------------------------------------------

\31\ 61 FR 38250 (July 23, 1996).
\32\ Id. at 38270.
\33\ Id.
\34\ Id.
---------------------------------------------------------------------------

To ``assist in formulating comments,'' the EPA set forth a summary
of the Agency's interpretation of the CAA and policy. The EPA stated
that the CAA ``plainly bars construction without a permit.'' A policy
rationale for this understanding, the EPA argued, is that if
``companies were given unlimited ability to place `equity in the
ground' by constructing plants before a permit is issued, permitting
authorities' discretion in making permit decisions may be compromised,
and the ability of EPA and citizens to challenge the permit that is
eventually issued may likewise be undermined.'' \35\
---------------------------------------------------------------------------

\35\ 61 FR 38270-71 (July 23, 1996).
---------------------------------------------------------------------------

The EPA proposed no revision of the definition of ``begin actual
construction'' in the Agency's regulations on the grounds that the
``regulations and EPA's longstanding policy clearly identify the scope
of prohibited preconstruction activities.''

[[Page 26964]]

The EPA said those ``current regulations and policies'' would ``remain
in effect regardless of today's request for comment.'' \36\ The EPA
demonstrated the Agency's willingness to consider revisions to the
definition of ``begin actual construction'' in rulemaking by soliciting
public comments on all aspects of this issue, but ultimately did not
alter its reading of the CAA or pursue amendment of the regulations on
this topic.
---------------------------------------------------------------------------

\36\ Id. at 38271.
---------------------------------------------------------------------------

G. Tribal NSR Rule

In July 2011, the EPA promulgated a final rule titled ``Review of
New Sources and Modifications in Indian Country'' (the ``Tribal NSR
Rule'').\37\ In the Tribal NSR Rule, the EPA created two air permitting
regulatory programs for Indian Country: the Tribal Minor NSR and the
Tribal Nonattainment NSR programs. The Tribal Minor NSR program applies
to new and modified minor stationary sources and to minor modifications
at existing major stationary sources throughout Indian country where
there is no EPA-approved TIP in place. The Tribal Nonattainment NSR
program applies to new and modified major sources in areas of Indian
country that are designated as nonattainment areas.
---------------------------------------------------------------------------

\37\ 76 FR 38748 (July 11, 2011).
---------------------------------------------------------------------------

In May 2014, the EPA finalized amendments to the Tribal NSR Rule
that defined the term ``begin construction'' and revised the definition
of the term ``commence construction'' for purposes of the Tribal minor
NSR program.\38\ The term ``begin construction'' was defined to include
a list of preparatory activities that are not considered to be
construction activities: ``engineering and design planning,
geotechnical investigation (surface and subsurface explorations),
clearing, grading, surveying, ordering of equipment and materials,
storing of equipment or setting up temporary trailers to house
construction management or staff and contractor personnel.'' The term
``commence construction'' was revised to be similar to the definition
of ``commence'' in the Federal regulations for the PSD program.\39\
---------------------------------------------------------------------------

\38\ 79 FR 31035 (May 30, 2014).
\39\ 40 CFR 52.21(b)(9).
---------------------------------------------------------------------------

H. Draft EPA Guidance Memorandum in 2020

In March 2020, in a draft guidance memorandum (the ``March 2020
Memo''), the EPA described a revised interpretation of the definition
of ``begin actual construction'' in the Agency's regulations and
solicited public comment on that interpretation.\40\ In the March 2020
Memo, the EPA stated the following:
---------------------------------------------------------------------------

\40\ U.S. Environmental Protection Agency. (2020). Draft
Memorandum from Anne Idsal, Principal Deputy Assistant Administrator
for the Office of Air and Radiation. Interpretation of ``Begin
Actual Construction'' Under the New Source Review Preconstruction
Permitting Regulations, available at: <a href="https://19january2021snapshot.epa.gov/sites/static/files/2020-03/documents/begin_actual_construction_032520_1.pdf">https://19january2021snapshot.epa.gov/sites/static/files/2020-03/documents/begin_actual_construction_032520_1.pdf</a>.

[T]he Agency's current interpretation . . . is considered by
many industry stakeholders to be overly and unnecessarily
restrictive. Some have asserted that, due to this interpretation,
projects have been delayed and efforts to engage in construction
pursuant to staged schedules (e.g., which seek to take account of
seasonal conditions in cold-weather areas) have been frustrated.\41\
---------------------------------------------------------------------------

\41\ Id. at 2.

Under the revised interpretation of the EPA's regulations
articulated by the Agency in the March 2020 Memo, ``a source owner or
operator may, prior to obtaining an NSR permit, undertake physical on-
site activities--including activities that may be costly, that may
significantly alter the site, and/or are permanent in nature--provided
that those actions do not constitute physical construction on an
emissions unit, as the term is defined in 40 CFR 52.21(b)(7).'' Under
this revised interpretation, in contrast to the March 1986 Memo, ``an
`installation necessary to accommodate' the emissions unit at issue is
not considered part of that emissions unit, and those construction
activities that may involve such `accommodating installations' may be
undertaken in advance of the source owner or operator obtaining a major
NSR permit.'' \42\ The EPA emphasized in the March 2020 Memo that,
under the Agency's regulations, there was a need to draw a distinction
between an emissions unit and a major stationary source. During public
comment on the March 2020 Memo, many commenters asked the EPA to
provide guidance on how to distinguish between an emissions unit and
stationary source. The EPA considered the public comments but
ultimately did not issue, and does not presently intend to issue, a
final version of the March 2020 Memo. For reasons described in this
preamble, the EPA has instead chosen to propose revisions to the
Agency's NSR regulations as they pertain to beginning actual
construction of a new major stationary source or major modification of
an existing major stationary source.
---------------------------------------------------------------------------

\42\ Id. at 2-3.
---------------------------------------------------------------------------

I. The EPA's September 2025 Letter to Maricopa County Air Quality
Department

On September 2, 2025, the EPA sent a letter to the Maricopa County
Air Quality Department (MCAQD) to address an MCAQD request for
clarification on the interpretation of ``begin actual construction'' as
it pertains to a project by TSMC Arizona Corporation (TSMC) (the
``September 2025 Letter'').\43\ In the September 2025 Letter, the EPA
summarized the factual scenario presented as follows:
---------------------------------------------------------------------------

\43\ U.S. Environmental Protection Agency. (2025). Letter from
Aaron Szabo, EPA Assistant Administrator for the Office of Air and
Radiation, to Philip McNeely, Director, MCAQD, available at: <a href="https://www.epa.gov/system/files/documents/2025-09/tsmc-arizona-begin-actual-construction-epa-response-letter.pdf">https://www.epa.gov/system/files/documents/2025-09/tsmc-arizona-begin-actual-construction-epa-response-letter.pdf</a>.

[T]his company proposes to construct the core and shell of a
building that will eventually house emission units without
contemporaneously beginning construction on any semiconductor
manufacturing equipment that could be classified as an emissions
unit. TSMC also states that this phase of construction will not
include air pollution capture or control equipment or foundations
---------------------------------------------------------------------------
for any emission units.

In a letter to MCAQD, TSMC stated that ``[t]he core and shell
itself is neither an emissions unit nor is it a capture device, as all
of the emissions ultimately produced by the fab are captured through
control devices and duct systems meticulously designed to maintain a
cleanroom environment. As tool hookup completes, semiconductor
manufacturing equipment can only then begin installation.'' \44\
---------------------------------------------------------------------------

\44\ Id. at 2.
---------------------------------------------------------------------------

In its letter to the EPA, MCAQD stated that it ``is inclined to
agree with TSMC that if a structure contains no emissions unit(s) it is
not a `source' subject to CAA permitting authorities because it does
not emit or have the potential to emit pollutants.'' MCAQD stated its
understanding that the building ``shells'' that TSMC sought to
construct prior obtaining an NSR permit ``are not specifically
configured for emissions units (e.g., there is no piping, ventilation
ductwork or specific foundation work for any emissions units.'' \45\
---------------------------------------------------------------------------

\45\ Id. at 3.
---------------------------------------------------------------------------

After reviewing the provided information on TSMC's proposed project
and the applicable MCAQD regulations, the EPA concluded that ``it is
within MCAQD's discretion to interpret its existing regulations to
allow TSMC to undertake, prior to obtaining an NSR permit . . .,
[construction of] the core and shell of a building, provided that the
construction of this

[[Page 26965]]

core and shell of a building does not involve the physical construction
on an emissions unit or the laying of underground piping or
construction of supports and foundations that are part of any emissions
unit.'' Regarding the interpretation discussed in the March 2020 Memo,
---------------------------------------------------------------------------
the EPA said the following:

Consistent with the views expressed in the March 2020 Draft
Guidance, the EPA continues to recognize that the definition of the
term ``begin actual construction'' in EPA's regulation prohibits
``the initiation of physical on-site construction on an emissions
unit'' and that this does not prohibit initiation of physical on-
site construction of those parts of a facility that do not qualify
as an emission unit. The EPA also continues to view the 1986 Reich
memo to have adopted an overly broad reading of the term ``emissions
unit'' to suggest that it includes installations necessary to
accommodate an emissions unit.\46\
---------------------------------------------------------------------------

\46\ Id. at 2.

The September 2025 Letter stated further that ``[a]ny construction
activities undertaken by TSMC prior to issuance of an NSR permit by
MCAQD would be solely at TSMC's risk, as MCAQD would retain the
discretion to deny any subsequent application to construct a stationary
source of air pollution (including emissions units) if the applicable
criteria are not met.'' \47\
---------------------------------------------------------------------------

\47\ Id. at 3.
---------------------------------------------------------------------------

J. Need for Regulatory Action

The EPA is initiating a rulemaking to revise the definition of
``begin actual construction'' to enhance clarity, regulatory certainty,
and align the rule with statutory and policy directives. As noted in
comments submitted to the EPA and discussed herein, the current
definition has created significant uncertainty and inconsistent
interpretations, leading to burdens on permitting authorities and
industry stakeholders, complicating compliance, and delaying projects.
The proposed revisions aim to align the definition with the best
reading of the CAA and implement recent Executive Orders focused on
regulatory reform and burden reduction. By clarifying permitting
requirements, the EPA seeks to improve the efficiency and effectiveness
of the regulations in a manner consistent with the CAA. These changes
are designed to mitigate uncertainties, reduce regulatory burdens, and
balance economic growth and environmental protection by allowing owners
and operators the opportunity, when appropriate, to begin construction
on non-emitting components before obtaining an NSR permit without
increasing air pollutant emissions resulting from the subsequent
construction of a stationary source after such a permit is issued.

