EPA Draws the Line: What Can You Build Before Getting an Air Permit?

On September 2, 2025, the U.S. Environmental Protection Agency (“EPA”) provided long-awaited clarity. In a letter opinion, the agency confirmed that the prohibition applies only to construction “on an emissions unit” itself—not related non-emitting infrastructure. At the same time, EPA announced it would undertake a rulemaking to codify this narrower boundary, limiting future administrations’ ability to revert to the broader 1986 guidance without a full rulemaking.

EPA’s clarification may allow project developers in certain industries to get a head start on construction. But project sponsors, investors, and lenders alike should note that any construction remains at the permittee’s own risk: time and money spent before the permit is issued will not influence whether the permit is granted or the conditions it will impose.

The 2025 EPA Interpretation

In July 2025, semiconductor manufacturer TSMC Arizona Corporation (“TSMC”) sought clarification from the Maricopa County Air Quality Department (“MCAQD”) on whether it could begin construction of the foundation, steel superstructure, and exterior walls of a manufacturing plant prior to MCAQD’s issuance of the plant’s air permit. MCAQD agreed that TSMC was not prohibited from constructing the “core and shell” of the plant because these structures are not a source of emissions under the CAA. Nevertheless, MCAQD sought EPA’s concurrence.

EPA’s September 2 response letter (the “TSMC Letter”) explains that permit applicants can commence permanent on-site construction activities prior to receipt of a New Source Review (“NSR”) preconstruction permit, provided that no construction is performed “on an emissions unit.” EPA agreed that, based on the facts provided, erecting TSMC’s proposed plant’s superstructure would not constitute construction “on an emissions unit” and so is not prohibited by the CAA. But EPA cautioned that any construction performed would be at TSMC’s own risk, meaning that the time and resources TSMC expended on the superstructure cannot be used to influence or justify any permitting decisions, and that TSMC would assume the risk that the permit could contain conditions requiring TSMC to modify or rebuild what was already in progress.

EPA concurrently shared its intent to finalize by the end of 2026 revisions to its regulatory definition of “begin actual construction,” to more clearly articulate the construction activities prohibited by the CAA. EPA has since updated its webpage, “Construction Activities Allowed Before Obtaining a Preconstruction Air Permit,” with this information and a reference to the TSMC Letter. In the interim, EPA will continue to provide case-by-case guidance on pre-permit construction.

The Regulatory Background

The CAA generally prohibits the construction of stationary sources of air pollutants without an NSR preconstruction permit. EPA implements the CAA’s preconstruction permitting mandate through regulations, which states must incorporate into their respective state implementation plans.

EPA’s regulations provide that major stationary sources cannot “begin actual construction” without a permit. “Begin actual construction” is defined as “in general, initiation of physical on-site construction activities on an emissions unit which are of a permanent nature,” including the emission unit’s supports and foundation, underground pipework, and storage facilities.¹ Emissions units are “any part of a stationary source that emits or would have the potential to emit” regulated pollutants.²

The TSMC Letter arguably preserves the status quo: based on the plain text of EPA’s regulations, project developers like TSMC have never been constrained from beginning construction on non-emitting structures. Only construction “on an emissions unit” is prohibited. More fundamentally, it is reasonable to conclude that structures with no emissions are beyond the ambit of the CAA, as MCAQD and the TSMC Letter posit.

However, earlier EPA guidance like the 1986 “Reich memo” suggested that EPA would view construction of “any accommodating installation” related to an emissions unit as prohibited by the CAA. This historically drove developers to take overly conservative approaches to pre-permit construction, to the detriment of project development timelines—a problem the TSMC Letter appears to alleviate.³

Takeaways

The impacts will vary considerably by industry and potentially also by state, given state permitting agencies are not obligated to follow EPA guidance. For manufacturing and data center development, which often have significant non-emitting infrastructure, the TSMC Letter may promote accelerated construction timelines. Indeed, EPA’s decision to revise the “begin actual construction” regulatory definition is explicitly linked to the current administration’s desire to ramp up the deployment of domestic manufacturing and data center infrastructure. However, with respect to projects where virtually all equipment has potential to emit or is a direct accessory to such emitting equipment, the potential benefits are less clear.

Bottom line: The TSMC Letter gives project developers new room to maneuver, but not without risk. Expect federal courts to weigh in—via citizen suits or rulemaking challenges—on whether the CAA bars construction of non-emitting yet essential project structures before a permit is in hand. And after Loper Bright, it is the judiciary, not EPA, that will have the last word.

¹ 40 C.F.R. § 52.21(b)(11).

² Id. § 52.21(b)(7).

³ Toward the end of the first Trump administration, EPA issued draft guidance disclaiming that an emission unit included ill-defined “accommodating installations,” which could include just about anything associated with a project. But this guidance was never finalized.