Contributed by Isaac Smith, Principal and District Manager, PPM Consultants
As someone who’s worked through countless Clean Air Act (CAA) permitting challenges, I know how much a single U.S. Environmental Protection Agency (EPA) guidance memo can reshape the path of a project. The agency’s recent updates to the New Source Review (NSR) program are a perfect example—introducing long-awaited clarity and flexibility for industries planning new construction or facility upgrades. These updates include the elimination of the longstanding Reactivation Policy for idle facilities, the reinstatement of the 2017 Actual-to-Projected-Actual emissions guidance for modifications, and clarification on what constitutes “begin actual construction” in the case of TSMC’s Arizona project. Together, these actions reshape key aspects of the New Source Review (NSR) program and merit close attention. Links to each of the documents/topics covered below can be found on the EPA’s NSR Review Policy and Guidance Document Index.
Begin Actual Construction
Arguably the most impactful of the three items centers around the definition of the term “begin actual construction”. In nearly every air permitting project that I have been involved with, this specific issue has come up in conversation and its impact on the overall project cannot be understated. Previously, EPA regulations prohibited beginning actual construction of a major stationary source prior to receiving an air permit. State and federal air quality regulations characterize “begin actual construction” as “the initiation of physical on-site construction activities on an emissions unit, which are of permanent nature….” Previous EPA guidance had precluded construction of ancillary buildings or structures that were not emissions units. The recently issued guidance stems from a Request for Clarification on current EPA policy submitted by TSMC Maricopa County Air Quality Department (MCAQD) and ultimately from MCAQD to EPA, regarding a multi-phase project involving the construction of several individual advanced semiconductor manufacturing facilities (fabs) at its campus in Phoenix, Arizona. TSMC argued that because of the phased construction specific to the proposed semiconductor facilities, construction should be allowed to begin in advance of a Prevention of Significant Deterioration (PSD) permit.
TSMC wants to accelerate bringing its facilities on-line by constructing building shells – which are the outer skins of buildings without any mechanical, electrical, or other services – in advance of permitting. TSMC states that the actual semiconductor fabrication lines are self-contained and fit within these outer building shells, which are not used for any air pollution control purpose. TSMC also states that the shells are not specifically configured for emissions units (e.g., there is no piping, ventilation ductwork or specific foundation work for any emissions units).
In their response to MCAQD, EPA states that “begin actual construction” does not apply to the parts of a facility that do not qualify as an emissions unit and that previous guidance (i.e., the March 28, 1986 Reich memo) adopted an overly broad reading of the term. EPA intends to provide more clarity through rulemaking on how MCAQD and other permitting authorities may distinguish between emissions units and the other parts of a facility that are not an emissions unit or a part of an emissions unit.
This site-specific determination is consistent with EPA’s March 2020 draft guidance on the topic, but it’s worth noting that the draft guidance was never finalized.
Given the lengthy construction timeline associated with semiconductor manufacturing and other large-scale industrial projects, any updates to the air regulations or EPA’s interpretation of certain terms that result in reducing a PSD project’s timeline by allowing several significant construction activities to be performed prior to permit issuance, are an enormous win for the individual corporations.
Actual to Projected Actual Emissions
On September 15, 2025, EPA Administrator Lee M. Zeldin issued a memorandum reinstating the agency’s 2017 policy on the “actual-to-projected-actual” test for determining whether facility modifications trigger major modification requirements under the NSR permitting program.
The move reverses a 2022 rescission that had created significant regulatory uncertainty for facilities and permitting authorities. The original 2017 memorandum was adopted to address confusion caused by conflicting court decisions on how companies should project future emissions following plant modifications. It clarified that facilities could rely on their own “projected actual emissions” when evaluating whether NSR applies, provided they complied with pre- and post-project obligations to ensure accuracy.
At the time, EPA described the 2017 guidance as interim, pending further legal and policy review. However, subsequent court decisions did not undermine the approach, and a 2020 EPA review of the NSR program found no need to revise the policies. Despite this, in December 2022 the agency rescinded the 2017 guidance without offering a clear replacement or justification. That rescission left industry and regulators in a “guidance vacuum,” forcing facilities to navigate permitting decisions without a consistent standard.