III. Legal Authority

The statutory authority for this proposed action is CAA sections
110(a)(2)(C), 165, 172(a)(5), 173, and 301(a)(1).\48\ These provisions
in the CAA require that States and the EPA regulate ``construction'' of
stationary sources of air pollution and prohibit ``construction''
without a permit. For both major and minor sources, CAA section
110(a)(2)(C) requires that SIPs contain a program to provide for
``regulation of the modification and construction of any stationary
source within the areas covered by the plan as necessary to assure that
[NAAQS] are achieved.'' \49\ This program, commonly called NSR, must
include the major source PSD and NNSR permit program requirements under
parts C and D of title I of the CAA, which include sections 165, 172,
and 173.\50\ Unless provided otherwise by statute, an agency may revise
or rescind prior actions so long as it acknowledges the change in
position, provides a reasonable explanation for the new position, and
considers legitimate reliance interests in the prior position.\51\
---------------------------------------------------------------------------

\48\ 42 U.S.C. 7410(a)(2)(C), 7475(a), 7502(c)(5), 7503,
7601(a)(1).
\49\ 42 U.S.C 7410(a)(2)(C) (emphasis added); CAA section
110(a)(2)(C).
\50\ For major sources located in attainment areas, one of the
PSD provisions in Part C, CAA section 165(a), prohibits construction
without a permit, stating that ``[n]o major emitting facility on
which construction is commenced after August 7, 1977, may be
constructed in any area to which this part applies unless . . . a
permit has been issued for such proposed facility in accordance with
this part . . . .'' 42 U.S.C. 7475(a) (emphasis added). The relevant
NNSR provision in Part D, CAA section 172(c)(5), includes similar
language: ``plan provisions shall require permits for the
construction and operation of new or modified major stationary
sources anywhere in the nonattainment area in accordance with [CAA
section 173].'' 42 U.S.C. 7502(c)(5) (emphasis added).
\51\ See, FDA v. Wages & White Lion Invs., L.L.C., 145 S. Ct.
898, 917 (2025); FCC v. Fox Television Stations, Inc., 556 U.S. 502
(2009); Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29 (1983); Clean Air Council v. Pruitt, 862 F.3d 1, 8 (D.C.
Cir. 2017) (``Agencies obviously have broad discretion to reconsider
a regulation at any time.'').
---------------------------------------------------------------------------

CAA section 169(2)(C) defines the term ``construction'' for
purposes of the part C PSD program to include ``modification'' but does
not identify or define what constitutes construction of a source.\52\
There is no definition of the term ``constructed'' in this section or
any other section of the CAA. CAA section 169(2)(A) defines
``commenced'' as applied to construction of a major emitting facility
as occurring when the owner or operator has obtained all necessary
preconstruction approvals or permits and has done either of the
following:
---------------------------------------------------------------------------

\52\ 42 U.S.C. 7479(2)(C); CAA section 169(2)(C).

(i) begun, or caused to begin, a continuous program of physical
on-site construction of the facility; or
(ii) entered into binding agreements or contractual
obligations... to undertake a program of construction of the
facility to be completed within a reasonable time.\53\
---------------------------------------------------------------------------

\53\ 42 U.S.C. 7479(2)(A); CAA section 169(2)(A).

None of these provisions identify a specific point ``on the
continuum from planning to operation of a major emitting facility''
when ``construction'' of such a source begins or the source may be
considered ``constructed.'' \54\ The definition of ``commenced'' does
not do so because its function was to identify construction projects
pending in 1977 that had progressed to the point that they were exempt
from the newly enacted requirement to obtain a PSD permit. The first
sentence of CAA section 165(a) requires a permit for a ``major emitting
facility on which construction is commenced after August 7, 1977.''
\55\ As applied through this sentence in the CAA, the definition of
``commenced'' identifies the nature and extent of the construction
activity a source owner or operator must have completed to avoid having
to obtain an additional preconstruction approval under the PSD program
after the source otherwise ``has obtained all necessary preconstruction
approvals or permits'' under requirements other than the PSD program.
This definition distinguishes between entering into contractual
obligations and ``physical on-site construction of the facility,'' but
it does not describe the type of activities that qualify as the latter.
---------------------------------------------------------------------------

\54\ December 1978 Memo at 1.
\55\ 42 U.S.C. 7475(a); CAA section 165(a) (emphasis added).
---------------------------------------------------------------------------

The EPA's December 1978 policy for identifying construction
activities that are precluded without an NSR permit was based on the
Agency's view that the CAA provisions described above left a gap for
the EPA to resolve the question of ``where on the continuum from
planning to operation of a major emitting facility does a company or
other entity violate the PSD regulations if it has not yet received a
PSD permit.'' \56\ The December 1978 Memo states that the ``statute and
regulations do not answer this question'' and that the ``term
`constructed' seems to be open to further interpretation by the EPA.''
\57\ In the December 1978 Memo, the EPA stated that the term
``commenced'' was ``quite specifically

[[Page 26966]]

defined in . . . Section 169(2)(A) of the Clean Air Act'' but that this
term served only the ``purpose of deciding the threshold question of
the applicability of the PSD regulations.'' \58\ The EPA further stated
``we are not bound by [the statutory and regulatory definitions of
``commence''] in deciding what activities may be conducted prior to
receiving a necessary PSD permit.'' \59\
---------------------------------------------------------------------------

\56\ December 1978 Memo at 1.
\57\ Id.
\58\ Id. at 2.
\59\ Id.
---------------------------------------------------------------------------

Applying this discretion, the EPA adopted a policy in 1978 to
prohibit ``on-site activities of a permanent nature aimed at completing
a PSD source for which a permit has yet to be obtained.'' The EPA
identified specific activities included in this formulation and said
that this policy reflected the ``most legally correct position.'' But
the December 1978 Memo did not explain how the CAA supported that
conclusion.
The EPA essentially concluded in the December 1978 Memo that
Congress had left a gap for the Agency to fill and made a policy
decision on where to draw the line between construction that requires a
permit and construction that does not. Two years later, in 1980, the
EPA reflected this policy in the 1980 PSD Regulations by adding and
defining the term ``begin actual construction.'' The 1980 PSD
Regulations refined the 1978 policy by selecting the point on the
continuum when ``physical on-site construction activities of a
permanent nature'' are started ``on an emissions unit.'' \60\ But the
preamble to the 1980 PSD Regulations did not provide further
justification for the conclusion that this policy was based on the most
legally correct position.
---------------------------------------------------------------------------

\60\ 45 FR 52676, 52736 (August 7, 1980).
---------------------------------------------------------------------------

The EPA added some detail to the Agency's reading of the CAA in the
1996 Proposed Rule that proposed no amendment to the definition of
``begin actual construction'' but sought comment on the topic.\61\ The
EPA stated in the 1996 Proposed Rule that the CAA ``plainly bars
construction without a permit'' and that it was ``clear that core
activities at an industrial site, such as the fabrication or
installation of pollution-generating equipment, constitute
`construction' within the meaning of the Act.'' \62\ The EPA also
acknowledged that ``the statute does not address the details of the
construction process, nor does it constrain the EPA's discretion to
fashion regulatory mechanisms to harmonize the needs of environmental
protection and economic growth in a manner consistent with the
legislative purpose.'' \63\
---------------------------------------------------------------------------

\61\ 61 FR 38270-71
\62\ Id.
\63\ Id. at 38271.
---------------------------------------------------------------------------

The focus of the March 2020 Memo was on improving the EPA's
interpretation of the text in the Agency's regulations, and this action
reflected the same understanding of the CAA that the Agency had
described in 1978 and 1996. The EPA discussed the relevant parts of the
CAA,\64\ but again stated that ``given that Congress provided neither a
statutory definition of `constructed' nor a meaningful definition of
`construction,' EPA has discretion to determine where on that
`continuum' it should draw a reasonable line.'' \65\ The EPA noted and
did not question the Agency's additional 1996 interpretative statement
that construction requiring a permit is ``the core activities at an
industrial site, such as the fabrication or installation of pollution-
generating equipment.'' \66\
---------------------------------------------------------------------------

\64\ March 2020 Memo at 3-4.
\65\ Id. at 13.
\66\ Id. at 11.
---------------------------------------------------------------------------

Under the Chevron doctrine, the U.S. Supreme Court maintained for
several decades that regulatory agencies are implicitly authorized by
statutory ambiguity to adopt permissible readings of the statute that
effectuate the agencies' reasonable policy goals.\67\ But the Supreme
Court recently altered its principles regarding review of agency
interpretations of laws in Loper Bright Enterprises v. Raimondo.\68\
The Court rejected its prior framework, which had required reviewing
courts to defer to an agency's interpretation of an ambiguous statute
that it administers so long as that court agrees the agency's chosen
interpretation is a permissible one. In Loper Bright, the Court
interpreted provisions in the Administrative Procedure Act (APA) and
held that ``courts need not and under the APA may not defer to an
agency interpretation of the law simply because a statute is
ambiguous.'' \69\ The Court concluded that ``[c]ourts must exercise
their independent judgment in deciding whether an agency has acted
within its statutory authority.'' \70\ In this opinion, the Court
rejected the idea that ambiguity in a statute reflects Congressional
intent that an agency, as opposed to a court, resolve the resulting
interpretive question.\71\ Rather, the Court reasoned that all statutes
have ``a single, best meaning'' that it is the responsibility of the
courts to identify.\72\ But with this new framework, the Court also
recognized that ``the statute's meaning may well be that the agency is
authorized to exercise a degree of discretion'' and that there may be
cases when ``the best reading of a statute is that it delegates
discretionary authority to an agency.'' \73\
---------------------------------------------------------------------------

