Maricopa County Air Quality Department (MCAQD) has recently proposed updates to Rule 204 to stakeholders, overhauling the requirements and typical procedure for the Emission Reduction Credit (ERC) Program. These proposed changes will pass through a stakeholder workshop which the public can join on July 23, 2025 at 9 am. Companies with operations that emit high levels of Nitrogen Oxides (NO_X) or Volatile Organic Compounds (VOCs) are most likely to be impacted by these proposed changes.

These updates address both the shortage of available ERCs in Arizona as well as the rejection of the previous rule version by the EPA. These changes will ensure that Maricopa County Rule 204 complies with the Clean Air Act (CAA) Section 173(c)(1) and New Source Review (NSR) requirements for Maricopa County which currently does not fulfill 2008 and 2016 ozone National Ambient Air Quality Standards (NAAQS).

Additional Opportunity for Emission Credits

The main directive of the Rule 204 changes is the expansion of the types of sources now eligible to produce an ERC credit. There will be a new category of credits known as Nonroad Engine Emission Reduction Credits (NERCs). NERCs allow for credits to be generated from captive fleets of nonroad engines. This includes equipment typically used for construction, transportation, airports, railroads, and distribution centers. These engines must be replaced or retrofitted to lower-emitting versions. The reductions in qualifying emissions must be:

• Real reductions are made instead of theoretical improvements,
• Quantifiable and traceable,
• Permanent or enduring over twenty (20) years, and
• Federally enforceable.

This rule requires strict and detailed application procedures including but not limited to, historic hours of operation, engine model data such as power rating, and evidence of changes made to equipment.

The Use of Nontraditional Generators is Now Permitted

These rule changes allow ERCs to be generated from non-stationary and non-permitted sources, which will result in a dramatic change for industries which use mobile equipment, allowing them to participate in the program for the first time. This could include industries such warehouses, distribution centers, trucking companies and other companies which participate in an emissions trading program.

There are three types of generators which are newly defined in these rule changes:

1. Truck Stop Electrification: Businesses who install electric plug-in stations for trucks.
2. Electric Transport Refrigeration Units: Cold storage truck trailers which reduce diesel generator emissions.
3. Electrified Onsite Equipment: Fleets which have converted diesel or gasoline equipment to electric equipment.

Each new category of generator will have separate requirements for monitoring, operation, and maintenance. Detailed monitoring and recordkeeping of all usage rates and in-depth inventories will be required to verify emission savings and permit eligibility.

Increased Accountability Required for Obtaining Credits

There is expected to be a significant change in the compliance requirements for companies intending to use ERCs to offset new emissions from construction using Rule 240. Semi-annual verification will not be required to ensure the reductions are truly achieved. If during this verification process there is a discrepancy found, then there will be corrective actions taken against the company using the credit system. This could include purchasing replacement credits, submitting a revised permit, or enhanced measures to ensure emissions are reduced. These changes increase the need for cooperation between generators and credit users, meaning regular communication and data sharing to ensure compliance.

Optional Registration and Mandatory Documentation

Registration for the Arizona Emissions Bank will remain optional. However, companies who choose not to register their credits under this system are still required to follow stringent documentation and validation requirements. This can include calculations demonstrating emission reduction, tracking of all equipment usage, signed affidavits from responsible parties and record retention.

Implementation Timeline

Stakeholders have until July 31, 2025 to submit comments through the Maricopa County Website. MCAQD is planning on posting the finalized rule changes in mid-August with a final vote on these revisions by the Board of Supervisors in November 2025. Companies who can potentially be affected by this rule are strongly encouraged to view the county’s website for updates and to participate in the public process.

Conclusion

This rule revision represents an important opportunity for businesses and industries which traditionally have not been able to benefit from ERCs such as distribution centers, logistic companies, and construction companies. It is also important for companies which are currently using these programs to remain proactive about new tracking and monitoring requirements as failure to comply with these standards could cause an enforcement action or withdrawal of credits.

If you have any questions about how these credits can affect your business, feel free to email Radu Iosifescu in Trinity’s Phoenix office or call 602.274.2900.