Rule2026-22647
Air Plan Revisions; Arizona; Maricopa County Air Quality Department; New Source Review; Emission Reduction Credits
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 5, 2026
Effective
December 7, 2026
Issuing agencies
Environmental Protection Agency
Abstract
The U.S. Environmental Protection Agency (EPA) is taking final action 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 for the generation of emission reduction credits (ERCs) by retrofitting or replacing existing on-road vehicles with lower emitting vehicles while meeting other Clean Air Act (CAA or "Act") requirements. These ERCs are intended to be used as offsets for major stationary sources under the Department's Nonattainment New Source Review (NNSR) program. The EPA is approving this SIP revision because we find that it meets the applicable CAA requirements.
Full Text
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<title>Federal Register, Volume 91 Issue 213 (Thursday, November 5, 2026)</title>
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[Federal Register Volume 91, Number 213 (Thursday, November 5, 2026)]
[Rules and Regulations]
[Pages 69694-69701]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22647]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[EPA-R09-OAR-2026-1684; FRL-13268-02-R9]
Air Plan Revisions; Arizona; Maricopa County Air Quality
Department; New Source Review; Emission Reduction Credits
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: The U.S. Environmental Protection Agency (EPA) is taking final
action 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 for the generation of emission reduction
credits (ERCs) by retrofitting or replacing existing on-road vehicles
with lower emitting vehicles while meeting other Clean Air Act (CAA or
``Act'') requirements. These ERCs are intended to be used as offsets
for major stationary sources under the Department's Nonattainment New
Source Review (NNSR) program. The EPA is approving this SIP revision
because we find that it meets the applicable CAA requirements.
DATES: This rule is effective December 7, 2026.
ADDRESSES: The EPA has established a docket for this action under
Docket ID No. EPA-R09-OAR-2026-1684. All documents in the docket are
listed on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website. Although listed in
the index, some information is not publicly available, e.g.,
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute.
[[Page 69695]]
Certain other material, such as copyrighted material, is not placed on
the internet and will be publicly available only in hard copy form.
Publicly available docket materials are available through <a href="https://www.regulations.gov">https://www.regulations.gov</a>, or please contact the person identified in the FOR
FURTHER INFORMATION CONTACT section for additional availability
information. 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: <a href="/cdn-cgi/l/email-protection#f1969e83959e9fdf949d989b9099b1948190df969e87"><span class="__cf_email__" data-cfemail="fd9a928f999293d3989194979c95bd988d9cd39a928b">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: Throughout this final rule, the use of
``we,'' ``us,'' or ``our'' is intended to refer to the EPA. We use
multiple abbreviations and terms in this final rule. While this list
may not be exhaustive, for ease of reading and for reference purposes,
the EPA defines the following terms and acronyms here:
ADEQ--Arizona Department of Environmental Quality
CAA--Clean Air Act
CBI--Confidential Business Information
CFR--Code of Federal Regulations
CNG--compressed natural gas
EIP--economic incentive program
EPA--Environmental Protection Agency
ERC--emission reduction credit
FR--Federal Register
IBR--incorporation by reference
MAG--Maricopa Association of Governments
MCAQD--Maricopa County Air Quality Department
MERC--mobile source emission reduction credit
MOVES--MOtor Vehicle Emission Simulator
NAA--nonattainment area
NAAQS--national ambient air quality standards
NERC--nonroad engine emission reduction credit
NNSR--Nonattainment New Source Review
NO<INF>X</INF>--oxides of nitrogen
NSR--New Source Review
PM<INF>10</INF>--particulate matter 10 micrometers or smaller in
diameter
SIP--State Implementation Plan
TPY--tons per year
TSD--technical support document
VOC--volatile organic compounds
U.S.C.--United States Code
Table of Contents
I. Executive Summary
A. What action is the EPA taking?
B. What is the legal authority and what are the requirements?
II. Background
III. Public Comments and EPA Responses
IV. EPA Action
V. Incorporation by Reference
VI. Statutory and Executive Order Reviews
I. Executive Summary
A. What action is the EPA taking?
The EPA is fully approving the Arizona Department of Environmental
Quality's (ADEQ's) May 30, 2025, SIP revision for MCAQD Rule 205,
``Emission Offsets Generated by Voluntary Mobile Source Emission
Reductions,'' revised on May 21, 2025 (``Rule 205'' or ``MCAQD Rule 205
submittal''). Specifically, the EPA is approving the MCAQD Rule 205
submittal by adding Rule 205 into the federally enforceable portion of
the Maricopa County portion of the Arizona SIP.\1\ Rule 205 allows for
the generation of ERCs through voluntary on-road mobile source
emissions reductions. ERCs generated by this rule are intended to be
used to offset emissions increases of oxides of nitrogen
(NO<INF>X</INF>) and volatile organic compounds (VOC) at major
stationary sources as part of the preconstruction permit process
required by the CAA's NNSR program.
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\1\ MCAQD developed an economic incentive program (EIP) support
document that is included in Appendix 18 of the MCAQD Rule 205
submittal. The EPA's approval of Rule 205 is based, in part, on the
Department's representations in this document of the actions it
intends to take to implement Rule 205 and ensure MERCs are
consistent with applicable CAA requirements. Therefore, the MCAQD's
EIP support document is also being added to the non-regulatory
portion of the Arizona SIP.
