Withdrawal of the May 2024 Proposed Revisions to Project Emissions Accounting

Environmental Consulting

08/19/2025

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The following discussion highlights:

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.

Background

The Clean Air Act’s (CAA’s) New Source Review (NSR) program requires certain sources of air emissions to obtain permits, including Prevention of Significant Deterioration (PSD) permits for major sources in attainment areas and Nonattainment New Source Review (NNSR) permits for major sources in nonattainment areas. Applicability of these permits is based on a two-step process: Step 1, accounting for project emissions increases, and Step 2, 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 major source exceeds PSD or NNSR significant emissions thresholds in both Step 1 and 2, PSD or NNSR permitting is triggered.

On September 14, 2006, U.S. EPA proposed a rule associated with Step 1 of the NSR permitting applicability. 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.” 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 the project are considered in determining whether a significant emissions increase has occurred in Step 1.

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.

November 2020 “Project Emissions Accounting Rule”

U.S. EPA published a rule on November 24, 2020 (Federal Register (85 FR 74890) that clarified applicability procedures in Step 1. 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). While this would still allow for claiming emissions decreases as part of Step 1 of NSR permitting applicability, it introduced more stringent requirements for how said decreases be included in issued permits.
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 (Step 2 of NSR permitting applicability) and project emissions accounting (Step 1 of NSR permitting applicability) 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”.

Potential Implications of the May 2024 Proposed Rule Withdrawal

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 if state-specific policies also allow for such reductions, and the use of project emissions accounting is maintained for nonattainment areas (thereby potentially avoiding burdensome sitewide netting for small projects). However, based on the U.S. EPA’s historical inconsistency relating to the interpretation of Step 1 of NSR permitting applicability, the withdrawal of the May 2024 Proposed Rule is unlikely to be the final decision on this topic. Although it is unknown what future changes may occur regarding Step 1 of NSR permitting applicability, planning for various Step 1 options for future permitting projects is recommended.

Please don’t hesitate to reach out to Trinity offices with any questions; Trinity’s experts are located across the country with state-level expertise related to implementing Step 1 and Step 2 of the NSR permitting applicability. For any questions about the withdrawal of the May 2024 proposed rule, contact your local Trinity office.