The last several months have brought two significant regulatory developments that could affect air permitting and economic development throughout the Phoenix-Mesa, Arizona metro area. On April 16, 2026, the U.S. Environmental Protection Agency (U.S. EPA) proposed approval of Maricopa County Air Quality Department (MCAQD) Rule 205 Emission Offsets Generated by Voluntary Mobile Source Emission Reductions. This rule would allow certain mobile-source emissions reductions to generate Emission Reduction Credits (ERCs) for use in the Nonattainment New Source Review (NNSR) permitting program.
More recently, on October 8, 2026, U.S, EPA Administrator Lee Zeldin announced proposed approval of MCAQD Rule 204 Emission Offsets Generated by Voluntary Nonroad Engine Emission Reductions. If finalized, Rule 204 would allow owners and operators of captive nonroad engine fleets, including but not limited to construction, airport equipment, and railyard switcher, to generate ERCs by replacing or retrofitting older engines. Major sources could use those ERCs to meet NNSR offset requirements for air permitting.
The common thread in these developments is the effort to reduce barriers to economic growth in ozone nonattainment areas by expanding the supply of available emissions offsets for nitrogen oxides (NOX) and volatile organic compounds (VOC). In announcing both proposals, U.S. EPA characterized the measures as “innovative” because they would support continued growth of high-tech manufacturing, power generation, and other industrial development while ensuring that overall air quality remains protected. 1 2
The Idea Is Not New
Despite the attention surrounding Rules 204 and 205, the use of ERCs as a compliance strategy to meet National Ambient Air Quality Standards (NAAQS) is not new. For decades, ERC programs have played an important role in NNSR permitting programs. In California, air districts such as the South Coast Air Quality Management District (SCAQMD) have long operated emissions banking systems that allow emissions reductions to be converted into tradable credits and used for permitting projects. Similarly, industries in Texas have relied on emissions banking and trading programs, most notably in the Houston-Galveston region.
So What Is Innovative?
Traditional NNSR offsets are typically generated from stationary source actions such as plant shutdowns, addition of emissions controls or other pollution prevention measures, fuel switching, and equipment retirement. These types of reductions are commonly used to generate credits because they satisfy Clean Air Act requirements that emissions offsets be real, surplus, permanent, quantifiable, and federally enforceable.
Rule 205 expands the pool of NNSR offsets by allowing certain voluntary emissions reductions from on-road vehicles to participate in the offset market, something that the SCAQMD has already done to a limited extent. Rule 204 goes further by creating an entirely new class of NNSR-eligible emissions offsets for new or modified sources in Maricopa County. What distinguishes Rule 204 is that it allows emissions reductions from nonroad engines, such as construction equipment, industrial equipment, portable generators, and similar sources, to generate ERCs through equipment replacement or retrofit projects. In practical terms, Rule 204 and Rule 205 expand the universe of activities that may participate in the offset market.
Why Industry Should Pay Attention
For manufacturers, data centers, power generators, and other large industrial developers, the increased availability of emissions offsets can be a critical factor in permitting timelines, project feasibility, and capital investment decisions. By expanding the potential supply of ERCs, Rules 204 and 205 could provide additional flexibility for companies seeking permits in the ozone nonattainment area of Maricopa County. If finalized, these rules may serve as a model for other jurisdictions seeking to balance economic growth with federal air quality requirements.
How Can ALL4 Help?
ALL4 is closely following the developments in Maricopa County and evaluating their potential implications for air permitting and compliance programs both in Arizona and in other jurisdictions. ALL4 supports facilities in finding or facilitating the generation of stationary source ERCs, and the team can help developers assess how expanded ERC opportunities may affect project planning, permitting strategies, offset procurement, and overall compliance obligations. ALL4 can also assist in evaluating whether voluntary emissions reduction projects (from mobile sources and nonroad engines) may qualify as future ERC-generating opportunities.
For questions regarding MCAQD Rules 204 and 205, or for assistance developing an air permitting strategy for a new or modified major source, please contact Juan Maldonado (jmaldonado@all4inc.com) or Sharon Sadler (ssadler@all4inc.com).