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B. What is the legal authority and what are the requirements?
We are taking this action under CAA section 110. Pursuant to CAA
section 110(a), States are required to submit SIPs to the EPA that
provide for the implementation, maintenance, and enforcement of the
national ambient air quality standards (NAAQS). CAA section 110(k)
requires SIPs to meet certain procedural requirements and requires the
EPA to approve or disapprove SIP submissions. CAA section 110(l)
requires States to 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 CAA
applicable requirements. If a SIP submittal meets all the applicable
CAA requirements, then the EPA must approve the submittal under CAA
section 110(k)(3).
In evaluating the MCAQD Rule 205 submittal, the EPA considered
whether ERCs generated under the rule would meet the statutory and
regulatory requirements for offsetting emissions reductions in CAA
section 173 and 40 CFR 51.165, respectively. Emissions reductions may
generally be credited for NNSR offset purposes under the CAA if they
achieve actual emission reductions in the relevant nonattainment area
that (1) are not otherwise required by the CAA or relied upon in any
air quality-related programs under the CAA; (2) can be reliably
quantified using methods that can be replicated; (3) will continue for
the duration of the SIP or other program that relies upon the emission
reductions; and (4) are enforceable by the EPA under the CAA.
II. Background
The MCAQD is the local air pollution control agency for Maricopa
County, Arizona and is responsible for regulating stationary sources of
air pollution within its boundaries. Portions of Maricopa County
designated nonattainment for the 2008 and 2015 ozone NAAQS are
classified as ``Moderate'' and portions of Maricopa County designated
nonattainment for the 1987 particulate matter 10 micrometers or smaller
in diameter (PM<INF>10</INF>) NAAQS are classified as ``Serious.'' \2\
In these nonattainment areas, the MCAQD is required to implement an
NNSR permit program for preconstruction review of new or modified major
stationary sources.\3\ One of the requirements of the NNSR program is
to provide surplus emissions reductions to offset a proposed project's
projected emissions increases.\4\
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\2\ 40 CFR 81.303.
\3\ The major source threshold for both VOC and NO<INF>X</INF>,
which are precursors of ozone, is 100 tons per year (tpy) for the
portions of Maricopa County designated as Moderate nonattainment for
the 2008 and 2015 ozone NAAQS. The major source threshold for
Serious PM<INF>10</INF> nonattainment areas is 70 tpy for
PM<INF>10</INF> and precursors to PM<INF>10</INF>. See 40 CFR
51.165(a)(1)(iv). Modifications to existing major sources trigger
NNSR review at different thresholds specified in 40 CFR
51.165(a)(1)(x).
\4\ 40 CFR 51.165(a)(9)(ii). The required offset ratio for
Moderate ozone nonattainment areas is at least 1.15 to 1. The offset
ratio for Serious PM<INF>10</INF> nonattainment areas is at least 1
to 1.
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The MCAQD has stated that the quantity of surplus emissions
reductions currently available for use as NNSR offsets do not appear
sufficient to support current and projected economic growth. To
incentivize the generation of additional offsets, the MCAQD developed
Rule 205 to create a regulatory structure for the generation and use of
NO<INF>X</INF> and VOC ERCs from a nontraditional category. Rule 205
can be used to generate NO<INF>X</INF> and VOC ERCs from on-road mobile
sources, or mobile source ERCs (MERCs). The rule allows
[[Page 69696]]
on-road mobile source fleet owners/operators that permanently reduce
NO<INF>X</INF> or VOC emissions from their fleets, or credit
``generators,'' to trade those reductions with stationary sources, or
``credit users,'' who can then use them to offset their proposed
NO<INF>X</INF> or VOC emissions increases for the purpose of meeting
NNSR permit requirements.
On April 16, 2026, the EPA proposed approving the MCAQD Rule 205
submittal because we determined that this SIP revision complied with
all relevant CAA requirements.\5\ Table 1 lists the materials we are
incorporating into the Arizona SIP. The proposed action and technical
support document (TSD) contain more information on the submittal and
our evaluation.
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\5\ 91 FR 20394 (Apr. 16, 2026).
Table 1--Materials for Inclusion Into the Arizona SIP
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Local agency Title Revised Submitted
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MCAQD...................................... Rule 205--Emission Offsets 05/21/25 05/30/25
Generated by Voluntary Mobile
Source Emission Reductions.
MCAQD...................................... Revision to Arizona's State 05/21/25 05/30/25
Implementation Plan (SIP) Addition
of Rule 205 to the Maricopa County
Air Pollution Control Regulations
(MCAPCR), Appendix 18--Economic
Incentive Program Support Document.
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III. Public Comments and EPA Responses
The EPA provided a 30-day public comment period on our proposed
action. The comment period opened on April 16, 2026, the date of
publication in the Federal Register, and closed on May 18, 2026.\6\
During this period, the EPA received comments from five separate
commenters. All comments submitted during the public comment period can
be found in the docket of this rulemaking.\7\
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\6\ 91 FR 20394 (Apr. 16, 2026).
\7\ See Docket No. EPA-R09-OAR-2026-1684 for all comments
submitted during the public comment period.