\67\ Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S.
837 (1984).
\68\ 603 U.S. 369 (2024).
\69\ Id. at 413.
\70\ Id. at 412.
\71\ Id. at 399.
\72\ Id.
\73\ Id. at 394-95.
---------------------------------------------------------------------------

In Loper Bright, the Supreme Court observed that, to resolve
ambiguities, ``courts use every tool at their disposal to determine the
best reading of the statute'' and those include ``traditional tools of
statutory construction.'' \74\ One such tool is the ``fundamental canon
of statutory construction that the words of a statute must be read in
their context and with a view to their place in the overall statutory
scheme.'' \75\ A court may look to legislative history or other
extrinsic material as an aid in statutory construction ``only to the
extent they shed a reliable light on the enacting Legislature's
understanding of otherwise ambiguous terms.'' \76\ The interpretation
of an agency may be persuasive to the court based on ``the thoroughness
evident in its consideration, the validity of its reasoning, [and] its
consistency with earlier and later pronouncements.'' \77\ The Supreme
Court has also observed that ``the informed judgment of the Executive
Branch--especially in the form of an interpretation issued
contemporaneously with the enactment of a statute--could be entitled to
`great weight.' '' \78\
---------------------------------------------------------------------------

\74\ Id. at 401-02
\75\ Util. Air Regulatory Group v. EPA, 573 U.S. 302, 320
(2014).
\76\ Exxon Mobil Corp. v. Allapattah Servs., 545 U.S. 546, 568
(2005).
\77\ Loper Bright, 603 U.S. at 402 (quoting Skidmore v. Swift &
Co., 323 U.S. 134, 140 (1944)).
\78\ Loper, 603 U.S. at 388-89 (citing and quoting U.S. v. Am.
Trucking Ass'n, 310 U.S. 534, 549 (1940); see also, id, 603 U.S. at
402.
---------------------------------------------------------------------------

To date, Federal courts have not identified a best reading of the
NSR provisions in the CAA regarding the line between construction that
requires a permit and construction that does not. The U.S. Court of
Appeals for the Third Circuit recently considered ``what sort of
construction triggers the need for a PSD permit,'' but in a context
involving restarting a stationary source that had been shut down.\79\
In its decision, the Third Circuit held that the definition of
``construction'' in CAA section 169 does not allow the EPA to include
resuming ``operation'' of a stationary source. Considering use of the
term ``construction'' in CAA sections 165 and

[[Page 26967]]

169 together, the Third Circuit wrote that ``[t]he type of construction
that requires a PSD permit is construction commenced after 1977 that
brings a major facility into existence,'' \80\ but the Third Circuit
did not attempt to identify when such construction on a major facility
starts.
---------------------------------------------------------------------------

\79\ Port Hamilton Refin. & Transp., LLLP v. EPA, 87 F.4th 188,
194 (3rd Cir. 2023).
\80\ Id.
---------------------------------------------------------------------------

In the March 2020 Memo describing the revised interpretation of the
term ``begin actual construction'' in the NSR regulations, the EPA
observed that the phrase ``may be constructed'' in CAA section 165(a)
``might reasonably be construed as precluding the initiation of any
construction activity prior to the issuance of a permit.'' The EPA
continued as follows: ``On the other hand, the phrase could also
reasonably be read to allow construction to proceed right up to the
point of near completion, before the source would be considered to have
been `constructed.' '' While these observations were sound when made,
the Supreme Court has since clarified that the EPA's task is not to
choose among permissible interpretations within an open range of this
nature. To discern the ``single, best'' meaning for purposes of this
rulemaking, a more thorough examination of the statute is required.
The statutory prohibition on construction without a permit requires
answering two questions. The first is ``what'' the CAA requires a
permit to construct. The second is ``when'' construction of that
``what'' begins. The EPA's past efforts to define and interpret the
phrase ``begin actual construction'' have addressed both questions, at
least implicitly. The EPA has expressly sought to determine ``where on
the continuum from planning to operation of a major emitting facility''
prohibited construction begins. This continuum across a sequence of
events suggests a focus on the point in time ``when'' construction
begins. But the EPA has also identified specific activities that are
permissible prior to (or without) a permit, which partly addressed the
``what'' question.
Therefore, the EPA begins by examining ``what'' the CAA requires a
permit to construct. The relevant provisions of the CAA require a
permit prior to construction of a ``stationary source'' of air
pollution. The PSD provision at CAA section 165 prohibits construction
of a ``major emitting facility'' without a permit.\81\ In turn, a
``major emitting facility'' is defined as ``any of the following
stationary sources of air pollutants'' that emits more than 100 tpy or
``any other source'' that emits more than 250 tpy.\82\ The latter
definition lists categories of industrial facilities and thereby
illustrates the type of facilities that Congress considered to be a
stationary source in 1977, in the absence of a definition of
``stationary source'' in the CAA. In 1990, Congress added a definition
of the term ``stationary source'' to the CAA. This term includes
``generally any source of an air pollutant except those resulting
directly from'' engines and vehicles that are regulated as mobile
sources under title II of the CAA.\83\ The NNSR provision at CAA
section 172(c)(5) requires a permit ``for the construction and
operation of new or modified major stationary sources.'' \84\ Likewise,
the term ``major stationary source'' is used in at least two places in
CAA section 173.\85\ Since 1977, the CAA has defined the term ``major
stationary source'' to mean ``any stationary facility or source of air
pollutants which directly emits, or has the potential to emit, one
hundred tons per year or more of any air pollutant . . . .'' \86\ CAA
section 110(a)(2)(C) likewise requires a program to regulate
``construction of any stationary source.'' \87\ So, it is clear that,
under the NSR program for major sources, the ``what'' that the CAA
requires a permit to construct is a stationary source that emits air
pollutions in amounts greater than specified thresholds.
---------------------------------------------------------------------------

\81\ 42 U.S.C. 7475(a); CAA section 165(a).
\82\ 42 U.S.C. 7479(1); CAA section 169(1) (emphasis added).
\83\ 42 U.S.C. 7602(z); CAA section 302(z).
\84\ 42 U.S.C. 7502(c)(5); CAA section 172(c)(5).
\85\ 42 U.S.C. 7503(a)(1)(B), (c); CAA section 173(a)(1)(B),
(c).
\86\ 42 U.S.C. 7602(j); CAA section 302(j).
\87\ 42 U.S.C. 7410(a)(2)(c); CAA section 110(a)(2)(c).
---------------------------------------------------------------------------

The essential characteristic of a stationary source under these
statutory provisions is that it emits air pollutants. The three
statutory definitions described above each use a variation of the
phrase ``source of air pollutants.'' \88\ The definitions of ``major
emitting facility'' and ``major source'' each identify a source as
``major'' based on tonnage thresholds of ``any air pollutant'' that the
source ``emits, or has the potential emit.'' \89\
---------------------------------------------------------------------------

\88\ 42 U.S.C. 7479(1), 7602(j), 7602(z); CAA sections 169(1),
302(j), 302(z).
\89\ 42 U.S.C. 7602(j); see 42 U.S.C 7479(1); CAA sections
302(j), 169(1) (using the phrase ``emit, or have the potential to
emit'').
---------------------------------------------------------------------------

These provisions are best read to mean that the CAA does not
require a permit for all activities that could be considered
construction, consistent with the EPA's longstanding interpretation.
For major stationary sources, the statute clearly prohibits
construction of the components of a facility that ``emit'' or are a
``source'' of air pollution without a permit but does not require a
permit for construction of something that does not have that
characteristic. Consistent with this reading, in 1996, the EPA stated
that it was ``clear that core activities at an industrial site, such as
the fabrication or installation of pollution-generating equipment,
constitute `construction' within the meaning of the Act.'' \90\
Furthermore, these CAA provisions do not clearly displace traditional
State authority to regulate land use and require general building
permits for construction.\91\
---------------------------------------------------------------------------

\90\ 61 FR 38270-71 (July 23, 1996).
\91\ See, Sackett v. EPA, 598 U.S. 651, 679 (2023).
---------------------------------------------------------------------------

In addition, CAA section 110(a)(2)(C) requires regulation of
construction ``as necessary'' to protect the NAAQS.\92\ This is not a
mandate to regulate construction of something that does not emit air
pollutants. While the decision on how much regulation is necessary is
for a State to determine in the first instance in its plan, the EPA
does not consider it clearly ``necessary'' to regulate something that
does not emit air pollutants in order to protect the NAAQS.
---------------------------------------------------------------------------

\92\ 42 U.S.C. 7410(a)(2)(c); CAA section 110(a)(2)(c).
---------------------------------------------------------------------------

The CAA provides less direct guidance on the question of ``when''
construction of something that emits air pollutants begins. There is no
definition of the term ``constructed,'' and the definition of
``construction'' only makes clear that this term includes the
``modification'' of a facility that was previously constructed. The
definitions of stationary source, major stationary source, and major
emitting facility identify their essential characteristics as something
that emits air pollutants, but these definitions do not provide insight
on when construction begins on such sources or facilities. As discussed
above, the definition of ``commenced'' does not function to identify
permissible or prohibited construction in relation to the permit
requirement.
Notwithstanding its role in Part C of title I of the CAA, the
definition of ``commenced'' includes the following two categories of
activities that fall on the continuum from planning to operation of a
stationary source: ``a continuous program of physical on-site
construction of the facility'' and entering into ``binding agreements
or contractual obligations . . . to undertake a program of construction
of the facility.'' \93\ These stages of construction occur after
planning and before operation, thus neither at the

[[Page 26968]]

beginning nor end of the continuum. Contracting will generally precede
physical on-site construction because an owner or operator of a
facility would typically need to hire construction services to begin
physical on-site construction. While these parts of the definition of
``commence'' are not controlling on the question of ``when'' addressed
in this proposed rule, they are part of the context of the NSR
provisions.
---------------------------------------------------------------------------

\93\ 42 U.S.C. 7479(2)(A); CAA section 169(2)(A).
---------------------------------------------------------------------------

