Air Plan Revisions; Arizona; Maricopa County Air Quality Department; New Source Review; Emission Reduction Credits

[Federal Register Volume 91, Number 73 (Thursday, April 16, 2026)]
[Proposed Rules]
[Pages 20394-20397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-07405]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2026-1684; FRL-13268-01-R9]


Air Plan Revisions; Arizona; Maricopa County Air Quality 
Department; New Source Review; Emission Reduction Credits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
approve a revision to the Maricopa County Air Quality Department (MCAQD 
or ``Department'') portion of the Arizona State Implementation Plan 
(SIP). This revision establishes a federally enforceable program 
allowing fleet owners/operators to generate emission reduction credits 
(ERCs) by either retrofitting or replacing existing fleet vehicles with 
lower emitting vehicles while meeting other Clean Air Act (CAA or 
``Act'') requirements. These ERCs are intended for use as offsets for 
major stationary sources under the Department's Nonattainment New 
Source Review (NNSR) program. We are proposing to approve a local rule 
to allow for the generation of ERCs through voluntary on-road mobile 
source emission reductions under the CAA. We are taking comments on 
this proposal and plan to follow with a final action.

DATES: Comments must be received on or before May 18, 2026.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R09-
OAR-2026-1684 at https://www.regulations.gov. For comments submitted at 
Regulations.gov, follow the online instructions for submitting 
comments. Once submitted, comments cannot be edited or removed from 
Regulations.gov. The EPA may publish any comment received to its public 
docket. Do not submit electronically any information you consider to be 
Confidential Business Information (CBI) or other information whose 
disclosure is restricted by statute. Multimedia submissions (audio, 
video, etc.) must be accompanied by a written comment. The written 
comment is considered the

[[Page 20395]]

official comment and should include discussion of all points you wish 
to make. The EPA will generally not consider comments or comment 
contents located outside of the primary submission (i.e., on the web, 
cloud, or other file sharing system). For additional submission 
methods, please contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section. For the full EPA public comment policy, 
information about CBI or multimedia submissions, and general guidance 
on making effective comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets. If you need assistance in a language other than 
English or if you are a person with a disability who needs a reasonable 
accommodation at no cost to you, please contact the person identified 
in the FOR FURTHER INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Elijah Gordon, EPA Region IX, 75 
Hawthorne St., San Francisco, CA 94105; telephone number: (415) 972-
3158; email address: gordon.elijah@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us,'' 
and ``our'' refer to the EPA.

Table of Contents

I. The State's Submittal
    A. What rule did the State submit?
    B. Are there other versions of this rule?
    C. What is the purpose of the submitted rule?
II. The EPA's Evaluation and Action
    A. How is the EPA evaluating the rule?
    B. Does the rule meet the evaluation criteria?
    C. Proposed Action and Public Comment
III. Incorporation by Reference
IV. Statutory and Executive Order Reviews

I. The State's Submittal

A. What rule did the State submit?

    The Arizona Department of Environmental Quality (ADEQ), the 
governor's designee for Arizona SIP submittals, submitted a SIP 
revision to the EPA on behalf of the MCAQD. Table 1 lists the rule, 
which the ADEQ included in the submittal with the Department's 
technical support materials, addressed by this proposal with the dates 
that it was adopted by the MCAQD and submitted to the EPA by the ADEQ.

                                             Table 1--Submitted Rule
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             Local agency                  Rule No.                 Rule title              Revised    Submitted
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MCAQD.................................             205  Emission Offsets Generated by       05/21/25    05/30/25
                                                         Voluntary Mobile Source Emission
                                                         Reductions.
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    On November 30, 2025, the submittal for MCAQD Rule 205, ``Emission 
Offsets Generated by Voluntary Mobile Source Emission Reductions,'' 
(revised May 21, 2025) (``Rule 205'') became complete by operation of 
law with respect to the completeness criteria in 40 CFR part 51, 
appendix V.