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Four commenters were supportive of the EPA's proposed action.\8\ In
addition to support for the proposed action, two of these commenters
included additional recommendations for the EPA to consider. One
commenter recommended that the EPA: (1) clarify that ``future MCAQD
revisions incorporating technology-neutral language for software/
operational reductions'' would be approvable if the offset integrity
criteria are satisfied and (2) commit to updating EPA's Economic
Incentive Program (EIP) guidance to clarify that ``software-driven
mobile source reductions can qualify for MERCs/NNSR offsets when
properly documented and enforced.'' Another commenter encouraged the
EPA to continue to take actions that will encourage the generation of
ERCs, improve the efficiency of the ERC certification process, and
focus on practical actions that could meaningfully improve public
health and reduce air pollution. These recommendations from commenters
are outside the scope of our final action on the Department's
submittal.
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\8\ One of the supportive commenters also sent an email, with an
attachment, during the comment period that was supportive of the
proposed action. The email and attachment are included in the docket
for this action.
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One commenter opposed the EPA's proposed action and requested that
the EPA disapprove Rule 205. Below, we summarize the commenter's
concerns and provide a response to each.
Comment 1: The commenter asserted that the CAA ``does not authorize
stationary sources to trade credits with mobile sources because such
reductions are not `permanent, quantifiable, and enforceable' as [CAA
section] 173(c)(1) requires.'' Additionally, the commenter stated
Congress separated the authority to regulate stationary sources and
mobile sources with no references to linking together with respect to
generating offsets.
Response 1: The EPA disagrees with the commenter's claim that
mobile source emissions reductions cannot be used as offsets for
stationary sources under CAA section 173(c)(1). CAA section 173(a)
conditions the issuance of an NNSR permit on a determination by the
permitting agency that, among other things, sufficient offsetting
emissions reductions will be obtained before the new or modified source
commences operation so as to represent ``reasonable further progress''
toward attainment of the NAAQS.\9\ The required offsetting emissions
reductions must be in effect and enforceable by the time the new or
modified source commences operations and must assure that the total
tonnage of increased emissions of the relevant air pollutant from the
source is offset by an equal or greater reduction, as applicable, in
the actual emissions of that air pollutant in the area.\10\ Under CAA
section 173(c)(1), ERCs must be obtained from the same source or other
sources in the same nonattainment area, except that the reductions may
be obtained from another nonattainment area if two conditions are met:
(1) the other area has an equal or higher nonattainment classification
than the area where the source is located, and (2) emissions from such
other area contribute to a violation of the NAAQS in the nonattainment
area where the source is located.\11\ These restrictions are designed
to ensure that offsets result in the improvement of air quality in the
nonattainment area, such that construction (or modification) of the
source is consistent with reasonable further progress toward
attainment.\12\
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\9\ CAA section 173(a)(1).
\10\ CAA section 173(c)(1).
\11\ Id.
\12\ See CAA sections 173(a)(1)(A) and 173(c); see also NRDC v.
EPA, 571 F.3d 1245,1267 (D.C. Cir. 2009) (noting ``CAA section 173's
mandate that total reductions `represent . . . reasonable further
progress' '').
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Consistent with these statutory requirements, the EPA's NNSR
implementing regulations require that all emissions reductions claimed
as offset credit be ``federally enforceable'' and that offsetting
emissions reductions be obtained from the same source or other sources
in the same nonattainment area, except that the reductions may be
obtained from another nonattainment area if the two conditions
specified in CAA section 173(c)(1) are met.\13\ Additionally, the EPA's
NNSR regulations provide that emissions reductions achieved by shutting
down an existing emission unit or curtailing production or operating
hours may be credited for offsets only if, among other things, the
reductions are surplus, permanent, quantifiable, and federally
[[Page 69697]]
enforceable.\14\ The EPA has referred to these four creditability
criteria in longstanding guidance as ``integrity elements''--i.e.,
elements of a program that ensure it has integrity and meets applicable
statutory requirements.\15\ The EPA sometimes refers to these integrity
elements, along with the requirement in CAA section 173(c)(1) that
offsets be based on the reduction of ``actual'' emissions of the
relevant pollutant, as the offset ``integrity criteria.'' \16\
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\13\ 40 CFR 51.165(a)(3)(ii)(E) (requiring that all emission
reductions claimed as offset credit be federally enforceable) and
(F) (requiring States to follow procedures relating to the
permissible location of offsetting emissions at least as stringent
as those set out in 40 CFR part 51, Appendix S, section IV.D).
\14\ 40 CFR 51.165(a)(3)(ii)(C); 40 CFR part 51, Appendix S,
paragraph IV.C.3.
\15\ See Improving Air Quality with Economic Incentive Programs,
EPA-452/R-01-001 (EPA Office of Air and Radiation, 2001) (``EIP
Guidance''), available at <a href="https://www.epa.gov/sites/production/files/2015-07/documents/eipfin.pdf">https://www.epa.gov/sites/production/files/2015-07/documents/eipfin.pdf</a>), chapter 4 (describing
``fundamental principles'' of all emission reduction banking and
trading programs). The EIP Guidance supersedes the EPA's 1986
emission trading policy statement at 51 FR 43813 (Dec. 4, 1986).
\16\ See, e.g., 91 FR 20394, 20396 (Apr. 16, 2026).