While the EPA recognized the definition of ``commenced'' did not
dictate which construction activities were permissible or prohibited
prior to obtaining permit, the Agency nevertheless chose in 1980 to use
a phrase from this definition (``physical on-site construction'') in
the definition of ``begin actual construction.'' The EPA chose not to
prohibit entering into contracts without a permit and had earlier
stated that ``planning'' was permissible. Thus, the EPA's initial
interpretation, close in time to the 1977 enactment of the NSR
provisions in the CAA, was that these provisions prohibited ``physical
on-site construction'' without a permit but not the planning or
contracting steps that would be expected to precede physical on-site
construction.
The EPA suggested in the March 2020 Memo that the term ``may be
constructed'' in section 165(a) of the CAA, when read in isolation,
could support drawing the line of ``when'' construction begins to be a
point near the completion of construction of a facility. At this point,
the nature of the built structure should make clear that it is
something that will generate and emit air pollutants. But other parts
of the CAA support the EPA's longstanding view that the NSR program is
a ``preconstruction'' permitting program, meaning that a permit is
required before construction begins. CAA sections 165(a)(4) and
173(a)(1) require a permitting authority to ensure that the proposed
facility will apply advanced pollution control technology. It should be
more cost-effective to install and integrate such pollution control
technology into a pollutant-emitting facility before its construction
is substantially completed.\94\ In addition, under the PSD program, CAA
section 167 empowers the EPA to ``take such measures, including
issuance of an order, or seeking injunctive relief, as necessary to
prevent the construction or modification of a stationary source that
does not conform to the requirements of [the PSD provision in Part C of
Title I of the CAA].'' \95\
---------------------------------------------------------------------------

\94\ This is consistent with the understanding of legislators
that drafted these laws, as reflected in a report of the Interstate
and Foreign Commerce Committee of the House of Representatives. H.R.
Rep. No. 95-294 at 136 (1977) (describing hearing testimony that
``it costs 25 percent less to build flue gas desulfurization systems
as part of a new source at time of construction than to retrofit
that same source after construction'').
\95\ 42 U.S.C. 7477; CAA section 167. This provision has most
frequently been applied by the EPA to support orders and civil
actions to enjoin specific construction activities by individuals or
corporations at a particular location, since ``issuance of an order,
or seeking injunctive relief'' is expressly identified as included
within ``such measures'' and the title to this section of the CAA is
``Enforcement.'' But the term ``including'' does not restrict ``such
measures'' to only the issuance of orders and civil actions in court
seeking an injunction. This provision also supports rulemaking by
the EPA to ``prevent'' construction that does not conform to the
requirements of the CAA.
---------------------------------------------------------------------------

Thus, in context, CAA section 165(a) should be read to require
authorization for construction of a source of air pollution before
construction starts, not when it is nearly complete.\96\ But the nature
of what is being constructed may be more ambiguous when construction-
related activities begin on a particular site. Nevertheless,
prohibiting physical construction of a source of air pollution without
a permit requires identifying the nature of what is being constructed.
That can be accomplished by considering the characteristics of the
equipment or components being constructed that enable them to be
identified as a source of air pollution and distinguished from
something that is not.
---------------------------------------------------------------------------

\96\ See United Sav. Assn of Tex. v. Timbers of Inwood Forest
Assoc. Ltd., 484 U. S. 365, 371 (1988) (``A provision that may seem
ambiguous in isolation is often clarified by the remainder of the
statutory scheme . . . because only one of the permissible meanings
produces a substantive effect that is compatible with the rest of
the law.'').
---------------------------------------------------------------------------

The legislative history of the 1977 Amendments to the CAA does not
shed additional light on the question of when construction that
requires a permit begins on a stationary source.\97\ The House, Senate,
and Conference Committee reports associated with the enactment of the
1977 Amendments to the CAA do not speak to the point in the process of
constructing a stationary source at which a permit must be
obtained.\98\ One notable takeaway from reviewing the discussion on the
NSR permitting program in these reports is the emphasis on protecting
air quality and promoting the development of pollution control
technology.\99\
---------------------------------------------------------------------------

\97\ Public Law 95-95.
\98\ Id.
\99\ Rep. No. 95-127 at 18, 31-32; H.R. Rep. No. 95-294 at 145
(1977).
---------------------------------------------------------------------------

Congress more directly identified in the statutory text the
purposes of Part C of title I of the CAA, which include ``to insure
that economic growth will occur in a manner consistent with the
preservation of existing clean air resources.'' \100\ The Supreme Court
has recognized that, in enacting the NSR program, ``Congress sought to
accommodate the conflict between the economic interest in permitting
capital improvements to continue and the environmental interest in
improving air quality.'' \101\ Based on this opinion, the D.C. Circuit
wrote that ``there can be no doubt that EPA is entitled to balance
environmental concerns with economic and administrative concerns, at
least to a point.'' \102\
---------------------------------------------------------------------------

\100\ 42 U.S.C. 7570(3).
\101\ Chevron, 467 U.S. at 851.
\102\ New York, 413 F.3d at 23.
---------------------------------------------------------------------------

Based on these considerations, the EPA views the best reading of
the CAA to be that an NSR permit is required ``when'' physical
construction on a site begins on equipment or components that have
characteristics that identify them as something that will emit air
pollution, as distinguished from equipment or components that will not.
This reading integrates the EPA's understanding of ``what'' the statute
requires a permit to construct with the Agency's interpretation shortly
after the 1977 enactment of statute that a permit is required prior to
beginning physical on-site construction (not before entering into
contracts). This reading reflects the context-based understanding that
the CAA requires an NSR permit at the beginning of physical
construction of a stationary source and provides a means to identify
when construction of a stationary source begins. Finally, this reading
serves to balance economic growth with environmental protection by
enabling owners and operators to advance project development without an
NSR permit until the point of physical construction begins on the
elements of a project that have the characteristics of a stationary
source.
The EPA has not identified text in the NSR provisions of the CAA or
discussion in the legislative history that suggests the Agency or
States should prohibit construction on a site because it may be costly
or permanent beyond a certain point to change course. What is material
under the CAA is whether the construction is something that emits air
pollution, not whether it may be costly to install additional controls
or difficult to remove. The phrase ``equity in the ground'' does not
appear in the NSR provisions of the CAA or legislative history from
1977. Nothing suggests that Congress was motivated by concern about the
balance of power between regulators and permit applicants. The focus is
on protecting air quality from

[[Page 26969]]

increased emissions resulting from the construction and modification of
stationary sources and stimulating improvement of pollution control
technology without hampering economic growth. Regardless of its merits
as a general matter, the EPA's prior objective to prevent owners from
making costly investments before obtaining a permit was a policy choice
not grounded in the CAA and not required by statute. The EPA did not
previously identify a statutory foundation for this policy against
owners placing ``equity in the ground'' before obtaining a permit. But
if such ``equity'' is something that emits air pollutants, the
provisions in the CAA described above require the EPA and States to
prevent it from occurring before a permit is issued.
Owners or operators and permitting authorities should be mindful
that engaging in some on-site construction activities that are allowed
under this proposed rule prior to obtaining an NSR permit could
otherwise be limited by other Federal, State, or local laws that may
apply in certain circumstances. This could include compliance with
other CAA requirements besides NSR, other environmental statutes
administered by the EPA, and other types of permitting and licensing
requirements within the jurisdiction of agencies other than the Agency.
When applicable according to their terms, this may also include cross-
cutting laws such as the Endangered Species Act or the National
Historic Preservation Act. Compliance with such cross-cutting Federal
laws is generally the responsibility of the Federal agency authorizing,
funding, or carrying out such actions unless a non-Federal
representative is designated to conduct such actions on behalf of the
Federal agency. Furthermore, it will continue to be the responsibility
of the owner and operator, and in some cases State and local permitting
authorities, to ensure that their actions comply with all relevant and
applicable Federal, State, and local laws. For example, occupational
safety and health exposures relating to worker safety are regulated
under different authorities, such as the Occupational Safety and Health
Act of 1970, and it is the responsibility of the owner and operator to
ensure that acts such as this and any applicable regulations are also
complied with.

IV. Proposed Changes

Based on the best reading of the statute described above and the
rationale that follows in section V of this preamble, the EPA is
proposing to change the Agency's policy (initially developed in 1978
and 1980) from requiring a permit to begin any construction that is of
a permanent nature or costly to requiring a permit to begin only
construction of components or equipment that emit air pollution. The
Supreme Court recognized that agencies are free to change their
existing policies if they acknowledge they are doing so, consider
relevant factors including any serious reliance interests, and provide
good reasons for the change.\103\
---------------------------------------------------------------------------

\103\ See FDA v. Wages & White Lion Invs., LLC, 604 U.S. 542,
567-69 (2025); FCC v. Fox Television Stations, Inc., 556 U.S. 502
(2009).
---------------------------------------------------------------------------

