Streamlining the Permitting Process for Fab Construction
As U.S. policymakers look to renew U.S. leadership in semiconductor manufacturing, a careful and comprehensive assessment of the permitting process for fab construction is underway to ensure these facilities are brought online as quickly as possible. The CHIPS and Science Act of 2022 includes $39 billion in subsidies for the construction, modernization, or expansion of fabs domestically. The appropriations are structured to facilitate rapid deployment and to entice semiconductor firms making decisions right now about where to construct their new fabs, with $19 billion in subsidies allocated for fiscal year 2022. A number of the world’s leading semiconductor companies, including Intel, Samsung, and TSMC, have already announced plans for new fab projects across the United States. Several of these projects have the potential to dramatically increase U.S. chip supply chain resiliency while providing substantial regional economic development.
The construction of semiconductor manufacturing facilities is an extremely complex, expensive, and resource-intensive process. Proposed plants must undergo extensive state, local, and federal regulatory reviews before their construction even begins. For the United States to take leadership in a globally competitive industry, the regulatory and permitting process for fab construction must be streamlined to ensure that these facilities begin operations without delay.
Regulatory Hurdles Facing the Industry
Semiconductor companies looking to build a fab in the United States are required to navigate a complex network of state, local, and federal environmental regulations meant to minimize the environmental impact of any proposed facility. They also face numerous local permitting requirements that can also delay construction.
In the United States, the bulk of environmental permits are granted by state and local governments, with the U.S. Environmental Protection Agency (EPA) issuing less than 5 percent of the total nationwide. It is a complex process; while some permits are required by state or local law, others are required by federal law and must be implemented by the states in coordination with federal agencies. In Arizona, for example, where TSMC recently started building a new fabrication plant, the Department of Environmental Quality (DEQ), a state agency, grants permits called for under the federal Clean Air Act (CAA), the Resource Conservation and Recovery Act (RCRA), and the Clean Water Act (CWA), among others. The DEQ also implements a variety of Arizona-specific environmental regulations. Permits granted by local authorities like the Arizona DEQ might receive input from the EPA prior to approval, further lengthening the process.
Proposals to construct semiconductor fabrication facilities are also subject to lengthy environmental reviews. These fabs have a large impact on the environment as they consume large quantities of energy and fresh water, and produce thousands of tons of hazardous waste every year. They are thus subject to strict environmental reviews, as documented in a 2017 report by the President’s Council of Advisors on Science and Technology (PCAST) titled “Ensuring Long-Term U.S. Leadership in Semiconductors.” PCAST found that the permitting process can take 12–18 months for larger fab projects, adding significant costs for companies. The report identified the CAA—specifically the preconstruction and operating permit programs—as the primary obstacle to the prompt issuance of permits.
All projects which receive CHIPS Act funds will be regulated under the National Environmental Policy Act (NEPA), which requires federal agencies to consider the environmental impacts of proposed actions and inform the public about their decisionmaking process. According to the Council on Environmental Quality (CEQ), between 2013–2018, Environmental Impact Statements took an average of 4.5 years to complete. This implies that any fab obligated to generate an Environmental Impact Statement faces significant delays. Some estimates put delay costs for large infrastructure projects as high as 5 percent a year, meaning, for example, that Intel’s planned $20 billion investment in Ohio could encounter about $1 billion in extra expenses for every year delayed.
Local and Municipal Processes
As documented by Charles Wessner and Thomas Howell, local governments and municipalities can also inadvertently stall projects due to a variety of regulations. For example, when GlobalFoundries was considering building a new plant in Malta, New York in 1996, a protracted local-level zoning change by the Malta and Stillwater town boards delayed the initial development of this site. Furthermore, local governments sometimes do not possess the bureaucratic resources to process all the required permitting in a timely manner, which slows fab construction. For example, even in 2022, local administrators at the Malta plant are working out of a makeshift trailer office just to process all the permits for the construction of the GlobalFoundries fabrication plant.
The Impacts of Delay
Substantial costs and bureaucratic delays do more than undermine regional economic development. They can also undercut the United States’ national strategy for revamping its advanced manufacturing capacity.
A report published by Data for Progress, a think tank and polling firm, finds that in addition to creating and preserving approximately 513,630 jobs between 2022 and 2026, funding from CHIPS would also help to create a steadier supply of semiconductor chips. U.S.-based fabs, once completed, will help ensure that the prices of automobiles and other technologies or devices using semiconductors will not rise significantly due to shortages.
