Under the Clean Air Act, a facility that emits air pollutants may not be constructed unless an air permit has been issued to the facility. For decades, EPA has interpreted the statute to prohibit almost any construction or modification activities until a permitting authority issues a final permit. But on March 25, 2020, EPA proposed new guidance to clarify that, according to regulations adopted 40 years ago, the only construction prohibited prior to issuance of an air permit is construction on the emitting unit itself. If adopted by state permitting authorities, this guidance should provide companies, such as pipeline project proponents, with more flexibility by allowing more construction activities pre-permit. That said, project proponents should carefully consider the risks associated with initiating construction prior to receiving an air permit.
EPA characterizes its newly proposed guidance as a “revised interpretation” of its 1980 rules, but it is actually a plain reading of the regulatory text, which defines the term “begin actual construction” as “construction activities on an emissions unit.” Despite that definition, EPA has for many years clung to its pre-1980 interpretation of the statute, under which EPA claimed the law prohibited the construction of non-emitting things, such as footings, foundations, storage structures, and retaining walls.
The theory behind EPA’s prior interpretation was that a company might gain leverage over state permitting authorities (or courts reviewing permitting decisions) by beginning construction early and then claiming that any refusal to issue an air permit would unfairly interfere with its investment. EPA’s new guidance recognizes that concern is no longer valid today. After 40 years of experience, state permitting authorities and courts reviewing their decisions are much more sophisticated than in the 1970s and highly unlikely to be swayed by any such “equity in the ground” arguments. Quite the contrary, companies that invest in a site prior to issuance of a permit are likely to have far less leverage in any negotiations with state authorities because the risk of permitting delays present a credible and substantial threat to any pre-permit investment.
EPA’s proposed guidance confirms that companies may construct early, so long as that construction is not “on an emission unit,” which remains prohibited. This approach is consistent with the regulations and balances the need for oversight against the burden of restricting even preliminary construction of non-emitting structures while companies wait for air permits on time-sensitive projects. EPA, unfortunately, provides little direction on how to distinguish between what constitutes construction “on an emission unit” and what constitutes construction on something else, other than to point to equipment defined and directly regulated by a federal standard. For equipment not expressly listed in an applicable standard, the issue remains a case-by-case question for state permitting authorities to answer.
Even with this new, more flexible guidance, companies should carefully consider the risks associated with initiating construction prior to receiving an air permit. Routine construction activities that are clearly distinct from an emission unit may be low risk, whereas other activities may present a greater risk if an air permit is denied or issued with unexpected terms. Even when a draft air permit has been issued for public comment, state permitting agencies will frequently change the final conditions based on comments from EPA or other third parties. If changes to the permit require substantial redesign of the project, pre-permit construction could prove costly.
Even though the proposed guidance merely applies the rules as written and continues to prohibit pre-permit construction of any equipment capable of emitting air pollutants, it is sure to come under attack as a roll-back of environmental protections. Direct attacks are unlikely to be successful, given that mere guidance is generally unreviewable, but recent D.C. Circuit precedent suggests that the guidance could become reviewable when actually used in an individual case.
EPA’s guidance is labeled “Draft for Public Review and Comment,” but EPA confirms that it does not trigger mandatory notice-and-comment procedures, so no deadline for comments is provided. Even so, many different interests are likely to provide feedback on the draft in the coming weeks. For more information about the guidance, please contact Mack McGuffey (404) 885-3698, Randy Brogdon at (404) 885-3147, and Melissa Horne at (404) 885-3286.