To implement this proposed change in policy, the EPA is
reconsidering in this rulemaking some of the Agency's prior
classifications of particular activities as construction that requires
a permit. The EPA's objective in this rulemaking is to replace the text
in the NSR regulations that focused on the permanent nature of
construction with criteria that identify those characteristics of
construction-related activities that enable owners, permitting
authorities, and citizens to distinguish something that generates and
emits air pollution from something that does not emit air pollution.
Since clearing vegetation and leveling land could precede the
construction of a variety of things that are not stationary sources of
air pollution, the EPA proposes to continue to allow such construction-
related activities to proceed absent an NSR permit. In some cases, man-
made surfaces and structures placed on clear and level land may
likewise be a prelude to something that does not generate or emit air
pollution. But surfaces or structures may also exhibit distinctive
characteristics that enable them to be identified as part of a source
of air pollutant emissions. This rulemaking by the EPA proposes revised
regulations based on such characteristics, which are intended to be
objective and not dependent on the intent of the owner or operator.
The EPA does not propose to require a permit to build surfaces or
structures that are capable of supporting multiple uses (e.g., either a
retail store or storage building that does not emit air pollution or a
factory that does). However, the EPA proposes that a permit will be
required before beginning on-site construction of components with the
single purpose of serving a factory or other type of facility that
generates air pollution, or configuring general components on a site in
a way that has no other purpose but to support a source of air
pollution.
However, the EPA also recognizes that it will be difficult to draw
a line in a regulation that addresses every circumstance when
construction begins of something that emits air pollutants. Thus,
States and local reviewing authorities will need to exercise their
judgment to resolve questions on a case-by-case, project-specific basis
in accordance with general criteria in the regulations that the EPA is
proposing here to implement this policy and the best reading of the
statute.
The EPA is proposing to revise the Agency's regulations
implementing the NSR program to distinguish between construction of a
stationary source and construction of non-emitting components or
structures, while removing restrictions on the latter on the grounds
that these restrictions are not supported by the text in the statute or
necessary to protect air quality. The EPA's goal is to more clearly
allow entities that plan to build or modify stationary sources of air
pollution to engage in construction of non-emitting components (e.g.,
infrastructure to provide utility service to a site, concrete pads,
foundations and other parts of buildings that are not specifically
configured for emitting equipment, and office buildings) at their own
risk, without altering requirements to control air pollutant emissions
from the stationary sources of air pollution that these owners or
operators must obtain an NSR permit to construct. When the EPA states
an entity may engage in construction of non-emitting components or
structures ``at their own risk,'' it means that the owner or operator
assumes the risk that it will not realize a return on its investment in
pre-permit construction of components or structures that do not emit
air pollution if a permit application is ultimately denied or an issued
permit requires additional construction to reduce air pollutant
emissions.
To accomplish this, the EPA is proposing to revise the current
definition of ``begin actual construction'' and add a new definition of
``pollutant-emitting activities'' to identify which on-site
construction activities an owner or operator of a stationary source of
air pollution may lawfully undertake for purposes of the CAA before
obtaining an NSR air permit. The EPA is also proposing to revise the
definition of ``begin construction'' and ``commence construction'' in
the Tribal NSR regulations at 40 CFR 49.152 and rename the term ``begin
construction'' to ``begin actual construction,'' which are terms that
apply to minor sources and minor modifications at existing major

[[Page 26970]]

sources of air pollution located in Indian country. As described
previously, these changes reflect the best reading of the CAA and
provide greater flexibility for owners and operators to engage in
construction activities that are allowed under the CAA prior to
obtaining an NSR permit, while still protecting public health and
welfare through the NSR air permitting requirements.
More specifically, the EPA is proposing to define ``begin actual
construction'' in the NSR regulations at 40 CFR 51.165; 51.166;
Appendix S to Part 51, and 40 CFR 52.21 as follows:

Begin actual construction means, in general, initiation of
physical on-site construction of pollutant-emitting activities on a
stationary source. This does not include the following: (1)
Engineering and design planning; (2) geotechnical investigation
(surface and subsurface explorations); (3) clearing vegetation,
grading, surveying, soil compacting and stabilization (including
associated pile driving), and excavating land (including blasting or
other removal of hardrock); (4) ordering of equipment and materials;
(5) storing of equipment or setting up temporary trailers to house
construction management or staff and contractor personnel; (6)
paving surfaces. This list is not intended to be exhaustive. With
respect to a change in method of operations, this term refers to
those on-site activities other than preparatory activities which
mark the initiation of the change.

The revised definition is intended to include a list of equipment,
components, or processes excluded from the definition of ``begin actual
construction'' to allow stakeholders to quickly and confidently
recognize these listed construction-related activities as separate from
the construction of a stationary source, thereby enabling owners or
operators to begin these construction-related activities prior to
obtaining an NSR permit. The EPA is soliciting comment on whether
additional activities should be included in this exclusion list
(recognizing it is not intended to be an exclusive list), if these
revisions align with other existing NSR regulations, and any other
general comments with this definition (see section VI of this
preamble).
Additionally, the EPA is proposing to add a new definition of
``pollutant-emitting activities'' to the NSR regulations at 40 CFR
51.165; 51.166; Appendix S to Part 51, and 52.21 and define it as
follows:

Pollutant-emitting activities, as used in 40 CFR 52.21(b)(6)(i)
and (b)(11), include any equipment or component in a process or
operation that emits or has the potential to emit a regulated NSR
pollutant. Pollutant-emitting activities do not include the
following: (1) office buildings; (2) retail stores; (3) buildings or
structures designed for storage if the product or material to be
stored therein is not capable of producing airborne vapors or
particles; (4) concrete pads and building foundations, walls, and
roofs that are not closed in on the interior side and do not have
design elements (e.g., piping, ductwork, wiring, anchor bolts)
specifically and uniquely configured to serve or support any
equipment or component in a process or operation that emits or has
the potential to emit a regulated NSR pollutant; (5) equipment or
components whose sole purpose is heating ventilation and air
conditioning for human workspaces or spaces within a building used
to store supplies related to the habitation of the building; (6)
wiring, piping, and associated support structures that supply
utility services (including electrical, water, wastewater, or
telecommunications) to a property site or a building on a site; (7)
sealed junctions or tie-ins within one process that may serve
equipment or components in another process constructed at a later
time. This list is not intended to be exhaustive. For purposes of
this definition, classification as pollutant-emitting is based on
emissions from a process or operation after construction, not
emissions of pollutants during the construction process.

The term ``pollutant-emitting activity,'' as used in the NSR
regulatory definition of ``building, structure, facility, or
installation,'' is used to determine whether an activity qualifies as a
``building, structure, facility, or installation.'' \104\ Under the NSR
regulations, a ``stationary source means any building, structure,
facility, or installation which emits or may emit a regulated NSR
pollutant.'' \105\ Therefore, adding a definition for ``pollutant-
emitting activities'' is crucial to determine if an activity meets the
definition of ``building, structure, facility, or installation'' and
therefore constitutes a stationary source. This proposed definition is
intended to enhance clarity regarding the types of activities that may
be classified as construction of a stationary source. This definition
aims to provide regulatory certainty for stakeholders by more clearly
delineating what construction-related activities on a stationary source
are allowed prior to the issuance of an NSR permit. Additionally, and
similar to the revisions in the definition of ``begin actual
construction,'' the proposed additional definition includes a list of
equipment or components of a process excluded from the definition of
``pollutant-emitting activities.'' This exclusion list is intended to
enable stakeholders to quickly and confidently recognize these
construction-related activities as separate from the construction of a
stationary source, thereby enabling owners to begin construction
activities on these excluded items prior to (or in some cases without)
obtaining an NSR permit. The EPA also is soliciting comment on whether
additional activities should be included in this exclusion list
(recognizing it is not intended to be an exclusive list), if these
revisions align with other existing NSR regulations, and any other
general comments with this definition (see section VI of this
preamble).
---------------------------------------------------------------------------

\104\ Definition of ``Building, structure, facility, or
installation''--40 CFR 51.165(a)(1)(ii)(A), 51.166(b)(6)(i), and
52.21(b)(6)(i).
\105\ Definition of ``stationary source''--40 CFR
51.165(a)(1)(i), 51.166(b)(5), and 52.21(b)(5).
---------------------------------------------------------------------------

Finally, the EPA is also proposing to revise the definition of
``begin construction'' and ``commence construction'' in the Tribal
minor NSR regulations at 40 CFR 49.152 and rename the term ``begin
construction'' to ``begin actual construction'' to have consistent
definitions for the terms ``begin actual construction'' and
``commence'' or ``commence construction'' for all NSR programs governed
by the EPA regulations. The EPA is also proposing to define the term
``commence construction'' in the Tribal minor NSR regulations at 40 CFR
49.152 to mirror the definition of ``commence'' in the major NSR
Federal regulations and, therefore, would define it as follows:

Commence construction means, as applied to a new minor
stationary source or minor modification at an existing stationary
source subject to this subpart, that the owner or operator has all
necessary preconstruction approvals or permits and either has: (i)
Begun, or caused to begin, a continuous program of actual on-site
construction of the source, to be completed within a reasonable
time; or (ii) Entered into binding agreements or contractual
obligations, which cannot be cancelled or modified without
substantial loss to the owner or operator, to undertake a program of
actual construction of the source to be completed within a
reasonable time.\106\
---------------------------------------------------------------------------

\106\ The EPA regulatory definition of ``commence'' in the PSD
regulations was proposed by the Agency in November 1977, finalized
in June 1978, and remains as the existing, current definition in 40
CFR 52.21.
---------------------------------------------------------------------------

V. Policy Rationale and Implications for Proposing Changes to
Regulations

In section III of this preamble, the EPA identifies what the Agency
believes to be the best reading of the statute. That reading is not one
that delegates to the EPA the discretion to determine ``what'' a permit
is required to construct or ``when'' construction of a stationary
source begins. If the EPA maintains this reading after considering
public comments, the Agency must follow the Agency's reading of how the
statute answers these ``what'' and ``when''

[[Page 26971]]

questions, regardless of the Agency's policy preferences.\107\ That the
law requires the proposed policy is a sufficiently good reason for the
EPA to make a change. Nevertheless, there are other good reasons for
the proposed change in policy, which the EPA articulates here for
consideration.
---------------------------------------------------------------------------

\107\ Loper Bright, 603 U.S. at 401 (``In the business of
statutory interpretation, if it is not the best, it is not
permissible.'').
---------------------------------------------------------------------------

Requiring a permit prior to constructing something that does not
emit air pollutants can unnecessarily delay projects and has been
viewed as an unduly restrictive and burdensome part of the NSR air
permitting program. In the 1996 Proposed Rule, the EPA took note of the
fact that ``[s]everal industry members'' of the CAA Advisory
Committee's Subcommittee on NSR Reform had ``recommended that EPA
change the NSR regulations to enable sources to engage in a broader
range of activities prior to receipt of an NSR permit in cases
involving modifications to existing sources.'' \108\ Commenters
expressed concerns about the definition of ``begin actual
construction'' in response to the 1996 Proposed Rule and the 2017
Federal Register publication titled ``Evaluation of Existing
Regulations,'' which sought input on the EPA regulations that may be
appropriate for repeal, replacement, or modification.\109\
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\108\ 61 FR 38270 (July 23, 1996).
\109\ 82 FR 17793 (April 13, 2017).
---------------------------------------------------------------------------

In response to the 2017 Federal Register publication, one commenter
stated that the EPA should ``revise the definition of `begin actual
construction' contained in 40 CFR 52.21(b)(11) to provide for greater
ability for conducting certain construction activities that are of a
permanent nature in advance of obtaining a permit.'' \110\ In support,
the commenter added the following: ``Facilities should, at their own
risk, be able to conduct time-consuming construction activities, e.g.
installing foundations and running underground utilities, in advance of
obtaining an NSR/PSD construction permit where it remains obvious that
the source for which a permit is being sought cannot operate. As a
reference for how this can work, many States have already incorporated
such common-sense allowances in their minor source permitting
programs.'' \111\ Another commenter stated that: `` `[b]egin actual
construction' has, by policy, been extended to prohibit construction on
`any installation necessary to accommodate the emissions unit.' Sources
should be able to conduct early work up until the piece of equipment is
actually emitting. This includes laying underground piping, excavating,
bringing in fill to prepare the area where the emission unit(s) will
sit, and other efforts until the point prior to installing the
emissions unit.'' \112\ Another commenter stated the following:
---------------------------------------------------------------------------

\110\ Curt Wells, Director, Regulatory Affairs, The Aluminum
Association (March 31, 2017), DOC-2017-0001-0101 available at:
<a href="https://www.regulations.gov/comment/DOC-2017-0001-0101">https://www.regulations.gov/comment/DOC-2017-0001-0101</a>.
\111\ Id.
\112\ Kyle B. Isakower, Vice President, Regulatory and Economic
Policy, American Petroleum Institute (March 31, 2017), DOC-2017-001-
0126 available at: <a href="https://www.regulations.gov/comment/DOC-2017-0001-0126">https://www.regulations.gov/comment/DOC-2017-0001-0126</a>.

