In a February 5, 2026 filing before the D.C. Circuit, a coalition of industry groups strongly endorsed the U.S. Environmental Protection Agency’s method for determining when upgrades at industrial facilities must undergo federal air‑quality review.

The dispute centers on the EPA’s “Project Emissions Accounting” (PEA) approach under the Clean Air Act’s New Source Review (NSR) program, which allows regulators to evaluate both emissions increases and reductions associated with a proposed project when assessing whether additional permitting is required. Environmental organizations have challenged this method, contending that project‑level accounting weakens long‑standing NSR safeguards, distorts the statutory trigger for review, and could enable facilities to bypass critical pollution‑control oversight when modifying their operations.

In October 2020, the EPA finalized the PEA rule to clarify how emissions changes should be assessed when determining whether a modification at an existing major stationary source triggers NSR permitting. Under this framework, facilities may count both emissions increases and decreases during Step 1 of the NSR analysis. Historically, emissions decreases could not be used at this stage; instead, sources were permitted to “net” increases and decreases only in Step 2, when assessing whether a project would result in a significant net emissions increase. The PEA rule changed this approach by allowing sources to consider emissions changes, both up and down, within the project itself when determining whether a significant emissions increase occurs.

In Step 1 of the NSR analysis, a facility evaluates the emissions changes from the proposed project alone, determining whether the modification would independently cause a significant emissions increase. Under the PEA framework, this assessment may incorporate both project‑related increases and decreases. If Step 1 does not show a significant increase, the project does not trigger major NSR, and no further analysis is required.

If Step 1 does identify a significant increase, the process proceeds to Step 2, where the facility evaluates the net emissions change across the entire source. This step combines the project’s emissions impacts with other contemporaneous and creditable emissions changes at the facility to determine whether there is a significant net emissions increase. Only if both steps show significant increases does the project trigger NSR permitting requirements.

Overall, the controversy surrounding the PEA rule reflects a broader tension between regulatory flexibility and environmental protection. Industry groups view the approach as a practical means of streamlining permitting and encouraging efficient facility upgrades, while environmental advocates warn that it risks eroding fundamental NSR safeguards. As the D.C. Circuit considers the competing interpretations, its ruling will likely shape how emissions accounting is applied in future permitting decisions and determine the extent to which facilities can rely on internal emission reductions to avoid triggering major NSR review.