August 31, 2026

Emission Offsets Necessary Only Before Construction, Not Permit Issuance

Under CAA Section 173(a) [42 U.S.C. Section 7503(a)], a nonattainment new source review (NNSR) permit may only be issued if, among other things, sufficient offsetting emission reductions will be obtained before the source commences operation. CAA Section 173(c) [42 U.S.C. Section 7503(c)] requires those reductions to be “in effect and enforceable” by the time the source commences operation and generally be obtained “from the same source or other sources in the same nonattainment area.” As neither the CAA nor the implementing regulations define what it means for emission reductions to be “obtained” and “in effect and enforceable,” such verbiage is open to interpretation. In 1994, EPA took the position that it was generally not appropriate to issue a permit until emission reduction credits (ERCs) were identified, quantified, and made federally enforceable, though there were exceptions. In practice, this meant permitting agencies typically did not issue an NNSR permit authorizing construction until ERCs were obtained, even if a facility would not begin operation for several years.

In new guidance issued July 1, 2026, EPA reversed its previous position, paving the way for NNSR permits to be issued earlier, and without secured ERCs. The agency reasons that the CAA Section 173(a) phrase “emission reductions required as a precondition” is best read as referring to the permittee’s obligation to obtain sufficient ERCs before operation—not a requirement that the ERCs themselves already be identified at permit issuance. “So long as the permittee’s obligation to obtain the required ERCs prior to operation is itself federally enforceable, a permit may be issued.” Furthermore, if a single permit authorizes multiple phases of construction, the applicant does not need to identify and secure offsets for the entire facility at the time the permit is issued. Instead:

“The permitting authority may issue an NNSR permit containing: (1) a federally-enforceable commitment by the permit applicant to secure, for each phase of construction, federally-enforceable ERCs by the time the source commences operation of that phase, and (2) a federally-enforceable permit provision that expressly prohibits actual operation of each phase until such time as the necessary offsetting emissions reductions for that phase have been identified, approved, and secured with appropriate permit restrictions on the source(s) providing the ERCs.”

This guidance is not legally binding nor enforceable. All permitting decisions are case-specific, and EPA’s new position may not apply in all situations, depending on the relevant circumstances.

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This document addresses issues of a general nature related to the federal environmental regulations. Persons evaluating specific circumstances dealing with the environmental regulations should review state and local laws and regulations, which may be more stringent than federal requirements. In addition, the assistance of a qualified professional should be enlisted to address any site-specific circumstances.