EPA should redefine the term `begin actual construction' in 40
CFR 52.21(b)(11) to allow non-emitting activities (e.g., pouring
foundations, electrical preparations) to begin before the final
permit is issued. We believe this would hasten the commencement of
major projects as permit applicants would be willing to assume the
risk of stranding an investment in some of these preparatory, non-
emitting activities in order to mitigate the effects of a potential
lost construction season.\113\
---------------------------------------------------------------------------

\113\ Robert L. Stout, Jr. Vice President and Head of Regulatory
Affairs, BP America, Inc. (March 31, 2017), DOC-2017-0001-0125
available at: <a href="https://www.regulations.gov/comment/DOC-2017-0001-0125">https://www.regulations.gov/comment/DOC-2017-0001-0125</a>.

Finally, one commenter stated that ``[g]iven the length of time it
takes to be issued NSR [p]ermits, preconstruction activities on non-
emitting activities can help expedite construction (particularly in
parts of the country with severe weather) and should be allowed at the
manufacturers' own risk even though they may be related to the NSR
affected emissions units.'' \114\
---------------------------------------------------------------------------

\114\ Leslie S. Ritts, Counsel, The National Environmental
Development Association's Clean Air Project (March 31, 2017), DOC-
2017-0001-0161 available at: <a href="https://www.regulations.gov/comment/DOC-2017-0001-0161">https://www.regulations.gov/comment/DOC-2017-0001-0161</a>.
---------------------------------------------------------------------------

Furthermore, during the public comment period for the March 2020
Memo, the EPA received a total of 44 comments either in support or
opposition. Several commenters on the March 2020 Memo contended that
the revised policy reflected in the March 2020 Memo should be adopted
through the notice and comment rulemaking process and not in a guidance
memorandum.\115\ For example, one commenter argued the policy change in
the March 2020 Memo would fundamentally change existing requirements
governing when construction can begin on a major source project and
therefore cannot be adopted without following the rulemaking procedures
specified in CAA section 307(d).\116\ Another commenter urged the EPA
``to update the interpretation of the regulatory definition of the term
`begin actual construction' in 40 CFR 52.21(b)(11) to allow owners/
operators to engage in a broader range of preparatory activities they
might desire to undertake for the purpose of ensuring projects are
positioned to move forward in an expedient manner, prior to obtaining a
New Source Review (NSR) permit.'' \117\ Several commenters on the March
2020 Memo also requested regulatory clarity on how to distinguish
between an emissions unit and major stationary source.\118\
---------------------------------------------------------------------------

\115\ Comment letters from the following: (1) Frank Kohlasch,
Climate Director, Minnesota Pollution Control Agency (May 11, 2020);
(2) David Baron, Attorney, Earth Justice. John Walke, Clean Air
Director, Natural Resource Defense Council. Sanjay Narayan, Managing
Attorney, Sierra Club Environmental Law Program (May 11, 2020); (3)
Eric Stuart, Vice President, Environment Policy, Steel Manufacturers
Association (May 11, 2020); and (4) Wayne Nastri, Executive Officer,
South Coast Air Quality Management District (May 8, 2020).
\116\ Ursula Nelson and Ali Mirzakhalili, Co-Chairs, NACAA
Permitting and NSR Committee (May 11, 2020).
\117\ James R. Plosay, Manager, Air Permits Program, Alaska
Department of Environmental Conservation (April 17, 2020).
\118\ Comment letters from the following: (1) American Chemistry
Council, American Forest & Paper Association, American Fuel &
Petrochemical Manufacturers, American Petroleum Institute, American
Wood Council, National Oilseed Processors Association, Portland
Cement Association, Air Permitting Forum, and Auto Industry Forum
(May 11, 2020); (2) Ram Singhal, Vice President of Technology &
Environmental Strategy, Flexible Packaging Association (May 11,
2020); (3) Alec Davis, Executive Director, Illinois Environmental
Regulatory Group (May 11, 2020); (4) Catharine Fitzsimmons, Chief,
Iowa Air Quality Bureau (May 11, 2020); and (5) Plastics Industry
Association (May 11, 2020).
---------------------------------------------------------------------------

After considering these comments and whether the EPA could provide
guidance on how to differentiate between an emissions unit and
stationary source, rather than attempting to provide such guidance in a
final version of the March 2020 Memo, the Agency is proposing to revise
the regulations to more clearly distinguish between construction that
is prohibited by the CAA without a permit and construction that is not.
Revising the NSR regulations will enable the EPA to provide greater
clarity on the construction activities that are permissible under the
CAA prior to obtaining an NSR permit (or without such a permit) and
address the longstanding concerns of stakeholders that considered the
NSR regulations unnecessarily restrictive.
These proposed changes would better reflect the best reading of the
statute (discussed in section III of this preamble) and effectuate
congressional intent to preserve and maintain air quality while
facilitating economic

[[Page 26972]]

growth. Allowing owners or operators to engage in construction
activities on components that do not emit or have the potential to emit
a regulated NSR pollutant(s) (i.e., are not pollutant-emitting
activities) before or during the permit application process may help
enhance the overall project planning and management process, expedite
completion of construction projects, and streamline permitting to allow
for faster timelines between construction and operation of a stationary
source of air pollution. These flexibilities do not authorize permit
writers to allow a constructed stationary source to emit more air
pollutants than would otherwise be allowed under the terms of any NSR
permit. The general public also benefits from the overall economic
development that is promoted by enabling businesses wishing to invest
in new projects to complete them more efficiently. For example, some
owners or operators may seek to construct in locations where
construction must be planned around seasonal conditions. If
constructing something that does not emit air pollutants, the owner or
operator might be able to complete that phase of the project before
seasonal conditions preclude it and then complete the permitting
process before starting on the equipment and components that emit air
pollutants.\119\
---------------------------------------------------------------------------

\119\ Permit applicants that choose to expedite projects by
undertaking on-site construction activities that are allowed in
advance of CAA permit issuance retain the obligation to follow a
schedule that complies with other applicable laws that protect
health and welfare, as discussed above.
---------------------------------------------------------------------------

The proposed changes also recognize that the NSR provisions in the
CAA are not intended to regulate decisions by businesses to accept
economic risk. This rulemaking proposes to enable owners and operators
of stationary source to make their own decisions about the degree of
economic risk they are willing to bear from the possibility that an NSR
permit application is ultimately denied or the possibility that
completed construction may need to be reworked to comply with the
conditions in an issued permit.
The EPA's existing regulations attempt to delineate when on the
continuum from planning to operation of a major emitting facility a
permit is required. But the structure of these regulations, and their
interpretations, has led to ambiguity and inconsistent results that the
EPA seeks to eliminate in this proposed rule.
To do so, the EPA proposes to amend the NSR regulations to more
clearly distinguish between things that are stationary sources and
things that are not (answering the ``what'' requires a permit question
described in section III of this preamble), rather than distinguishing
between emission units and stationary sources. The EPA also proposes to
more clearly identify ``when'' construction of that ``what'' begins.
In 1980, the EPA chose to identify ``physical on-site
construction'' as the point on the continuum when the construction of
stationary source begins and used that phrase (from the statutory
definition of ``commenced'') in the regulatory definition of ``begin
actual construction.'' But not all physical on-site construction
activities were prohibited--only physical onsite construction
activities ``on an emissions unit which are of a permanent nature.''
Forty years later, in the March 2020 Memo, the EPA emphasized how this
definition creates the need to distinguish between an ``emissions
unit'' and a ``major stationary source.'' But the EPA's existing NSR
regulations define both a stationary source and an emissions unit as
something that emits air pollutants. The definition of emissions unit
is ``any part of a stationary source that emits or would have the
potential to emit any regulated NSR pollutant.'' \120\ The EPA defines
a stationary source as ``any building, structure, facility, or
installation which emits or may emit a regulated NSR pollutant.'' \121\
Further, the EPA's regulations define a ``building, structure,
facility, or installation'' to include a collection of ``pollutant-
emitting activities'' that meet three specific characteristics: all of
the pollutant-emitting activities belong to the same industrial
grouping, are located on one or more contiguous or adjacent properties,
and are under the control of the same person (or persons under common
control).\122\
---------------------------------------------------------------------------

\120\ Definition of ``Emissions unit''--40 CFR
51.165(a)(1)(vii), 51.166(b)(7), and 52.21(b)(7).
\121\ Definition of ``Stationary source''--40 CFR
51.165(a)(1)(i), 51.166(b)(5), and 52.21(b)(5).
\122\ Definition of ``Building, structure, facility, or
installation''--40 CFR 51.165(a)(1)(ii)(A), 51.166(b)(6)(i), and
52.21(b)(6)(i).
---------------------------------------------------------------------------