Administrator Zeldin’s 2025 memorandum concludes that there has been no material change in circumstances since 2017 and no evidence that industry had relied significantly on the 2022 rescission. As a result, EPA is reinstating the 2017 policy immediately, emphasizing that it remains the preferable and more consistent framework under the NSR rules.
For regulated facilities, the reinstatement is welcome news. It restores regulatory certainty and reduces the risk that normal modernization projects will trigger lengthy, expensive NSR permitting battles. Under the actual-to-projected-actual framework, facilities have more control in projecting emissions based on realistic operating expectations, rather than being forced into rigid, worst-case calculations. This flexibility allows companies to pursue efficiency improvements, equipment upgrades, and operational changes without automatically facing costly delays.
From a business perspective, the policy shift means reduced compliance costs, fewer legal disputes, and greater confidence in long-term planning. Projects that might have been shelved due to permitting risks can move forward, helping facilities improve productivity and, in many cases, environmental performance. By easing regulatory uncertainty, the reinstatement also encourages investment in modernization—an outcome that benefits both industry competitiveness and local economies.
For regulators, the reinstatement re-establishes a clear, consistent standard that limits ambiguity in NSR applicability determinations. It streamlines permitting decisions, reduces enforcement disputes, and provides a stable foundation for oversight. EPA retains oversight authority through the actual-to-projected-actual test’s built-in obligations, ensuring emissions accountability while avoiding unnecessary red tape.
Ultimately, the reinstatement signals EPA’s intent to prioritize regulatory clarity and economic efficiency in environmental permitting. By re-adopting the 2017 framework, the agency is delivering a policy that supports facility modernization while still maintaining Clean Air Act safeguards, a balance that industry has long sought.
EPA Ends Reactivation Policy, Easing Restart of Idle Facilities
On September 18, 2025, EPA announced that the agency will no longer apply its longstanding “Reactivation Policy” under NSR program. The decision follows the Port Hamilton ruling by the U.S. Court of Appeals for the Third Circuit, which held that EPA exceeded its authority by requiring a refinery in St. Croix to obtain a preconstruction permit before restarting operations after a prolonged shutdown.
For decades, the Reactivation Policy presumed that major facilities idle for two or more years were “permanently shut down.” Restarting such plants was treated as equivalent to building a new source, triggering costly NSR permitting requirements unless operators could prove they always intended to resume operations.
The court rejected this approach, clarifying that the Clean Air Act only requires NSR permits for new construction or major modifications, not for simply restarting an existing plant. EPA has now accepted that reasoning and eliminated the policy nationwide.
The change delivers significant regulatory relief. Idle facilities including refineries, power plants, and manufacturers can now restart without facing the heavy costs and delays of NSR permitting, unless the restart involves modifications that increase emissions. This provides operators flexibility to respond quickly to market shifts, restore capacity, and avoid long downtime.
By removing subjective factors like operator intent and length of shutdown, EPA also reduces uncertainty and inconsistent enforcement. Regulators can now focus squarely on construction and modification projects, while facilities gain a clear path to resume operations.
Additionally, with the current race for AI-driven power generation, this change in policy should allow companies to tap into a broader mix of power generation units that have been idled across the U.S. (i.e. power boilers, turbines, etc.).
Summary
Recent EPA actions mark a shift toward greater regulatory clarity and flexibility in air permitting. The agency’s actions reduce permitting risks and support expedited growth and investment in the U.S. At PPM, we help clients navigate these evolving policies, streamline permit applications, and stay compliant while advancing operational goals. If you would like to discuss how these updates may affect your facility or project plans, contact me at Isaac.Smith@ppmco.com or (251) 266-7921.
Links to relevant articles on these topics
EPA can’t force Virgin Islands refinery to obtain new permit, U.S. court says | Reuters
EPA Targets Preconstruction Rules and Retires Reactivation Policy