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To the extent the commenter intended to assert that stationary
sources are regulated under title I of the CAA while mobile sources are
regulated under title II of the CAA, this is generally correct. But
nothing in CAA section 173 or any other provision of the CAA prohibits
the use of emissions reductions from mobile sources within the relevant
nonattainment area for NNSR offset purposes, provided the applicable
statutory and regulatory requirements are met. The commenter fails to
identify any such prohibition in the text of the CAA or the EPA's
implementing regulations. The commenter also fails to support its claim
that mobile source emissions reductions would not meet the permanent,
quantifiable, and federally enforceable offset integrity criteria.\17\
The EPA's proposed rule and TSD explained in detail how Rule 205 meets
the applicable CAA requirements and addresses the EPA's longstanding
integrity criteria for offsetting emissions reductions. In the next few
paragraphs, we briefly summarize our prior analysis of the permanent,
quantifiable, and federally enforceable criteria.
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\17\ The commenter did not raise the surplus criterion in the
offset integrity criteria in this comment.
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To ensure emissions reductions from mobile sources meet the
permanent criterion, generators of MERCs must demonstrate that replaced
vehicles no longer operate in the nonattainment area (NAA) and/or that
emissions do not shift to higher emitting vehicles within the fleet.
Generators of MERCs do so through enforceable requirements, including
robust monitoring, recordkeeping, and reporting requirements. Rule 205
contains several enforceable conditions to ensure that emissions
reductions are permanent, including: limiting the applicability of the
rule to ``captive fleet'' \18\ vehicles; requiring the original
baseline vehicle to be permanently removed from the Maricopa NAA or
rendered permanently disabled and disposed of; \19\ requiring any
future replacement of the new or retrofitted fleet vehicle to be with a
vehicle that is certified to the same or lower emission standard; \20\
and related monitoring, recordkeeping, and reporting
requirements.<SUP>21 22</SUP>
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\18\ Rule 205, section 203 defines captive fleet as, ``[A] fleet
of vehicles where all the vehicles in the fleet are identifiable,
the locations where they are being operated can be tracked and
recorded using a fleet management system, such as a global
positioning system (GPS), their base of operation is in a
nonattainment area, and which can serve as a permanent source of
emission reductions when a vehicle is replaced or retrofitted. The
captive fleet can only include on-road vehicles.''
\19\ Rule 205, section 302.2c.
\20\ Rule 205, section 302.2d.
\21\ See, for example: Rule 205, sections 302.2, 401.2, 401.3,
501, 503, 504, and 505.
\22\ For a fuller discussion on each of these requirements and
how they fulfill the permanent criterion, please see pages 16
through 22 of the TSD for this action.
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To ensure emissions reductions from mobile sources meet the
quantifiable criterion, generators of MERCs calculate emissions
reductions using specific methodologies that are clear and replicable.
Appendix A of Rule 205 articulates the calculation formula that MERC
generators will use to determine the number of eligible MERCs.\23\ Rule
205 requires MERC generators to submit information, within their MERC
application, on the methodology for quantifying emissions reductions,
including emissions calculations and documentation of each original
vehicle's historic vehicle miles traveled.<SUP>24 25</SUP> Rule 205
also requires MERC generators to demonstrate that the captive fleet of
vehicles used to generate MERCs are based and operated within the
NAA.\26\ Finally, Rule 205 requires the MCAQD to evaluate whether the
proposed qualifying emission reductions within the application for
MERCs will result in quantifiable emission reductions.<SUP>27 28</SUP>
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\23\ Additionally, section 302.1d of Rule 205 allows MERC
generators to use an alternative method to quantify emissions
reductions, which must go through the public participation process
and receive approval from the Department and the EPA Administrator
prior to use.
\24\ Rule 205, section 301.1a.(4).
\25\ See Rule 205, section 209. The original vehicle's historic
vehicle miles traveled is based on original vehicle's actual vehicle
miles traveled within the NAA.
\26\ Rule 205, section 302.1a.
\27\ Rule 205, section 301.2.
\28\ For a fuller discussion on each of these requirements and
how they fulfill the quantifiable criterion, please see pages 14
through 16 of the TSD for this action.
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To meet the requirement in 40 CFR 51.165(a)(3)(ii)(E) that
offsetting emissions reductions be federally enforceable, emissions
reductions must be enforceable by the EPA and must be legally and
practicably enforceable. The term ``federally enforceable'' is defined
in the EPA's regulations at 40 CFR 51.165(a)(1)(xiv) to mean ``all
limitations and conditions which are enforceable by the
Administrator,'' including those requirements developed pursuant to 40
CFR parts 60 and 61, requirements within any applicable SIP, and any
permit requirements established pursuant to 40 CFR 52.21 or under
regulations approved pursuant to 40 CFR part 51, subpart I.
Additionally, reductions are legally and practicably enforceable if the
reductions can be independently verified; violations of the program
that generated the credits are defined and those liable for the
violations can be identified; access to the emissions-related
information underlying the credits is available; and the public can
file civil lawsuits to enforce violations.\29\ The EPA's approval of
Rule 205 into the SIP ensures that MERCs issued under the rule are
federally enforceable. In addition, after determining that the
requested reductions meet the certification criteria, the permits that
MCAQD issues pursuant to its SIP-approved NNSR program incorporate
requirements that make the reductions in qualifying emissions federally
enforceable.<SUP>30 31</SUP>
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\29\ See EIP Guidance, pages 35 through 36.