Given that all of these definitions include activities or things
that emit air pollutants, the only unique feature in the definition of
emissions unit is that it is a ``part'' of a stationary source (not the
whole source). The current regulations do not anywhere suggest there
could be a part of stationary source that is not an emissions unit.
Under these regulations, something that does not emit is not an
emissions unit or a stationary source. Therefore, it is understandable
why commenters on the March 2020 Memo asked the EPA to provide more
guidance to distinguish between an emissions unit and a stationary
source. In addition, some comments on the March 2020 Memo indicated
that the relevant provision that prohibits the construction of a
stationary source does not use the term ``emissions unit.'' For these
reasons, the EPA proposes to more clearly identify the characteristics
of a stationary source and when construction of such a source begins,
rather than attempting to further define an emission unit.
Because of the current form and function of the two existing
definitions of ``stationary source'' and ``building, structure,
facility, or installation,'' the EPA prefers adding a definition of
``pollutant-emitting activities'' over amending the definition of
``emissions unit.'' The existing definition of ``emissions unit''
serves an important function of distinguishing between new and existing
emission units for purposes of determining how to calculate the
increase in emissions from a modification to an existing source to
determine if that modification requires a permit. The EPA is thus
concerned that adding to that definition a list of construction-related
activities that do not need an NSR permit prior to construction may
have the unintended effect of causing confusion as to which projects
require an NSR permit, rather than clarifying which construction-
related activities constitute construction of a stationary source and
which do not.
The proposed text identifies specific activities that are
permissible without a permit but uses more general text to address
activities that are prohibited. The EPA prefers this approach to ensure
the regulations are adaptable to the broad range of stationary
facilities across various industry sectors that may emit regulated NSR
pollutants. However, the EPA is also considering whether to add more
specific text to the NSR regulations to prohibit the construction of
components that have characteristics unique to a source of air
pollutants.
In the past, various stakeholders have submitted comments or
requested further clarification on whether an industry-specific
construction activity is allowed prior to ``beginning actual
construction'' under the EPA's NSR air permitting regulations. For
example, the refinery industry has suggested ``tie-ins'' as an activity
that should be allowed before a modification to an existing source
needs to obtain an NSR permit. To address this concern, the EPA has
included specific text in the proposed definition of ``pollutant-
emitting activities'' to address this topic (i.e., see (7.) in the
proposed definition of pollutant-emitting activities) and clarify

[[Page 26973]]

that ``tie-ins'' can be undertaken prior to obtaining an NSR permit for
a process that may be constructed at a later time. The EPA is
soliciting comment on adding industry-specific activities, such as tie-
ins, into the exclusion list to the definition and if any other
industry-specific activities should be considered (see section VI of
this preamble).
In the proposed revised definitions, the EPA's focus is on whether
``what'' is being constructed is something that emits air pollutants
and no longer focuses on whether the thing being constructed is
permanent in nature or costly to change. The primary rationale that the
EPA provided for the policy of requiring sources to obtain an NSR
permit prior to undertaking any on-site construction activity ``of a
permanent nature'' was first articulated in the October 1978 Memo.
There, the EPA expressed concern that it would be ``extremely difficult
to deny issuance of a permit when it results in a completed portion of
a project having to remain idle.'' \123\ ``Therefore,'' the EPA
reasoned, ``in order to avoid any equity arguments at a later time, it
is better to prevent any construction now rather than have a `white
elephant' on our hands later on.'' \124\ The EPA has since reiterated
this position in subsequent guidance and a proposed rulemaking.\125\
---------------------------------------------------------------------------

\123\ October 1978 Memo at 2.
\124\ Id.
\125\ See, e.g., May 1993 Memo at 2 (A ``permitting authority
would be placed in a very difficult position when denying issuance
of a permit when it results in a completed portion of a project
having to remain idle.''); December 1995 Letter at 2 (``[A]bsent a
prohibition on any costly, significant or permanent
preconstruction,'' sources could ``defeat'' the ``preconstruction
requirement or its enforcement by making a costly, substantial, and/
or permanent investment'' and then ``later argue that retrofitting
of PSD requirements or a denial of the permit would unreasonably
interfere with their investment.''); 61 FR 38270 (``If . . .
companies were given unlimited ability to place `equity in the
ground' by constructing plants before a permit is issued,'' then a
permitting authority's ``discretion in making permit decisions may
be compromised'' and the ``ability of EPA and citizens to challenge
the permit that is eventually issued may likewise be undermined.'').
---------------------------------------------------------------------------

Underpinning these concerns about an owner or operator being
allowed to place ``equity in the ground'' by engaging in costly and
permanent on-site construction activities prior to receiving an NSR
permit is the presumption that, in doing so, the owner or operator
would gain ``leverage'' in the permitting process. That is to say, in
such circumstances, the permitting authority might feel compelled to
issue a permit that was not as stringent in its terms as it otherwise
would have been, or no permit at all.
However, in addition to not comporting with the best reading of the
statute (as discussed in section III of this preamble), the EPA no
longer believes that this original rationale provides a sound policy
basis for precluding any activity ``of a permanent nature'' regardless
whether that activity involves construction of something that emits air
pollution. While the EPA's concerns over potential ``equity'' arguments
may have had supported the Agency's policy at the inception of the NSR
permitting program in 1978, when both the Agency and State permitting
authorities lacked experience in implementing the program, the Agency
does not believe that such concerns are currently warranted given that
permitting authorities have been implementing the NSR permitting
program for nearly 50 years. Several permitting authorities commented
in support of this position in response to the March 2020 Memo. NSR
permitting authorities must continue to apply the applicable permitting
criteria (such as determining BACT and LAER) for a new or modified
stationary source based on the permit application submitted, without
regard to the preparatory activities an applicant may conduct on the
site of the eventual stationary source. The EPA also received comments
in response to the March 2020 Memo that doing otherwise would divest
States of their responsibility for safeguarding natural resources
within their borders. Importantly, the revisions being proposed in this
action are not intended to, and should not be construed as,
establishing any equity or reliance arguments on the part of owners,
operators, or permit applicants in the permitting process. In all
instances, owners or operators accept risk for the actions they may
take in advance of obtaining a permit. Owners or operators cannot
expect that any site activities prior to permitting will alter or
influence the BACT analysis for an emissions unit or other elements of
a permitting decision. Permit applicants that choose to undertake on-
site construction activities in advance of permit issuance do so at
their own economic risk that a permit may be denied or issued with
unanticipated conditions on operations, potentially resulting in a lost
investment or increased construction costs. In sum, the EPA's focus of
the proposed revisions is on the best reading of the CAA and reflection
of current source construction needs and expectations.
The revisions, if finalized, should also ensure that construction
of stationary sources and pollutant-emitting activities are restricted
until the permit authority has finalized the environmental safeguards
required by the NSR program. Notably, to meet the requirements of the
CAA, the permitting authority must retain the discretion to deny any
subsequent NSR permit application to construct a stationary source of
air pollution if the applicable criteria are not met. Since the EPA
cannot foresee all situations when a construction-related activity
might constitute ``begin[ning] actual construction'' on a stationary
source, the proposed rule, if finalized, is expected to afford
reviewing authorities discretion to apply relevant provisions on a
case-by-case basis. Reviewing authorities may consult with the EPA for
case-by-case advice on applicability determinations. No matter how
costly or permanent it may be, any on-site construction or preparatory
activity that a permit applicant undertakes prior to receiving a final
NSR permit remains a risk for the owner or operator. A permit applicant
may not use time and resources expended on construction prior to
obtaining an NSR permit to justify the reviewing authority decision on
any applicable BACT or LAER determinations and/or to grant the final
NSR air permit. Furthermore, if changes to the design of the permit
applicant's proposed stationary source are necessary to meet these
control technology requirements or any other requirements of the
permitting process (such as demonstrating that emissions from the
stationary source will not cause or contribute to violations of air
quality standards), the permitting authority may require the permit
applicant to meet the requirements of such conditions in the final air
permit, even if it means modifying or rebuilding permanent or costly
structures that the permit applicant has built prior to obtaining a
permit. As such, the EPA is requesting comment on whether regulatory
text should be added to prohibit permitting authorities from
considering economic losses from the permit applicant if a valid permit
cannot be issued (see section VI of this preamble).
Permitting authorities must continue to apply the applicable
permitting criteria to determine emissions limitations for a new
proposed major stationary source or major modification based upon the
BACT and LAER standards, without regard to the preparatory construction
activities an applicant may conduct on the site. Accordingly, the
permitting authority, in conducting an analysis of BACT and LAER should
not include the cost of any adjustments or modifications to already
constructed portions of the facility

[[Page 26974]]

necessary to install any control device or technology when determining
the cost of the controls. Owners or operators will not be allowed and
cannot expect that any preparatory construction activities prior to
permit issuance will alter or influence the BACT and LAER analysis for
the stationary source or any other elements of the permitting decision.
An applicant cannot use equity and resources expended to claim cost
infeasibility or otherwise influence the BACT or LAER determinations.
Considering this, these proposed revisions should not allow greater
emissions of air pollution from the operation of new or modified
stationary sources than under existing rules. The definitions proposed
herein do not change any requirements of the NSR permit programs
pertaining to the control of air pollutant emissions resulting from the
construction or operation of stationary sources. The proposed revisions
are also not intended to relieve owners or operators of stationary
sources from the requirement to obtain permits for new construction or
modifications. Rather, the purpose of the proposed rule is to
streamline the ability of the owners and operators of stationary
sources that already require NSR permits to meet construction
milestones by clarifying activities that may occur without a permit
before construction on a stationary source begins. In other words, the
proposed revisions are intended to reduce overall regulatory burdens
associated with delay without a corresponding increase in relevant
emissions or reductions in air quality.
The EPA's implementing regulations at 40 CFR 51.166(a)(6) provide
permitting authorities with approved PSD programs up to three years to
submit any required revisions to the PSD program requirements in a SIP.
While the EPA establishes regulations that set minimum national
stringency standards, State, local, or Tribal governments are not
restricted from considering revisions to their EPA-approved plans that
may include setting more stringent rules to meet the needs of such
State, local, or Tribal air quality programs.\126\ The EPA is also
soliciting comments on whether revisions to existing approved plans
reflecting the proposed changes (if finalized) should be required and
if this provision (40 CFR 51.166(a)(6)), which is only in the PSD
regulations, should be added into the NNSR provision in 40 CFR 51.165
(see section VI of this preamble).
---------------------------------------------------------------------------

