On May 13, 2026, the U.S. Environmental Protection Agency (EPA) published its highly anticipated Proposed Rule, “Begin Actual Construction in the New Source Review (NSR) Preconstruction Permitting Program” (91 Fed Reg 26958), kicking off the formal rulemaking process to reshape the Clean Air Act’s (CAA) NSR preconstruction permitting program, principally, by redefining the term “begin actual construction” (hereafter, the “Proposed Rule”).
The Proposed Rule distinguishes between the construction of a stationary source and the construction of non-emitting components or structures and clarifies that the latter can occur before obtaining an NSR permit. At a critical moment when power plants are expanding, data centers are proliferating, and electricity demand is spiking across the country, the Proposed Rule provides companies greater flexibility to commence physical onsite construction of non-emitting components and structures prior to obtaining an NSR permit.
The Proposed Rule Significantly Relaxes Restrictions on Pre-Permit Construction Activity.
The Proposed Rule represents a significant departure from EPA’s existing regulations, which require an owner or operator to obtain an NSR permit before it can “begin actual construction” on a new major stationary source or a major modification of an existing source, meaning “in general, initiation of physical on-site construction activities on an emissions unit which are of a permanent nature.” 40 C.F.R. § 52.21(b)(11). Notably, “emissions unit” includes installations necessary to accommodate that unit. Id. §§ 51.165(a)(1)(vii), 51.166(b)(7), and 52.21(b)(7).
EPA has historically interpreted this language to allow a company to only undertake a limited set of preconstruction activities (i.e., planning, ordering equipment and materials, site clearing, grading, and onsite temporary storage of equipment and materials) while the company’s permit application is pending. By extension, the current regulatory language does not allow companies to build supports and foundation, lay underground pipe work, construct permanent storage structures, or undertake any other related activities prior to obtaining a permit.
For years, the industry has argued that these restrictions cause lengthy and unnecessary project delays. The Proposed Rule seeks to obviate these issues by removing restrictions on pre-permit construction of components and structures that are not “pollutant-emitting activities,” such as utility service infrastructure, concrete pads, and certain types of buildings and building components. The Proposed Rule also allows companies to conduct engineering and design planning, geotechnical investigation, clearing and grading, soil compaction and stabilization, excavation, ordering materials, temporary trailers, and surface paving, before obtaining a permit.
The Proposed Rule is an Outgrowth of EPA’s Recent Interpretative Trends.
While the Proposed Rule marks a significant departure from existing regulations, it reflects the natural outgrowth of a multi-year interpretative trend by EPA, which has sought to loosen the NSR program’s tight restrictions on pre-permit construction activities.
During the first Trump Administration, the EPA sought to loosen this “overly and unnecessarily restrictive” prohibition by issuing a non-binding, interpretive guidance document that sought to clarify the agency’s understanding of the term “begin actual construction.” In that guidance document, EPA indicated that, under its revised interpretation, “a source owner or operator may, prior to obtaining an NSR permit, undertake physical onsite activities – including activities that may be costly, that may significantly alter the site, and/or are permanent in nature – provided that those activities do not constitute physical construction on an emissions unit….” Interpretation of “Begin Actual Construction” Under the New Source Review Preconstruction Permitting Program, EPA, Office of Air and Radiation, 2 (Mar. 5, 2020) (emphasis in original).
For the first time, this change opened the door for a company to begin constructing permanent “installation[s] necessary to accommodate” an emissions unit on project sites prior to obtaining an NSR permit, so long as no construction was conducted on the emissions unit itself. Id. at 12. Because EPA’s guidance document had no real binding legal effect, the choice to conduct construction activities without first obtaining an NSR permit was not without its legal risks. Nevertheless, companies in capital-intensive industries and sectors (e.g., manufacturing, natural gas and midstream, industrial, etc.) jumped at the chance to shave months off their construction timelines by beginning physical, onsite construction of new facilities, and by initiating major modifications to existing facilities, with their NSR permit applications pending before EPA, albeit with some apprehension due to the uncertain legal landscape.
Last year, EPA issued additional guidance—this time, in the form of a Response Letter—that sought to further clarify the agency’s interpretation of “begin actual construction.” Specifically, the Maricopa County Air Quality Department (MCAQD) wrote a letter to EPA requesting clarification on the agency’s policy regarding “being actual construction” as it related to plans by TSMC Arizona Corporation (an American subsidiary of TSMC, the Taiwanese multinational semiconductor manufacturer) to invest $65 billion into a semiconductor manufacturing site in northern Phoenix, Arizona. TSMC had asked MCAQD whether the company could accelerate its construction schedule by beginning construction on the outer shells of its buildings, which would eventually house its emissions units, before first obtaining an NSR permit. See Letter from P. McNeely to A. Szabo, Re: Request for clarification of current EPA policy on “begin actual construction” (Aug. 1, 2025). In its letter to EPA, MCAQD indicated that it was inclined to agree with TSMC that its proposed structure contains no emission units and, therefore, is not a source subject to CAA permitting authorities (relying on EPA’s March 5, 2020, Memo).
EPA agreed and responded to MCAQD, indicating that the company could proceed with building the core and shell of a building, which merely included the foundation, steel superstructure, and external walls, that would eventually be used to house emission units before obtaining an NSR permit. See Letter from A. Szabo to P. McNeely, TSMC Arizona Begin Actual Construction – EPA Response Letter (Sept. 2, 2025). EPA agreed that the company’s proposed activities were permissible because its “initial phase of construction” did not involve the construction of any emissions units or air pollution capture or control equipment, nor did it involve laying foundations for any emissions units. In other words, the structure could not be considered a CAA “source” because it did not emit or have the potential to emit air pollutants.
In its response letter to MCAQD, EPA also indicated that it would “provide greater clarity on the construction activities that are permissible under the CAA prior to obtaining an NSR permit (or without such a permit) by revising the EPA’s NSR regulations, including the definition of ‘begin actual construction,’ which EPA plans to proposed and finalize in 2026.” Id. at 2. The Proposed Rule fulfills this promise by creating a new definition of “pollutant-emitting activities” and allowing pre-permit construction activities that do not meet that specific regulatory definition.
Implications for New and Prospective Sources in Mississippi and Tennessee.
The Proposed Rule is sure to support the continued development of data centers and other power-generating facilities across the Southeast, including in Mississippi and Tennessee, as both states are likely to adopt new rules and/or guidance aligning their permitting approaches with EPA’s.
Public Comments are Due by June 29, 2026.
Public comments are due by June 29th. EPA may also hold a public hearing on May 28th (if a meeting is requested by May 18th). The deadline to pre-register to speak is May 25th.
Potential Litigation
In an October 30, 2025, letter to Administrator Lee Zeldin, environmental groups raised their concerns to the EPA that allowing any construction activities to occur prior to a company obtaining an NSR permit is expressly prohibited by the CAA. See Letter from Earthjustice, Natural Resources Defense Council and Sierra Club to EPA Admin. Zeldin, RE: Clean Air Act preconstruction permits for major new sources (Oct. 30, 2025).
Given these group’s position on EPA’s current interpretation of “begin actual construction,” we can expect EPA’s Final Rule, once finalized and issued by the end of this year, to be challenged in federal district court by environmental, and potentially other, groups on at least these grounds. It is also possible that such groups could file lawsuits against individual companies that begin construction prior to obtaining an NSR permit under the CAA’s citizen suit provisions.
If your company or industry trade group is interested in submitting public comments on the Draft Rule or if you want to learn more about how these regulatory changes might affect your business or sector, please contact Trudy Fisher or Tim Roth for additional information.