\30\ Rule 205, sections 301.2 and 301.3b.
\31\ For a fuller discussion on each of these requirements and
how they fulfill the federally enforceable criterion, please see
pages 22 through 23 of the TSD for this action.
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Based on our evaluation, we find that Rule 205 ensures that
offsetting emissions reductions will be permanent, quantifiable, and
federally enforceable consistent with the requirements of CAA section
173 and 40 CFR 51.165.
Comment 2: The commenter stated that Rule 205 measures emissions
reductions solely at the tailpipe, relies on the EPA's MOtor Vehicle
Emission Simulator (MOVES) based emission factors, and excludes
``upstream NO<INF>X</INF> and VOC emissions associated with electricity
generation and transmission needed to power replacement battery
electric vehicles.'' Therefore, the commenter believes these actions
can, in effect, overstate actual emissions reductions. Because CAA
section 173(c)(1) requires emissions increases to be offset by the
``actual emissions'' of such air pollutant within the nonattainment
area, the commenter requested the EPA account for upstream
[[Page 69698]]
``lifecycle'' emissions increases associated with charging electric
vehicles by ``requiring MCAQD to include, at minimum, a qualitative
disclosure in each MERC application identifying the electricity source
and associated upstream NO<INF>X</INF> and VOC emissions.''
Response 2: The EPA disagrees with the claim that to approve Rule
205 the EPA must account for upstream ``lifecycle'' emissions
potentially associated with charging electric vehicles by requiring the
MCAQD to include a qualitative disclosure in each MERC application
identifying the electricity source and upstream NO<INF>X</INF> and VOC
emissions. As an initial matter, we note that Rule 205 is designed to
be broadly applicable, and MERCs can be generated using any fuel type
(e.g., replacing a diesel engine with a lower-emitting diesel engine).
That is, Rule 205 is fuel neutral and not every MERC application will
be for electric vehicles, as suggested by the comment.
The commenter's concern that the use of MOVES can overstate the
actual emissions reductions eligible for offsets when a vehicle is
replaced with an electric vehicle raises a hypothetical, fact-specific
issue that is best evaluated in the context of an individual MERC
application. The commenter specifically cited to the requirement in CAA
section 173(c)(1) that requires emissions increases to ``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.'' As
we explained in our proposal, this means 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.\32\ The requirements of
Rule 205 ensure that this requirement will be met. For example, before
granting MERCs, Rule 205 requires the MCAQD to evaluate whether the
emissions reductions will be real and include an opportunity for public
comment on the Department's evaluation.\33\ The rule also defines
``real'' as ``[a] reduction in actual emissions previously released
into the air resulting from a physical change or change to the method
of operation by a generator.'' \34\ Thus, no revisions to Rule 205 are
needed to ensure CAA section 173(c)(1) will be met. While the MERC
calculation methodology in Appendix A of Rule 205 is meant to be
applicable to most situations, if the MCAQD determines that not all of
the emissions reductions for a specific project would be real, then the
MERC generator could potentially obtain approval from the MCAQD and the
EPA for an alternative MERC calculation method.\35\ Regardless of the
calculation method used, the Department must determine that the
requested MERCs will result in real, quantifiable, federally
enforceable, permanent, and surplus emissions reductions prior to the
MERC generator requesting a permit or permit revision to impose
conditions to make the emissions reductions permanent and
enforceable.\36\
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\32\ 91 FR 20394 (Apr. 16, 2026).
\33\ Rule 205, section 301.2 and 301.3a.
\34\ Rule 205, section 220.
\35\ Rule 205, section 302.1d.
\36\ Rule 205, section 301.2.
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Comment 3: The commenter stated that Appendix A of Rule 205, which
contains the equation used to quantify the number of MERCs, and the
MCAQD's EIP support document effectively only addresses electric
vehicles. The MOVES model does not ``separately represent hybrid, plug-
in hybrid, CNG [compressed natural gas], LNG [liquefied natural gas],
or other alternative-fuel vehicles as distinct source types'' and, as a
result, non-electric vehicle projects may rely on default MOVES
assumptions that do not reflect actual emissions and undermine the
``quantifiability and integrity of generated MERCs.''
Response 3: The EPA disagrees with the commenter's claim that the
quantification method in Rule 205 can only be used to generate MERCs
through replacing vehicles with electric vehicles. In 2025, MCAQD
revised the quantification method in Rule 205 to ensure the rule is
fuel neutral. Owners/operators of vehicle fleets can opt to choose any
available vehicle type as a replacement as long as it would emit less
NO<INF>X</INF> and VOC, including diesel, compressed natural gas,
gasoline/diesel hybrids, plug-in hybrids, and electric vehicles.
The emission rates within MOVES differ by the vehicle type and by
the fuel type used, as well as other aspects of vehicles and their
activity.<SUP>37 38</SUP> Rule 205 identifies fuel type as one of the
data points required to run MOVES.\39\ Therefore, the necessary inputs
to quantify MERCs are well defined in Rule 205, ensuring emissions from
all fuel types are quantifiable under Rule 205.<SUP>40 41</SUP>
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\37\ MOVES categorizes vehicles into 13 source types based on
physical characteristics. The source types are based on the Highway
Performance Monitoring System (HPMS) vehicle groups. HPMS is defined
at 23 CFR 490.101, and includes Motorcycles, Light Duty Vehicles--
Short and Long Wheelbase, Buses, Single Unit Trucks, and Combination
Trucks. The source types are set based on physical characteristics,
such as number of wheels, number of axles, bus, truck type, etc.