B. Are there other versions of this rule?

    There are no previous versions of Rule 205 approved in the Arizona 
SIP, however the MCAQD adopted an earlier version of this rule on April 
26, 2023, and the ADEQ submitted it to the EPA on May 4, 2023 (``2023 
submittal''). The EPA proposed conditional approval of the 2023 
submittal on August 22, 2024.\1\ On May 30, 2025, the ADEQ submitted a 
SIP revision requesting the EPA approve the revised version of Rule 205 
(``2025 submittal'') into the Arizona SIP. In the 2025 submittal, the 
ADEQ also withdrew the 2023 submittal, including the April 26, 2023 
version of Rule 205. Because the 2023 submittal was withdrawn and 
superseded by the 2025 submittal, and due to other changes to the rule, 
as explained in our TSD, the EPA is not finalizing our 2024 proposed 
conditional approval.
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    \1\ 89 FR 67919 (August 22, 2024).
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C. What is the purpose of the submitted rule?

    Portions of Maricopa County are currently designated as 
``Moderate'' nonattainment for the 2008 and 2015 ozone National Ambient 
Air Quality Standards (NAAQS) and as ``Serious'' nonattainment for the 
1987 particulate matter equal to or less than 10 micrometers 
(PM10) NAAQS.\2\ Sections 110(a) and 173 of the CAA require 
States with areas designated nonattainment to submit regulations that 
include a preconstruction permit program for new or modified major 
stationary sources of air pollutants within the applicable 
nonattainment areas (NAAs), referred to as the NNSR program. Therefore, 
the MCAQD is required to implement a NNSR program, which requires new 
or modified sources emitting ozone precursors or PM10 
exceeding specific thresholds to provide surplus emissions reductions 
to offset the proposed project's projected emissions 
increases.3 4
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    \2\ 40 CFR 81.303.
    \3\ 40 CFR 51.165(a)(1)(iv). The major source threshold for both 
VOC and NOX, which are precursors of ozone, is 100 tons 
per year for the portions of Maricopa designated as Moderate 
nonattainment for the 2008 and 2015 ozone NAAQS. Rule 205 applies to 
ozone precursors only and cannot be used to generate NNSR offsets 
for the PM10 NAAQS.
    \4\ 40 CFR 51.165(a)(9)(ii). The offset ratio for Moderate 
nonattainment ozone areas is at least 1.15 to 1.
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    The MCAQD states that the quantity of surplus emissions reductions 
currently available for use as NNSR offsets does not appear sufficient 
to support current and projected economic growth. The MCAQD developed 
Rule 205 to generate NNSR offsets for oxides of nitrogen 
(NOX) and volatile organic compounds (VOC), which are ozone 
precursors. Rule 205 creates a regulatory structure for the generation 
and use of nontraditional ERCs from on-road mobile sources for the 
Department's NNSR program. When ERCs are generated from on-road mobile 
sources, they are referred to as mobile ERCs or ``MERCs.'' The rule 
allows on-road mobile source fleet owners/operators that permanently 
reduce NOX or VOC emissions from their fleets to trade those 
reductions to stationary sources, or ``credit users,'' who can then use 
them to offset their proposed NOX or VOC emissions increases 
for the purpose of meeting NNSR requirements. Rule 205 outlines the 
requirements a ``generator'' of emissions reductions must meet before 
the Department can certify the emissions reductions as meeting the 
offset requirements specified for NNSR programs. In general, the rule 
requires the generator to submit certain information in its MERC 
application; provides procedures for processing an application; 
provides methodologies to calculate emissions reductions; requires the 
issuance of MERC certificates; and provides ongoing monitoring, 
recordkeeping, and reporting requirements for MERC generators. The rule 
also contains certain requirements for the credit user and the 
Department's Control Officer. The EPA's technical support document 
(TSD) includes more information about this rule.

II. The EPA's Evaluation and Action

A. How is the EPA evaluating the rule?

    In evaluating Rule 205, we reviewed it for compliance with the NNSR 
offset requirements found in CAA section 173

[[Page 20396]]

