The following discussion highlights:

• Project Emissions Accounting Background;
• November 2020 published “Project Emissions Accounting Rule”;
• May 2024 proposed “Regulations Related to Project Emissions Accounting”;
• July 2025 withdrawal of the May 2024 proposed rule; and
• Potential implications of the rule withdrawal for Rocky Mountain States.

Project Emissions Accounting Background:

The Clean Air Act’s (CAA’s) New Source Review (NSR) program requires sources of air emissions to obtain permits. Especially significant sources may trigger the need to pursue Prevention of Significant Deterioration (PSD) permits for major sources in attainment areas and/or Nonattainment New Source Review (NNSR) permits for major sources in nonattainment areas. In relation to existing sources seeking modifications, applicability of these permits is based on a two-step process: Step 1 requires accounting for project-specific emissions increases, and Step 2 requires accounting for emissions increases and decreases attributable to other projects undertaken at the source within a specific time frame (i.e., Project Netting). If a modification source exceeds PSD or NNSR significant emissions thresholds in both Step 1 and 2, PSD or NNSR permitting is triggered. PSD and NNSR permitting requires significant resources and generally require lengthy review by state and federal agencies. As such, determining applicability to one or both of these programs can be one of the most important steps when evaluating projects at existing facilities.

On September 14, 2006, U.S. EPA proposed a rule associated with Step 1 of the NSR permitting applicability determination. The purpose of the proposed rule was to “clarify for sources and permitting authorities three (3) aspects of the NSR program: aggregation, debottlenecking, and project netting that pertain to how to determine what emissions increases and decreases to consider in determining major NSR applicability for modified sources.”¹ In that rule, U.S. EPA proposed to enable emissions decreases to be included in the calculation of whether a significant emissions increase will result from a project (Step 1). Prior to these 2006 proposed provisions, U.S. EPA had indicated that only the increases resulting from a project could be considered in determining whether a significant emissions increase would occur.

U.S. EPA subsequently published a rule on January 5, 2009, addressing only the project aggregation provisions in the 2006 proposed rule. At that time, U.S. EPA also published a separate document in the Federal Register to withdraw the 2006 proposed provisions related to debottlenecking and did not to take further action relating to the proposed project netting provisions. Since no further action was taken on the 2006 proposed project netting provisions, U.S. EPA’s prior (e.g., pre-September 14, 2006) interpretation that only emissions increases associated with a project be included in Step 1 of the NSR permitting applicability remained in place.

This series of EPA actions resulted in a fair amount of confusion surrounding project emissions accounting, until the more recent 2020 rule was implemented.

November 2020 “Project Emissions Accounting Rule”:

U.S. EPA published a rule on November 24, 2020 (Federal Register 85 FR 74890) clarified applicability procedures in Step 1 of NSR applicability determinations, something sorely needed to help clarify the series of proposed rules and withdrawals that historically occurred. Specifically, the “Project Emissions Accounting Rule” made it clear that both emissions increases and decreases associated with a project should be accounted for in Step 1 of the PSD or NNSR applicability analysis. A petition, dated January 22, 2021, was received by U.S. EPA requesting reconsideration of this rule. This petition was submitted by a collection of Non-Governmental Organizations (NGOs) including Sierra Club, Environmental Defense Fund, and others.

May 2024 Proposed Rule related to “Project Emissions Accounting Rule”:

Although the petition referenced above was denied, U.S. EPA undertook a discretionary rulemaking and proposed a rule entitled “Prevention of Significant Deterioration and Nonattainment New Source Review: Regulations Related to Project Emissions Accounting”, published on May 3, 2024 (89 FR 36870). This proposed rule sought to provide clarity on types of activities to be included in a single project, increase transparency in project emissions accounting, and improve general compliance with the required project emissions accounting procedure. The following were addressed in the proposed rule:

• U.S. EPA revised the definition of “project” to codify their 2018 interpretation and policy for determining whether changes at a facility should be grouped together or separated (“project aggregation”).
• Revisions to monitoring, recordkeeping, and reporting were proposed with the goal of clarifying and strengthening existing requirements.
• U.S. EPA proposed to include enforceability provisions for any project emissions decreases included in Step 1 of the NSR permitting applicability (Project Emissions Accounting).