\38\ MOVES has four tables--FuelSupply, FuelFormulation,
FuelUsageFraction, and AVFT (Alternative Vehicle Fuel and
Technologies)--that defines the fuels used in the area being
modeled. These tables can be adjusted to accurately model the type
of fuel being used at the local level.
\39\ See Appendix A, section A.3.(a) and Appendix A, section
B.3.(a) of Rule 205.
\40\ See EPA's MOVES5 Technical Guidance: Using MOVES to Prepare
Emission Inventories for State Implementation Plans and
Transportation Conformity (EPA-420-B-24-043, Nov. 2024) for further
information on how to run and implement these tools within MOVES.
The EPA encourages MOVES users to contact us about the application
of this guidance to specific SIPs or a regional conformity analysis.
\41\ As explained previously, to the extent Rule 205 does not
address every possible scenario that may be encountered, generators
may obtain approval from the MCAQD and the EPA for an alternative
calculation methodology as prescribed in Section 302.1d of Rule 205.
However, we anticipate the need for such approvals to be rare.
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Comment 4: The commenter stated that the surplus requirement
mandates that credited reductions must not otherwise be required by the
CAA and, therefore, MERCs must account for tightening Federal vehicle
standards. The commenter stated that as EPA emissions standards
progressively reduce NO<INF>X</INF> and non-methane organic gas
emissions, ``the emissions factors embedded in MOVES will increasingly
reflect reductions mandated by [F]ederal law,'' which would not qualify
as voluntary or surplus reductions. Essentially, ``[r]ule 205 addresses
surplus only at the point of application and fails to ensure that
credits remain `surplus' as [F]ederal vehicle standards tighten.''
Response 4: We disagree with the commenter's claim that Rule 205
fails to ensure that MERCs remain surplus as Federal vehicle standards
tighten. While not specifically stated in the comment, we assume the
commenter is referring to the concept of ``fleet turnover,'' where the
totality of the vehicles in an area will emit less air pollutants over
time because of the natural cycle of vehicle owners replacing their
vehicles with newer models, which are typically subject to more
stringent vehicle emissions standards. Because CAA section 173(c)(2)
expressly states that ``[e]mission reductions otherwise required by
[the CAA] shall not be creditable as emissions reductions for purposes
of any such offset requirement,'' emissions reductions used to
demonstrate attainment of the NAAQS or to meet transportation
conformity requirements would not be creditable for NNSR offset
purposes under CAA section 173.
To ensure MERCs are surplus and meet the requirements of CAA
section 173(c)(2), the MCAQD Rule 205
[[Page 69699]]
submittal explains that the Maricopa Association of Governments (MAG)
\42\ will address this by adding 1,000 tpy of NO<INF>X</INF> and 500
tpy of VOC emissions into the emissions inventory for its new ozone
``Moderate'' area plan for the 2015 ozone NAAQS.\43\ This line item
represents the maximum number of MERCs and/or nonroad engine emission
reduction credits (NERCs) that will be creditable through Rule 205 and
MCAQD Rule 204, ``Emission Offsets Generated by Voluntary Nonroad
Engine Emission Reductions,'' revised on November 5, 2025 (``Rule
204'').\44\ Effectively, this ensures MERCs and NERCs generated through
Rules 205 and 204, respectively, will be excluded from SIP modeling and
cannot be accounted for in the State's attainment demonstration for the
2015 ozone NAAQS. Regarding transportation conformity, the MCAQD Rule
205 submittal explains that before the start of modeling for a
transportation plan or transportation improvement program conformity,
the MCAQD will notify MAG of each individual MERC project so that the
reductions from each project are not included in the corresponding
transportation conformity analysis, consistent with the interagency
consultation process required by 40 CFR 93.112.\45\
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\42\ MAG is a nonprofit Arizona corporation composed of elected
officials from over 20 cities and towns, Maricopa County, Gila River
Indian Community, and the Arizona Department of Transportation. MAG
is the lead planning organization for Maricopa County that is
responsible for conducting air quality modeling and preparing and
demonstrating that the transportation plans and transportation
conformity are consistent with air quality plans.
\43\ MCAQD Rule 205 submittal, page 37.
\44\ NERCs are ERCs generated from captive fleet nonroad
engines, as defined in Rule 204. On November 14, 2025, Rule 204 was
submitted to the EPA by the ADEQ for inclusion into the Maricopa
County portion of the Arizona SIP. On October 8, 2026, the EPA
proposed approval of Rule 204 into the Maricopa County portion of
the Arizona SIP. See 91 FR 64321 (Oct. 8, 2026).
\45\ MCAQD Rule 205 submittal, page 37. For a fuller discussion
on how Rule 205 meets the surplus criterion, please see pages 9
through 14 of the TSD for this action.
---------------------------------------------------------------------------
These actions by the MCAQD and MAG related to attainment plans and
transportation conformity ensure that Rule 205 will only allow surplus
emissions reductions to be creditable for NNSR offset purposes and that
Arizona will not ``double-count'' emissions reductions when developing
SIP attainment demonstrations.