A secure semiconductor supply will also advance U.S. strategic priorities and international competitiveness by insulating U.S. firms and the military from the acute effects of global supply chain disruptions. Without an accommodating regulatory environment, however, progress towards and fulfillment of these ends would come slower than expected, if at all. As countries around the world, including U.S. allies and adversaries alike, seek to bolster their own share of semiconductor production, the United States risks missing a critical strategic opportunity.
Crucial Reforms Underway
To realize the policy objectives of the CHIPS and Science Act, the United States should make sure that environmental protection and streamlined permitting processes are objectives that can be realized in tandem. Managed appropriately, environmental reviews need not stand in the way of expedited fab construction and the economic and the national security benefits that come from a more secure supply of semiconductors.
Recognizing that the environmental permitting process, both for advanced manufacturing facilities as well as other economically significant infrastructure projects, is in need of reform, the Biden administration in May 2022, announced a “Permitting Action Plan.” This plan leverages new permitting provisions in the Bipartisan Infrastructure Law (BIL), also known as the Infrastructure Investment and Jobs Act. The BIL expands the authority of the Federal Permitting Improvement Steering Council (FPISC), an interagency body established to identify bottlenecks and conflicts and share best practices for faster permitting. In August, the Biden administration further announced a new high-tech manufacturing sector-specific working group which will work in parallel with the FPISC to address permitting issues unique to federally funded fab construction.
Significantly, the BIL also expands eligibility for “FAST-41” status, an identification which expedites the environmental permitting process for projects of critical economic importance. While fab construction was not included in the original set of expanded FAST-41 eligible projects under the BIL, a law passed on August 16, 2022, extended such eligibility to all semiconductor, artificial intelligence, quantum information science, and cyber-related infrastructure projects. FAST-41 status for fab construction also promises increased transparency and accountability, as the progress of all projects will be tracked using a new permitting dashboard and interactive map. These efforts reflect a strong determination across the executive and legislative branches to eliminate bureaucratic delay for critical infrastructure projects, including those which will be initiated via CHIPS funding.
Clarity, Consistency, Coordination, and Communication
While the Biden administration’s initiative will positively impact the performance of the consultative bodies that enhance coordination and streamlining in the permitting process, industry and interagency consultation is no guarantee of success. As regulators deliberate on the path forward, they must prioritize clarity, consistency, coordination, and communication with the firms whom they are interacting with.
In a 2017 request for information (RFI), the Department of Commerce received nearly 200 responses from industry stakeholders sharing what they believe to be the most burdensome aspects of the federal permitting process. Respondents "expressed clear support for the need to protect the environment, human health, and worker safety, but shared concrete, detailed concerns about how the federal government tries to achieve those objectives." Commerce's subsequent report, "Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing," identified two overarching problems: "overlap, duplication, and poor coordination” among agencies permitting processes, and reporting requirements, and "uncertainty in the permitting processes."
The report listed 17 specific “priority areas for reform,” the majority for the Clean Air Act and the Clean Water Act, and three broad recommendations, including "further implementation of the streamlined permitting process created by ‘FAST-41.’” Under the aggressive actions taken by the Biden administration and Congress, while semiconductor firms will still be subject to all relevant regulations, they will now have the benefit of FAST-41 status, which will guarantee them regular communications with regulators and a precise review timeline.
As the government works to streamline the permitting process, Oregon's Plant Site Emissions Limit (PSEL) program offers a helpful example of best practices for simplifying and eliminating unnecessary review procedures which are costly and time-consuming. PSEL allows flexibility to change operations as long as the plant site remains within emission limits. This flexible permitting allows companies to make changes to their plants without having to notify environmental regulators of equipment or process alterations. According to a report from the Center for Security and Emerging Technology, a policy research organization at Georgetown University, Intel was able to save "hundreds of business days associated with operational and process changes to increase production” through PSEL.
As the Department of Commerce prepares to distribute the first awards under the CHIPS Act, parallel government action must ensure that the construction of fabs is not unnecessarily delayed. For the United States to renew its global position as a technology leader and manufacturer, it should match and surpass the regulatory efficiency of its competitors and rivals. It is in the shared interest of state and federal governments as well as semiconductor companies to structure and participate in a speedy and environmentally responsible review process.
Phillip Singerman is a senior adviser (non-resident) with the Center for Strategic and International Studies (CSIS) in Washington, D.C. Sujai Shivakumar is director and senior fellow of the CSIS Renewing American Innovation Project. Gregory Arcuri is a research assistant with the CSIS Renewing American Innovation Project. Hideki Tomoshige is an intern with the CSIS Renewing American Innovation Project.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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