\126\ 40 CFR 51.165(a)(1) and 51.166(b).
---------------------------------------------------------------------------

Under CAA section 110(l), the EPA may not approve a revision to a
State plan ``if the revision would interfere with any applicable
requirement concerning attainment and reasonable further progress.''
\127\ Since the proposed revisions do not affect emissions, revisions
to State plans that incorporate the proposed changes are not expected
to interfere with attainment or reasonable further progress and, thus,
CAA section 110(l) should not be implicated in any forthcoming SIP
submission. If these proposed regulatory changes are finalized, any
revisions to the Federal PSD regulations will automatically apply to
the EPA and all permitting authorities that implement a PSD program
that does not reference 40 CFR 52.21 as of a specific date.\128\
Similarly, Appendix S to Part 51 contains the NNSR program requirements
applicable in Indian country and applicable to other areas designated
as nonattainment where an NNSR SIP has not yet been approved by the
EPA. Thus, if these proposed regulatory changes are finalized, any
revisions to Appendix S will immediately apply, as of the effective
date in the final rule, to the EPA and all permitting authorities who
implement regulations pursuant to this Appendix.
---------------------------------------------------------------------------

\127\ 42 U.S.C. 7410(l).
\128\ Where the EPA has only delegated authority to implement a
date-specific version of 40 CFR 52.21, the delegation agreement
would need to be updated to incorporate the revisions in this
rulemaking.
---------------------------------------------------------------------------

VI. Request for Comments

The EPA solicits comments on all aspects of this proposed action.
In particular, the EPA seeks input on the following questions, which
are not intended to preclude commenters from addressing other
considerations. When addressing one of the particular questions below
in a comment, or specific part of a comment, the EPA requests that
commenters identify the question number to which they are responding.
Question #1: Are the proposed revisions appropriately aligned with
other definitions within the NSR regulations, and might they have
unintended impacts on other NSR requirements?
Question #2: Should the list of equipment, components, and
processes excluded from ``begin actual construction'' and ``pollutant-
emitting activities'' be included in the definitions of ``emissions
units'' or ``stationary source''? Which approach is preferable, and
why?
Question #3: What additional activities should be included in the
exclusion list for ``begin actual construction'' and ``pollutant-
emitting activities,'' and what are the reasons for their inclusion?
Question #4: Are the proposed revisions too general or too
specific? What suggestions do you have for enhancing clarity and
certainty in these regulations?
Question #5: What industry-specific construction activities, such
as refinery tie-ins, should or should not be allowed prior to the
issuance of an NSR permit? \129\ How might allowing these activities
impact construction timelines, permitting timelines, regulatory
compliance, enforcement, air pollution emissions, public health and
welfare, and other permitting concerns for any industry sector?
---------------------------------------------------------------------------

\129\ Refinery ``tie-ins'' are connection points for new
equipment or piping system to an existing refinery's infrastructure.
A ``tie-in'' does not involve any construction on an unpermitted
emissions unit.
---------------------------------------------------------------------------

Question #6: What are the expected economic benefits for industry
(including small businesses) and for State and local economies of
allowing specified construction activities to proceed prior to NSR
permit issuance? Please provide supporting data and information that
substantiates your response.
Question #7: Should the EPA add regulatory text to explicitly
prohibit permitting authorities from considering economic losses for
permit applicants if a valid permit cannot be issued? Should those
economic losses include the cost of modifying or rebuilding specific
facility components that were built without an NSR permit because they
were initially considered not to generate or emit air pollutants but
are later determined to require modification to enable the components
or equipment that do produce emissions to meet NSR permitting
requirements? Would such text help ensure that permitting authorities
do not consider equity already invested or by permit applicants in
determining the conditions in a permit or whether a final permit should
be issued for a stationary source of air pollution or not?
Question #8: Should the EPA require revisions to existing approved
plans to reflect any final revisions to the Agency's regulations if
these proposed changes were to be finalized?
Question #9: Should the EPA's implementing regulations at 40 CFR
51.166(a)(6), which provide permitting authorities up to three years to
submit required revisions to PSD program requirements in a SIP, be
added to the NNSR planning requirement regulations in 40 CFR 51.165?
Question #10: Does the EPA articulate the best interpretation of
the CAA in

[[Page 26975]]

this proposal? Is there additional statutory text, history, or judicial
precedent that the EPA should consider?
Question #11: Have any parties taken actions in reliance on the
current regulations, and do such parties have interests that would be
affected by the proposed changes?

VII. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

This proposed action is a significant regulatory action that was
submitted to the Office of Management and Budget (OMB) for review. Any
changes made in response to Executive Order 12866 review have been
documented in the docket. As discussed above, these proposed revisions
should not allow greater emissions of air pollutants from the
construction, modification, or operation of new or modified stationary
sources. The definitions proposed herein do not change any requirements
of the NSR permit programs pertaining to the control of emissions
resulting from the construction or operation of stationary sources. The
proposed revisions are also not intended to relieve owners or operators
of stationary sources from requirements to obtain permits for new
construction or modification of a stationary source. Rather, the
purpose of the proposed rule is to streamline the ability of the owners
and operators of stationary sources that already require NSR permits to
meet construction milestones by clarifying activities that may occur
without a permit before construction on a stationary source begins.

B. Executive Order 14192: Unleashing Prosperity Through Deregulation

This proposed action would be an Executive Order 14192 deregulatory
action. This proposed rule is expected to reduce burden by increasing
flexibility to begin construction of non-emitting components or
structures before an NSR permit is obtained.

C. Paperwork Reduction Act (PRA)

This proposed action does not impose any new information collection
burden under the PRA. OMB has previously approved the information
collection activities contained in the existing regulations and has
assigned OMB control numbers 2060-0003 for the NSR permitting programs.
The revisions to the regulations proposed in this action do not
directly change any of the information collection activities previously
approved by OMB.

D. Regulatory Flexibility Act (RFA)

I certify that this proposed action will not have a significant
economic impact on a substantial number of small entities under the
RFA. This proposed action will not impose any requirements on small
entities. Instead, the proposed rule revisions expand the range of
permissible construction on non-emitting components or structures, and
provide opportunity for owners or operators to expedite construction
timelines before obtaining an NSR permit. This proposal also does not
directly impose any requirements on the entities involved in these
processes (including permitting authorities, permittees, and the
members of the public). Owners or operators, at their own risk, may
complete construction on non-emitting components or structures that
might result in an economic impact. However, the revisions to the
definition do not require any owners or operators to do anything
additional before obtaining an NSR permit. As such, the EPA does not
believe the increased flexibility to engage in some types of
construction before obtaining an NSR permit will result in a
significant economic impact on a substantial number of small entities.

E. Unfunded Mandates Reform Act (UMRA)

This proposed action does not contain an unfunded mandate of $100
million or more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. The proposed action
imposes no enforceable duty on any State, local, or Tribal governments
or the private sector. Nonetheless, if this rulemaking is finalized as
proposed, the EPA expects that some authorized State, local, and Tribal
reviewing authorities will want to revise their NSR permitting program
provisions to incorporate the Agency's revised definitions. States that
choose to revise their existing SIP-approved programs would need to
submit a SIP revision to the EPA for review and approval.

F. Executive Order 13132: Federalism

This proposed action does not have federalism implications. It will
not have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.

G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

This proposed action proposes to revise regulations applicable to
stationary sources in Indian country, but it does not have Tribal
implications of the nature specified in Executive Order 13175. The
proposed regulatory revisions do not impose substantial direct
compliance costs on Tribal governments and do not preempt Tribal law.
The EPA has reviewed this proposed rule in accordance with the
requirements of Executive Order 13175 and has determined that this
proposed rule, if finalized, will not have substantial direct effects
on Indian Tribes, on the relationship between the Federal Government
and Indian Tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian Tribes. The EPA is currently
the reviewing authority for most PSD and NNSR permits issued on Tribal
lands. At this time, two Indian Tribal governments have approved TIPs
that authorize the Tribe to administer the PSD and NNSR programs within
their jurisdiction. The proposed revisions are not expected to impose
direct burdens on Tribal authorities. Thus, Executive Order 13175 does
not apply to this action. However, because of Tribal interest on this
proposed rule and consistent with the EPA Policy on Consultation with
Indian Tribes, the EPA will offer consultation with Tribes.

H. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

The EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that the Agency has reason to believe may disproportionately affect
children, per the definition of ``covered regulatory action'' in
section 2-202 of the Executive Order. This action is not subject to
Executive Order 13045 because it does not concern an environmental
health risk or safety risk. Furthermore, since this action does not
concern human health risks, the EPA's Policy on Children's Health also
does not apply.

I. Executive Order 13211: Actions That Significantly Affect Energy
Supply, Distribution, or Use

This proposed action is not a ``significant energy action'' because
it is not likely to have a significant adverse effect on the supply,
distribution, or use of energy. The purpose of this proposed rule is to
provide additional flexibility

[[Page 26976]]

for owners and operators to engage in construction on non-emitting
components or structures before obtaining a final NSR permit and
beginning actual construction of a stationary source of air pollution.
The EPA does not expect these activities to adversely affect energy
suppliers, distributors, or users.

J. National Technology Transfer Advancement Act (NTTAA)

This rulemaking does not involve technical standards.

VIII. Statutory Authority

The statutory authority for this action is provided by 42 U.S.C.
7401 et seq.

List of Subjects

40 CFR Part 49

Environmental protection, Administrative practice and procedure,
Air pollution control, Indians, Indians--law, Indians--tribal
government, Intergovernmental relations, New source review.

40 CFR Part 51

Environmental protection, Administrative practice and procedure,
Air pollution control, Intergovernmental relations, New source review,
Preconstruction permitting.

40 CFR Part 52

Environmental protection, Administrative practice and procedure,
Air pollution control, Incorporation by reference, Intergovernmental
relations, New source review, Preconstruction permitting.

Lee Zeldin,
Administrator.
[FR Doc. 2026-09524 Filed 5-12-26; 8:45 am]
BILLING CODE 6560-50-P

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