Comment 5.a: The commenter asserted that Rule 205 is deficient
because it does not specify whether ongoing monitoring, recordkeeping,
and reporting requirements applicable to MERC generators must be
preserved when the generator's business changes hands, restructures,
expands, or shuts down. The commenter asserted that this omission is a
legal defect.
Response 5.a: We disagree that Rule 205 is deficient because it
does not specifically state what happens to ongoing requirements in
Rule 205 when the MERC generator's business changes hands,
restructures, expands, or shuts down. Under Rule 205, MERC generators
will be issued permits that contain the applicable monitoring,
recordkeeping, and reporting requirements.\46\ If the owner/operator
named on the permit were to change as a result of a business changing
hands, restructuring, expanding, or shutting down, the MCAQD's SIP-
approved New Source Review (NSR) program provides a process for
ensuring that permit requirements remain in effect, and this process
would apply to MERC generators.\47\ MCAQD Rule 200, ``Permit
Requirements,'' revised on December 11, 2019 (``Rule 200''), describes
the requirements for transferring a permit, including, but not limited
to, a signed statement and acceptance of responsibility for the permit
by the new permit holder.\48\ To the extent the commenter is concerned
about the integrity of MERCs as a result of a business changing hands,
restructuring, expanding, or shutting down, Rule 205 contains
provisions for ensuring the ongoing integrity of MERCs and includes
requirements to address potential shortfalls in emissions
reductions.\49\
---------------------------------------------------------------------------
\46\ Rule 205, sections 301.2b and 301.3b.
\47\ The NSR program refers to the requirements for SIPs to
contain permitting programs for the preconstruction review of new
and modified stationary sources under the CAA. The program consists
of three main components: the minor NSR program at 40 CFR 51.160
through 51.164, the NNSR program at 40 CFR 51.165, and the
Prevention of Significant Deterioration program at 40 CFR 51.166.
The MCAQD has SIP-approved rules for all three components.
\48\ Rule 200, section 404, as approved into the SIP. See 87 FR
8418 (Feb. 15, 2022).
\49\ Rule 205, section 401.
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Comment 5.b: The commenter stated that the requirement for MERC
generators in Rule 205 to track, for 20 years, that a new or
retrofitted vehicle is only replaced with a vehicle that is certified
to the same or lower emission standards is a ``de facto constraint on
future fleet decisions.'' As an example, the commenter stated that a
company that switches to electric vehicles but leases vehicles on a
three-year cycle could be prohibited from reverting to internal
combustion engines at the end of the lease term, which the commenter
asserted would effectively function as a long-term electric vehicle
mandate. The commenter concluded that the rule therefore ``raises
significant preemption concerns absent a [CAA] [s]ection 209 waiver.''
Response 5.b: We disagree that Rule 205 functions as a long-term
electric vehicle mandate that raises preemption concerns under CAA
section 209. CAA section 209(a) prohibits States from setting or
enforcing new motor vehicle emissions standards unless a waiver is
granted by the EPA under CAA section 209(b).\50\ Here, there is no
State action to set or enforce a new motor vehicle emissions standard.
Rule 205 is merely an administrative rule to facilitate the creation
and trading of MERCs for use as offsets by stationary sources.
Participation in the MERC generating program is voluntary. If a fleet
owner or operator voluntarily chooses to generate MERCs by replacing a
vehicle with an electric vehicle, then Rule 205 requires the MERC
generator to maintain the same level of emissions reductions for 20
years to meet the offset integrity criteria. As stated previously, Rule
205 is fuel neutral and does not restrict the type of vehicle
replacement that qualifies for generating MERCs. If a MERC generator
finds that replacing a vehicle with an electric vehicle would be too
restrictive on future vehicle fleet decisions, then the MERC generator
can choose a replacement vehicle type with emission rates the MERC
generator can more confidently maintain.
---------------------------------------------------------------------------
\50\ CAA section 209(a) states: ``No State or any political
subdivision thereof shall adopt or attempt to enforce any standard
relating to the control of emissions from new motor vehicles or new
motor vehicle engines subject to this part. No State shall require
certification, inspection, or any other approval relating to the
control of emissions from any new motor vehicle or new motor vehicle
engine as condition precedent to the initial retail sale, titling
(if any), or registration of such motor vehicle, motor vehicle
engine, or equipment.''
---------------------------------------------------------------------------
IV. EPA Action
No comments were submitted that changed our assessment of the
approvability of the MCAQD Rule 205 submittal as described in our
proposed action. Therefore, as authorized in CAA section 110(k)(3), the
EPA is approving the MCAQD Rule 205 submittal by adding MCAQD Rule 205
into the federally enforceable portion of the Arizona SIP and adding
the MCAQD's EIP support document into the non-regulatory portion of the
Arizona SIP.
V. Incorporation by Reference
In this document, the EPA is finalizing regulatory text that
includes incorporation by reference. In accordance with requirements of
1 CFR 51.5, the EPA is finalizing the incorporation by reference of
MCAQD
[[Page 69700]]
Rule 205, ``Emission Offsets Generated by Voluntary Mobile Source
Emission Reductions,'' revised on May 21, 2025, which establishes a
federally enforceable program allowing fleet vehicle owners/operators
to generate ERCs through voluntary on-road mobile source emissions
reductions under the CAA. Therefore, these materials have been approved
by the EPA for inclusion in the SIP, have been incorporated by
reference by the EPA into that plan, are fully federally enforceable
under CAA sections 110 and 113 as of the effective date of the final
rulemaking of the EPA's approval, and will be incorporated by reference
in the next update to the SIP compilation.\51\ The EPA has made, and
will continue to make, these documents available through <a href="https://www.regulations.gov">https://www.regulations.gov</a> 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).