U.S. EPA clarified the statutory limitations on netting (Step 2 of NSR permitting applicability) in NNSR applicability analyses; the revisions applied to serious, severe, and extreme ozone nonattainment areas. The rule reflected that for serious and severe nonattainment areas, emissions increases over any period of five (5) consecutive years should be aggregated when determining whether there is a significant net emissions increase. Also, in extreme ozone nonattainment areas, the proposed revisions establishing that netting  and project emissions accounting are not available.

Withdrawal of May 2024 Proposed Rule:

U.S. EPA published the withdrawal of the May 2024 Proposed Rule on July 21, 2025 (90 FR 34206). The basis for withdrawal included the potential for unnecessary additional burden on regulated entities that could “disincentivize or delay environmentally and economically beneficial projects.” Based on careful review of the proposed rule and public comments, U.S. EPA determined that:

• The proposed definition of “project” could lead to more uncertainty in permitting decisions since it included undefined criteria such as “substantially related,” “economic viability,” and “technical viability.” Also, there was insufficient evidence to show that aggregation concerns warranted changes to the existing NSR program.
• The proposed revisions to monitoring, recordkeeping, and reporting could “unnecessarily burden the permitting process and associated obligations without corresponding benefits”. Specifically, the burden of the additional data collection required proposed changes outweighs theoretical benefits. U.S. EPA also agreed it did not provide examples or empirical evidence to support the proposed changes.
• The proposed enforceability of Step 1 emissions decreases is inconsistent with the treatment of Step 1 emissions increases, which U.S. EPA has previously determined should not be made enforceable through a permitting action. Also, U.S. EPA agreed requiring enforcement of a projected decreases could “restrict operating flexibility and future project opportunities”.

Implications of the May 2024 Proposed Rule Withdrawal:

The withdrawal of the proposed May 2024 rule leaves the November 2020 “Project Emissions Accounting Rule” as the prevailing federal rule covering Step 1 project emissions accounting, meaning as of today, both increases and decreases associated with a given project may be accounted for during Step 1 evaluations without any additional limitations surrounding the enforceability of said reductions. Overall, it is anticipated that withdrawal of the May 2024 Proposed Rule will be beneficial for capital projects, especially at existing sites. The existing definition of “project” is preserved, though project aggregation remains a topic of concern for NSR and NNSR applicability analyses, projected actual emissions reductions can continue to be included as part of Step 1, and the use of project emissions accounting is maintained even for extreme nonattainment areas, thereby potentially avoiding burdensome sitewide netting for small projects​.

However, based on the U.S. EPA’s historical inconsistency in their interpretation of Step 1 of NSR permitting applicability, the withdrawal of the May 2024 Proposed Rule is unlikely to be the final step on this ongoing odyssey.

Even more importantly is that many Rocky Mountain States have their own policies or interpretations on how Step 1 project emissions accounting should be performed:

• Colorado: The Colorado Department of Public Health and Environment (CDPHE) has historically not allowed for any decreases to be included as part of Step 1 evaluations. This has not changed with the November 2020 rule, and there are no signs that they are reevaluating their position on this subject.

• New Mexico: While the New Mexico Environmental Department (NMED) allows for decreases to be included as part of Step 1 evaluations, they have historically included enforceability provisions in issued permits, making their position fairly similar to the withdrawn May 2024 propose rule.

• Montana: The Montana Department of Environmental Quality (MDEQ) has generally deferred to federal EPA policy when it comes to Step 1 evaluations, and as such, is currently abiding by the November 2020 Rule. However, MDEQ has its own state-level interpretations surrounding potentially major projects and typically will require project netting (Step 2) even when the Step 1 analysis comes in under the significance thresholds.

• Utah: The Utah Department of Environmental Quality (UDEQ) follows federal policy on this subject. Thus, the requirements of the November 2020 Rule will drive Step 1 evaluations in Utah.

• Wyoming: The Wyoming Department of Environmental Quality (WDEQ) has state rules that are generally similar to the November 2020 federal rule, allowing for both increases and decreases to be considered, assuming that the overall project consisting of both increases and decreases is well defined, and appropriately compared against state and federal “project” definitions.

Clearly, this is a complex and ever-evolving situation. And even with some better clarity on the federal level, individual state interpretations and policies make this a tricky subject. However, Trinity is here to help! With locations across the country, Trinity has experts on any state regulations you may be subject to. So please don’t hesitate to contact Trinity’s Colorado office at 720.638.7647 or email Christopher Platt.