Environmental Law Alert: EPA Issues New Guidance on Nonattainment NSR Emission Offsets

Marina Thomas

EPA Issues New Guidance on Nonattainment NSR Emission Offsets

On July 1, 2026, the U.S. Environmental Protection Agency (EPA) issued new guidance clarifying how emission offsets may be addressed under the Clean Air Act’s Nonattainment New Source Review (NNSR) permitting program. The guidance explains when emission reduction credits (ERCs) must be federally enforceable and clarifies that permitting authorities may issue an NNSR permit before specific offsets have been identified and secured, provided certain enforceable permit conditions are satisfied.

The guidance represents a significant shift from EPA’s 1994 policy, which generally encouraged permitting authorities to require identification and securing offsets before issuing an NNSR permit. EPA now concludes that the Clean Air Act permits a more flexible approach because the statute requires that offsets be obtained and in effect by the time the source begins operation, not necessarily before the permit is issued.

Under the new guidance, a permitting authority may issue an NNSR permit before ERCs have been specifically identified if the permit includes:

• A federally enforceable commitment requiring the permittee to obtain sufficient federally enforceable ERCs before commencing operation; and
• A federally enforceable prohibition preventing the source from beginning operations until the necessary offsets have been identified, approved, and secured through appropriate enforceable mechanisms.

The guidance also confirms that this phased approach may be used for projects authorized under a single permit with multiple phases of construction. In those situations, the permittee may secure offsets separately for each operational phase, provided each phase is prohibited from commencing operation until the required ERCs have been obtained and made federally enforceable.

Why This Matters

Developers of projects requiring NNSR permits have often faced delays while identifying and securing emission offsets before permit issuance. EPA’s new interpretation provides permitting authorities with greater flexibility by allowing permitting and offset acquisition to proceed on separate timelines, while still ensuring that required emission reductions are in place before operations begin.

Practical Considerations

Project developers and facility owners should consider the following:

• Reevaluate permitting timelines: Developers may be able to obtain NNSR permits earlier in the project lifecycle without first identifying every emission offset, provided appropriate permit conditions are included.
• Plan offset acquisition carefully: Although offsets no longer need to be secured before permit issuance, they still must be identified, approved, federally enforceable, and in effect before the source begins operation.
• Coordinate with permitting authorities: Because EPA emphasizes that permitting decisions remain case-specific, applicants should work closely with state, local, or tribal permitting agencies regarding the documentation necessary to demonstrate that sufficient creditable offsets will be available before startup.

Although the EPA memorandum is nonbinding guidance and does not amend federal regulations, it signals a more flexible interpretation of the Clean Air Act’s offset requirements that could reduce permitting uncertainty for major projects in nonattainment areas while maintaining the statutory requirement that emission reductions be achieved before operations commence.