How Texas Ozone Reclassifications Could Affect Project Permitting

For companies planning new facilities or expansions in some of Texas’ most active markets, the permitting window could be shifting.

Houston, Dallas-Fort Worth and San Antonio face the possibility of more stringent ozone nonattainment classifications, changes that could significantly lower major source permitting thresholds and add complexity to permitting new and existing facilities. But a recent demonstration submitted by the Texas Commission on Environmental Quality (TCEQ) could delay that timeline or prevent the classifications from changing altogether.

The outcome remains uncertain. For companies planning projects that could increase nitrogen oxides (NOx) or volatile organic compound (VOC) emissions, that uncertainty makes early permitting strategy increasingly important.

Where the Nonattainment Areas Stand

2026 is the demonstration year for the three ozone nonattainment areas in Texas. Based on preliminary monitoring data, measured values could exceed the standard in all three areas. Normally, this would mean that in early 2027, TCEQ would analyze the data before the attainment demonstration date in the summer of 2027.

If the analysis shows continued nonattainment, Houston-Galveston-Brazoria (HGB) and Dallas-Fort Worth would escalate to an extreme nonattainment classification, and San Antonio would escalate to severe nonattainment. EPA would then proceed with the formal rulemaking process to reflect this change, including publication of proposed and final rules in the Federal Register. That process could extend several months or longer beyond the summer 2027 attainment date. The new attainment designations would be enforceable 30 days after the final rule is published.

These designations would lower the major source threshold for nitrogen oxides (NO_X) and volatile organic compounds (VOCs) to 10 tons per year in HGB and Dallas, and 25 tons per year for San Antonio, making expansion or initial air permitting significantly more complicated. New projects would need to either reduce projected emissions below these thresholds through controls or undergo major source permitting.

Companies seeking to authorize a project under the existing designations and higher major source thresholds may need to evaluate whether submitting applications in late 2026 or early 2027 could preserve access to the current permitting framework before any redesignation takes effect.

TCEQ's "But For" Demonstration Could Change the Timeline

TCEQ has submitted a demonstration to the EPA that three key ozone nonattainment areas — Houston-Galveston-Brazoria, Dallas-Fort Worth and Bexar County/San Antonio — would have attained both the 2008 and the 2015 eight-hour ozone National Ambient Air Quality Standards (NAAQS) “but for” emissions originating outside the United States. These demonstrations will require review and approval by the EPA, but if approved, they could prevent these areas from being reclassified to the next-higher nonattainment classification. An approved demonstration would also remove the requirement to implement contingency measures. In effect, an approved demonstration would freeze the current ozone nonattainment status in place.

According to information shared by TCEQ, the modeling supporting the “but for” analysis attributes significant ozone contributions to wildfires in Canada and Mexico and transportation emissions in Mexico. TCEQ’s results showed notably larger contributions than similar EPA modeling, sufficient to demonstrate that the areas would attain the applicable standards “but for” those contributions.

Such a determination could result in the attainment status of those three areas being frozen at the current levels and eventually being redesignated as attainment.

How the Regulatory Process Could Unfold

The analysis put forth by TCEQ creates two potential paths, as EPA could either accept or reject the analysis. To make this determination, EPA will need to review the modeling presented by TCEQ. Given the technical complexity of the modeling, this process could require months of review.

While EPA conducts this review, the potential redesignation analysis for the 2026 demonstration year would be put on hold, potentially delaying the review of 2026 data by several months to a year.

Figure 1: EPA's review of TCEQ's "but for" analysis could delay reclassification and lead to several potential outcomes, including lawsuits that could delay implementation of any of these steps.

If EPA agrees with the TCEQ “but for” analysis, the three areas would initially be held at their current levels of nonattainment. TCEQ and EPA could then evaluate whether the areas should be redesignated to attainment, which would require in-depth analysis and modeling using additional years of data.

If the EPA disagrees with TCEQ “but for” analysis, the attainment designation would not be frozen or reverted. EPA would begin analyzing the 2026 data, albeit delayed, to determine whether the three areas met the attainment criteria. The proposed redesignation could shift from summer 2027 to later in the year or potentially into 2028, depending on the length of the “but for” review.

Regardless of EPA’s decision, legal challenges could follow and create additional regulatory uncertainty while cases move through the courts. Potential temporary injunctions could add another layer of uncertainty to how the areas are treated during that period.

What Project Teams Should Watch

Three potential outcomes should be on the radar for companies planning projects in these areas:

1. At a minimum, companies could have a longer window to permit new projects under the current designation if redesignation is delayed until late 2027 or early 2028.
2. The three areas could remain under the current attainment status indefinitely, reducing the risk of advancing to the next level of nonattainment and maintaining the current permitting framework for new projects.
3. While unlikely, the three areas could be redesignated to attainment. Nonattainment major source permitting would no longer apply, although maintenance and potential anti-backsliding provisions could be added to the State Implementation Plan, similar to those established for Beaumont-Port Arthur.

Uncertainty Makes Early Planning More Important

EPA’s decision may take time, and the regulatory path could continue to shift through agency review and potential litigation. Project planning does not have the same luxury.

Companies considering new facilities, expansions or other projects that could increase NOx or VOC emissions in Houston, Dallas-Fort Worth or San Antonio should evaluate their permitting strategies now. Understanding potential emissions, permitting thresholds and project schedules early can help teams understand how a change in classification could affect project scope, cost and timing.

The current uncertainty may also create a potential permitting window. Projects that can move forward under today’s classifications could face significantly different permitting requirements if major source thresholds drop.