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\51\ 62 FR 27968 (May 22, 1997).
---------------------------------------------------------------------------
VI. Statutory and Executive Order Reviews
Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the CAA 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
action merely approves State law as meeting Federal requirements and
does not impose additional requirements beyond those imposed by State
law. For that reason, this action:
<bullet> 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);
<bullet> Is not an Executive Order 14192 (90 FR 9065, February 6,
2025) regulatory action because this action is not significant under
Executive Order 12866;
<bullet> Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
<bullet> 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.);
<bullet> 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);
<bullet> Does not have federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
<bullet> Is not subject to Executive Order 13045 (62 FR 19885,
April 23, 1997) because it approves a State program;
<bullet> Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001); and
<bullet> 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).
This action is subject to the Congressional Review Act, and the EPA
will submit a rule report to each House of the Congress and to the
Comptroller General of the United States. This action is not a ``major
rule'' as defined by 5 U.S.C. 804(2).
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by January 4, 2027. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this action for the purposes of
judicial review nor does it extend the time within which a petition for
judicial review may be filed, and shall not postpone the effectiveness
of such rule or action. This action may not be challenged later in
proceedings to enforce its requirements (See CAA section 307(b)(2)).
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Nitrogen oxides, Ozone,
Reporting and recordkeeping requirements, Volatile organic compounds.
Dated: November 2, 2026.
Michael Martucci,
Acting Regional Administrator, Region IX.
For the reasons stated in the preamble, the EPA amends 40 CFR part
52 as follows:
PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS
0
1. The authority citation for Part 52 continues to read as follows:
Authority: 42 U.S.C. 7401 et seq.
Subpart D--Arizona
0
2. Amend Sec. 52.120 by:
0
a. In paragraph (c), amending Table 4, under the subheading
``Regulations II--Permits and Fees'', adding an entry for ``Rule 205''
after the entry for ``Rule 200''; and
0
b. In paragraph (e), amending Table 1, under the subheading ``Part D
Elements and Plans for the Metropolitan Phoenix and Tucson Areas''
adding an entry for ``Revision to Arizona's State Implementation Plan
(SIP) Addition of Rule 205 to the Maricopa County Air Pollution Control
Regulations (MCAPCR), Appendix 18-Economic Incentive Program Support
Document'' after the entry for ``Revision of Rule 322 of the Maricopa
County Air Pollution Control Regulations, Appendix 12: RACT Analyses
Submitted to the Maricopa County Air Quality Department from the
Arizona Public Service and the Salt River Project, only''.
The additions read as follows:
Sec. 52.120 Identification of plan.
* * * * *
(c) * * *
[[Page 69701]]
Table 4 to Paragraph (c)--EPA-Approved Maricopa County Air Pollution Control Regulations
----------------------------------------------------------------------------------------------------------------
State effective Additional
County citation Title/subject date EPA approval date explanation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Regulation II--Permits and Fees
----------------------------------------------------------------------------------------------------------------
* * * * * * *
Rule 205........................ Emission Offsets May 21, 2025...... November 5, 2026, Submitted on May
Generated by 91 FR [INSERT 30, 2025.
Voluntary Mobile FEDERAL REGISTER
Source Emission PAGE WHERE THE
Reductions. DOCUMENT BEGINS].
* * * * * * *
----------------------------------------------------------------------------------------------------------------
* * * * *
(e) * * *
Table 1--EPA-Approved Non-Regulatory and Quasi-Regulatory Measures
[Excluding certain resolutions and statutes, which are listed in tables 2 and 3, respectively] \1\
----------------------------------------------------------------------------------------------------------------
Applicable
geographic or State submittal
Name of SIP provision nonattainment area date EPA approval date Explanation
or title/subject
----------------------------------------------------------------------------------------------------------------
The State of Arizona Air Pollution Control Implementation Plan
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Part D Elements and Plans for the Metropolitan Phoenix and Tuscon Areas
----------------------------------------------------------------------------------------------------------------
* * * * * * *
Revision to Arizona's State Maricopa County... May 30, 2025...... November 5, 2026, Adopted by the
Implementation Plan (SIP) 91 FR [INSERT Maricopa County
Addition of Rule 205 to the FEDERAL REGISTER Air Quality
Maricopa County Air Pollution PAGE WHERE THE Department on May
Control Regulations (MCAPCR), DOCUMENT BEGINS]. 21, 2025.
Appendix 18--Economic Incentive
Program Support Document.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
\1\ Table 1 is divided into three parts: Clean Air Act Section 110(a)(2) State Implementation Plan Elements
(excluding Part D Elements and Plans), Part D Elements and Plans (other than for the Metropolitan Phoenix or
Tucson Areas), and Part D Elements and Plans for the Metropolitan Phoenix and Tucson Areas.
* * * * *
[FR Doc. 2026-22647 Filed 11-4-26; 8:45 am]
BILLING CODE 6569-60-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.