Biden Chip Money Sparks Debate Over Plants’ Environmental Impact

The White House’s grand vision of a thriving domestic semiconductor industry could be undermined by environmental permitting rules, according to Senate lawmakers and regulatory specialists.

To head off that red tape, a bipartisan group of lawmakers has introduced a bill to change the permitting process for chip manufacturing sites. Opponents of the bill say it’s just the latest in a long line of attempts to carve out exemptions from the strictures of the National Environmental Policy Act.

Both Democrats and Republicans want last year’s CHIPS and Science Act (Public Law 117-167) to succeed because it checks so many boxes in its effort to scale up the production of semiconductors. The measure promises to create domestic manufacturing jobs, wean the nation off foreign supply chains, expand the corporate tax base, kick-start a broad range of new technologies, and firm up national security.

Yet the permitting requirements under NEPA are throttling those ambitions, Sen. Mark Kelly (D-Ariz.) said in an interview.

Companies have announced plans to invest hundreds of billions of dollars to bring microchip manufacturing back to America, including in Kelly’s home state. Commerce Secretary Gina Raimondo said in February that the US will develop at least two large clusters of chip manufacturing by 2030.

But as soon as a company gets a federal grant under the CHIPS Act, “that triggers a federal NEPA process, and it seems that you might have to stop construction for an extended period of time,” Kelly said. “I just don’t want to see this unnecessarily delayed.”

To cut through the bureaucracy, Kelly, Todd Young (R-Ind.), Bill Hagerty (R-Tenn.), and Sherrod Brown (D-Ohio) brought forward a bill on Tuesday that would exempt certain CHIPS Act projects from NEPA review.

Among the exempted categories are projects that have already started construction, are subject to state environmental reviews that are “at least as stringent as NEPA”, take less than 15% in federal dollars to complete, or merely expand existing sites—as long as the expansion doesn’t more than double the site.

A House version of the bill, also introduced on Tuesday, was cosponsored by three Republicans and two Democrats.

“We cannot simply fund our way back into a leadership position,” said Scott Faris, CEO of quantum technology company Infleqtion. “We are in this predicament because we built a set of rules that made the US uncompetitive in a global race.”

In Faris’ view, what’s needed is “legislation that builds a sense of unified purpose across all government bodies, and a set of rules that rewards agility and innovation, if we hope to win what is akin to a marathon.”

A Dirty Business?

To some, the notion of exempting chip factories from the full suite of NEPA’s requirements is a dangerous idea because chipmaking can be an environmentally dirty business.

The process accounts for most of the carbon output attributable to making hardware systems, and the production of next-generation chips is expected to use up to 7.7 billion kilowatt hours per year, according to a 2020 paper from a group of Harvard University, Arizona State University, and Facebook researchers.

Semiconductor manufacturing also uses several gases with high global warming potential, including perfluorocarbons and hydrofluorocarbons, according to the Environmental Protection Agency. Chemicals like PFAS, known for their persistence in the environment and link to health issues, can also get into the water from manufacturing facilities.

But Kelly’s bill “proposes to entirely eliminate review for entire categories of activities that would potentially impact local communities,” said Stephen Schima, senior legislative counsel at Earthjustice.

It also fails to recognize that last year Congress added semiconductor manufacturing to the list of projects eligible for consideration by the Federal Permitting Improvement Steering Council and its sped-up review process, Schima said.

He further criticized the “slow creep of carve-outs and rollbacks, industry by industry,” saying those efforts are “frustrating and completely undermine the purpose of the law.”

Similar carve-outs have been proposed for critical minerals, transportation projects, and broadband deployment.

Kelly said the semiconductor industry hasn’t asked him for a carve-out, and that “we’ve got to make decisions based on what’s in the best interest of the country. Sometimes it might make sense to come up with a different process.”

A Different Kind of Sector

Alex Herrgott, who led FPISC during the Trump era, said semiconductor manufacturing, “like national defense, critical minerals, or border infrastructure, is a bit different than other permitting issues,” because it directly affects national security.

Moreover, most semiconductor facilities are built on existing industrial footprints and would still have to secure federal air and water permits even if they’re exempted from NEPA, said Herrgott, now president of the Permitting Institute.

The industry is also taking steps to clean up its operations. SEMI, a trade association, has established a consortium of semiconductor makers that is trying to steer the industry toward net-zero emissions by 2050.

Chipmaking also requires vast amounts of water—up to 4 million gallons a day, according to Herrgott—but Kelly said many manufacturers are taking steps to be more efficient with their water use. To illustrate, he said he recently visited an Intel plant in Maricopa County, Ariz., that is treating and recycling 95% of its water.

“Historically we have an excellent environmental record,” said David Isaacs, vice president of government affairs at the Semiconductor Industry Association. “We’re not suggesting that there should be a free pass and bypass environmental controls, but there’s an existing permitting structure and compliance requirements that are well understood. These facilities have been in operation for decades, so they’re still held to high environmental standards.”

Federal Help

In the meantime, FPISC stands ready to help project developers who apply for its voluntary services in coordinating agencies and making the permitting process happen more smoothly, said Eric Beightel, the office’s executive director.

So far FPISC hasn’t started working on any semiconductor projects, but it has held meetings with manufacturers curious about how the office can help, Beightel said.

“We encourage chips manufacturers to seek coverage, because it’s an emerging infrastructure type and we could provide a value add to them,” he said. In anticipation of a surge of new work—not just in the chips space, but across all of FPISC’s covered sectors—the office is looking to staff up and increase its capacity, Beightel said.

But he also noted that FPISC doesn’t “pick winners and losers” when managing its workload, and doesn’t prioritize projects in sectors the administration wants to promote.

The CHIPS Act has already invested $52.7 billion over five years for chip manufacturing already, from 2022 to 2027, to prop up the nation’s diminishing world market share, which has fallen from 37% in 1990 to 12% today.

“Let’s not waste this window,” Herrgott said. “We’re already a year in. If we don’t significantly reduce the unforced error permitting delays on some of the current and planned facilities, I’m very concerned that the remaining four years may not be enough to time for these capital-intensive projects to fully utilize the funds before they expire.”