and 40 CFR 51.165 and the substantive CAA requirements for SIPs and SIP 
revisions as set forth in CAA sections 110(a)(2), 110(l), and 193.
    CAA section 173(a)(1)(A) states that ``. . . permits to construct 
and operate may be issued if (1) . . . the permitting agency determines 
that (A) by the time the source is to commence operation, sufficient 
offsetting emissions reductions have been obtained. . . .'' CAA section 
173(a) concludes that ``[a]ny emission reductions required as a 
precondition of the issuance of a permit under paragraph (1) shall be 
federally enforceable before such permit may be issued.'' CAA section 
173(c)(1) requires emissions reductions to be ``by the time a new or 
modified source commences operation, in effect and enforceable.'' 
Collectively, CAA section 173 requires permitting authorities to 
determine that offsets have been obtained and are federally enforceable 
before an NNSR permit is issued and that such offsets will be in effect 
before the source commences operation. These requirements, which mostly 
pertain to NNSR permit issuance, are generally met by the requirements 
in the MCAQD's SIP-approved NNSR program.\5\ In our evaluation, we also 
considered whether Rule 205 would interfere with these requirements.
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    \5\ MCAQD Rule 240, ``Federal Major New Source Review (NSR),'' 
revised December 11, 2019, contains the majority of the MCAQD's NNSR 
program. 87 FR 8418 (February 15, 2022).
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    Regarding whether emissions reductions qualify as offsets, CAA 
section 173(c)(1) requires that emissions increases ``shall be offset 
by an equal or greater reduction, as applicable, in the actual 
emissions of such air pollutant from the same or other sources in the 
area,'' meaning the emissions reductions must be ``real'' and not a 
theoretical reduction in the source's potential to emit; in other 
words, it requires that each offset represents emissions that have been 
taken out of the air. CAA section 173(c)(2) only allows emissions 
reductions to be creditable as offsets if they are not otherwise 
required by the CAA, meaning they must be ``surplus'' to other CAA 
requirements. Building on this, 40 CFR 51.165(a)(3)(ii)(C)(1)(i) 
requires offsets for SIP-approved NNSR programs to be surplus, 
permanent, quantifiable, and federally enforceable. Collectively, CAA 
section 173(c) and 40 CFR 51.165 require offsets to be real, surplus, 
quantifiable, permanent, and federally enforceable. We refer to these 
requirements colloquially as the offset ``integrity elements'' or 
``integrity criteria.'' Generally, emissions reductions meet these 
requirements if they are based on reductions in actual emissions, have 
not been relied upon in any air quality-related programs under the CAA, 
can be reliably calculated using methods that can be replicated, will 
last in the NAA for the life of the source utilizing the credits, and 
are legally and practicably enforceable by the EPA.
    CAA section 110(a)(2) requires that regulations submitted to the 
EPA for SIP approval be clear and legally enforceable. CAA section 
110(l) requires that states provide public notice and an opportunity 
for public hearing of SIP revisions prior to their submittal and 
prohibits the EPA from approving any SIP revisions that would interfere 
with attainment or maintenance of a NAAQS, reasonable further progress, 
or other applicable requirements of the CAA. CAA section 193 prohibits 
the modification of any SIP-approved control requirement in effect 
before November 15, 1990, in a nonattainment area, unless the 
modification ensures equivalent or greater emissions reductions of the 
relevant pollutants.
    Throughout our evaluation, we also referred to the EPA's 2001 
Economic Incentive Programs (EIPs) guidance document titled ``Improving 
Air Quality with Economic Incentive Programs'' (``2001 EIP guidance''), 
which sets out the EPA's non-binding guidelines on discretionary 
EIPs.\6\ An EIP is a regulatory program that implements market-based 
strategies to achieve an air quality objective. Rule 205 is classified 
as an EIP because it provides a framework for generating ERCs from 
mobile sources. The ERCs generated under the EIP may be traded with 
stationary sources to provide the offsets required under a NNSR 
program.\7\ The 2001 EIP guidance document does not represent final EPA 
action on the requirements for EIPs, but it identifies several 
different types of EIPs and proposed elements for each type that, if 
met, could assure that the program meets the applicable CAA 
requirements.
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    \6\ A discretionary EIP is not subject to the requirements for 
mandatory EIPs found in 40 CFR part 51, subpart U.
    \7\ See Id.
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    Guidance and policy documents that we used to evaluate 
enforceability, revision/relaxation, and rule stringency requirements 
for the applicable criteria pollutants include the following:

    1. ``Improving Air Quality with Economic Incentive Programs,'' 
EPA-452/R-01-001, OAQPS, January 2001.
    2. ``MOVES5 Technical Guidance: Using MOVES to Prepare Emission 
Inventories for State Implementation Plans and Transportation 
Conformity,'' EPA-420-B-24-043, OTAQ, November 2024.

