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New Source Review Permitting
As we enter 2026, New Source Review (NSR) continues to be among the most complex and challenging of permitting programs. The second half of 2025 brought some meaningful interpretive and policy changes to NSR, with a few more on the horizon. These developments are worth watching, especially for new energy projects in planning stages, including those related to data centers. State-specific responses to these announcements remain to be seen in many cases, but these actions have the potential to provide better clarity to project proponents on certain concepts that have fluctuated over time and by administration.
First, EPA determined in July that it would withdraw its 2024 proposed rule entitled Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR): Regulations Related to Project Emissions Accounting; Withdrawal of Proposed Rule on the basis that there is insufficient justification for the rule, and out of concern that the proposal could result in unnecessary additional burden on regulated entities and state, tribal and local air agencies that implement the NSR regulations. See 90 Fed. Reg. 34206 (July 21, 2025). In short, the proposed rule published under the Biden Administration would have partially rolled back the concept of project emission accounting that was codified under the first Trump Administration, which allowed for both increases and decreases to be accounted for under “Step 1” of the NSR applicability process. The Biden rule would have revised the definition of “project” under the federal NSR rules in order to provide clarity and to avoid either over – or under-aggregation in determining the scope of a project for which emission increases and decreases may be counted in Step 1. In addition, the proposed rule would have imposed additional recordkeeping and reporting requirements and may have required decreases counted in Step 1 to be enforceable. For each proposed change, EPA reviewed comments received and determined that the changes would impose additional burden and uncertainty on stationary sources without clear and justifiable corresponding benefits. The withdrawal can be found here.
Second, on September 2, 2025 EPA Assistant Administrator Aaron Szabo issued a letter to the Maricopa County Air Quality Department signaling a more flexible approach toward the prohibition against “beginning actual construction” prior to permit issuance under the New Source Review program. Whereas EPA and state agencies have historically taken a restrictive view of acceptable pre-permit activities, this recent guidance from EPA is more forgiving, agreeing that an initial phase of construction proposed by semiconductor manufacturer TSMC Arizona Corporation, the would-be permittee, would not run afoul of the prohibition. Whereas prior guidance would have considered the construction of building supports, foundation, and shell, among other activities, as beginning actual construction, EPA agreed with Maricopa County that if a structure contains no emissions unit(s) it is not a ‘source’ subject to Clean Air Act permitting authorities because it does not emit or have the potential to emit pollutants. Referring back to a March 2020 guidance issued under the first Trump Administration, the letter states: [c]onsistent 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. Stating EPA’s intention to provide more clarity through rulemaking, Assistant Administrator Szabo was careful to note that Maricopa County has discretion to interpret its existing regulations in a manner consistent with EPA’s current stance. Further, any construction activities undertaken by TSMC prior to issuance of an NSR permit would be done at risk, as the County would retain the discretion to deny any subsequent application to construct if applicable criteria are not met. In addition, TSMC’s time and resources expended on construction prior to obtaining a permit (so-called “equity in the ground”) should not justify any subsequent permit decision. EPA’s Regulatory Agenda indicated that a Notice of Proposed Rulemaking is planned for January 2026, and a final rule is expected September 2026.
Third, in a September 15, 2025 memorandum issued by Administrator Zeldin entitled EPA Policy on Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability in New Source Review Preconstruction Permitting: Reinstatement of 2017 Memorandum, EPA has reinstated the 2017 memorandum authored by then Administrator Scott Pruitt entitled New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability" ("2017 Memorandum . Our 2017 article provided a detailed summary of this memo, which served to signal EPA’s intent to not “second guess” permit applicants’ good faith calculations of projected actual emissions in NSR permit applications, including where an applicant intends to actively manage future emissions to avoid significant increases. Instead, in evaluating the potential need for NSR enforcement, EPA will focus on whether the actual post-project emission increases should have triggered NSR requirements.
Finally, on September 18, 2025, EPA Administrator Lee Zeldin issued a memorandum entitled New Source Review Program "Reactivation Policy" which serves to signal a change in EPA’s historical presumption that a major stationary source that was idle for two or more years was permanently shut down and thus subject to NSR permitting requirements applicable to a newly constructed source prior to restarting operations. Citing Port Hamilton Refining and Transportation, LLLP v. EPA, 87 F .4th 188 (3d Cir. 2023), the memo stated EPA’s determination that the reactivation of an idled source will not trigger NSR permit requirements unless modifications to the source qualify it as a "major modification" under applicable regulations based on the nature of the change and the magnitude of any resulting increase in emissions.
Each of these actions are no doubt an effort by the Trump Administration to ease permitting burdens on permit applicants and to clarify NSR rules that have been subject to stringent interpretations over the long history of the NSR program. However, it is important to note that states with delegated NSR programs have the discretion to accept or reject EPA’s interpretations of these key NSR concepts. Because air permitting is often the longest lead time permitting action for significant new projects or expansions and carries with it the risk of third party attention and appeals, a clear understanding of the current NSR landscape is paramount for project planning and risk mitigation.