B. Does the rule meet the evaluation criteria?

    As stated previously, the EPA proposed conditional approval of the 
2023 submittal for Rule 205 on August 22, 2024, but the submittal was 
later withdrawn, and the EPA did not finalize that action. The TSD from 
that proposed conditional approval action informs our analysis and is 
included in the docket for this action. We primarily focus on the 
revisions to the 2025 version of Rule 205 and supplemental information 
\8\ provided in the 2025 submittal and how it addresses comments and 
concerns we previously provided to the MCAQD on Rule 205.
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    \8\ See the Department's EIP Support document in Appendix 18 of 
the 2025 submittal.
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    We find that Rule 205 complies with the applicable CAA requirements 
and is consistent with relevant guidance. We find that the rule ensures 
offsets will meet the offset requirements in CAA section 173 and 40 CFR 
51.165, including the criteria for being real, surplus, quantifiable, 
permanent, and federally enforceable. For generators that are issued 
MERCs, the rule contains monitoring, recordkeeping, and reporting 
requirements and other implementation and enforcement provisions to 
ensure that compliance is consistently evaluated and determined. 
Finally, we find that the rule meets the substantive requirements for 
SIPs and SIP revisions set forth in CAA sections 110(a)(2), 110(l), and 
193. Our TSD, which is in the docket for this action, contains a 
detailed and complete evaluation of how Rule 205 satisfies CAA 
requirements.

C. Proposed Action and Public Comment

    As authorized in section 110(k)(3) of the Act, the EPA proposes to 
approve the Rule 205 submittal because it fulfills all relevant 
requirements. We will accept comments from the public on this proposal 
until May 18, 2026. If we take final action to approve the Rule 205 
submittal, our final action will incorporate Rule 205 into the 
federally enforceable SIP and codify revisions to 40 CFR 52.120.

III. Incorporation by Reference

    In this document, the EPA is proposing to include in a final EPA 
rule regulatory text that includes incorporation by reference. In 
accordance with requirements of 1 CFR 51.5, the EPA is proposing to 
incorporate by reference Maricopa County Air Quality Department Rule 
205, ``Emission Offsets Generated by Voluntary Mobile Source Emission

[[Page 20397]]

Reductions,'' revised May 21, 2025, which establishes a program 
allowing fleet owners/operators to generate ERCs by either retrofitting 
or replacing existing fleet vehicles with lower emitting vehicles and 
meeting other ongoing requirements. The EPA has made, and will continue 
to make, these materials available through https://www.regulations.gov 
and at the EPA Region IX Office (please contact the person identified 
in the FOR FURTHER INFORMATION CONTACT section of this preamble for 
more information).

IV. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP 
submission that complies with the provisions of the Act and applicable 
federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in 
reviewing SIP submissions, the EPA's role is to approve state choices, 
provided that they meet the criteria of the CAA. Accordingly, this 
proposed action merely proposes to approve state law as meeting federal 
requirements and does not impose additional requirements beyond those 
imposed by state law. For that reason, this proposed action:
    •  Is not a significant regulatory action subject to review 
by the Office of Management and Budget under Executive Order 12866 (58 
FR 51735, October 4, 1993);
    •  Is not subject to Executive Order 14192 (90 FR 9065, 
February 6, 2025) because SIP actions are exempt from review under 
Executive Order 12866;
    •  Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
    •  Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
    •  Does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4);
    •  Does not have federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
    •  Is not subject to Executive Order 13045 (62 FR 19885, 
April 23, 1997) because it proposes to approve a state program;
    •  Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001); and
    •  Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the CAA.
    In addition, the SIP is not approved to apply on any Indian 
reservation land or in any other area where the EPA or an Indian Tribe 
has demonstrated that a Tribe has jurisdiction. In those areas of 
Indian country, the rule does not have Tribal implications and will not 
impose substantial direct costs on Tribal governments or preempt Tribal 
law as specified by Executive Order 13175 (65 FR 67249, November 9, 
2000).

List of Subjects in 40 CFR Part 52

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Incorporation by reference, Intergovernmental 
relations, Nitrogen oxides, Ozone, Reporting and recordkeeping 
requirements, Volatile organic compounds.

    Dated: April 7, 2026.
Michael Martucci,
Acting Regional Administrator, Region IX.
[FR Doc. 2026-07405 Filed 4-15-26; 8:45 am]
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