A three-judge panel of the U.S. Court of Appeals for the District of Columbia sided with the Environmental Protection Agency, saying New York and a dozen other states failed to show how the administration's new regulations violate the 1970 environmental law.
The Bush administration argued its decision to let older power and other industrial plants modernize without making them install expensive new pollution controls will remove barriers to innovation and increase productivity. Environmental critics said it will also increase pollution.
The judges' 73-page ruling said it is not clear if the administration's changes in "new source review" regulations will lead to greater pollution, or if leaving the old rules in place would deter companies from modernizing.
Judge Stephen Williams wrote:
"This case illustrates some of the painful consequences of reliance on command-and-control regulation in a world where emission control is typically far more expensive, per unit of pollution, when accomplished by retrofitting old plants than by including state-of-the-art control technology in new ones."
Other states in the lawsuit were California, Connecticut, Delaware, Illinois, Maine, Massachusetts, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont, and Wisconsin.
The decision comes a week after a Richmond, Va., appeals court ruled power plants can pump more pollutants into the air annually when they modernize to run longer operating hours.
That panel found the deciding factor was not that the plants in question produced more overall pollution, but that the hourly rate of emissions did not increase.
The decision affects one prong of Northeast states' attack on Bush administration changes to new source review regulations. The other lawsuit, focusing on plant maintenance and upgrades, has yet to be resolved.
Peter Lehner, the chief environmental lawyer for New York Attorney General Eliot Spitzer, said the ruling does allow states to continue to take action against polluters.
Lehner noted the judges took issue with an EPA proposal to allow companies not to keep records of their pollution levels if they have reason to think they don't produce enough pollution to trigger any enforcement action.
The court directed the agency to review its recordkeeping provisions and either come up with a better justification or change the provision.
"We think this is a major boost to clean air enforcement, because the court upheld the importance of accountability by polluters and rejected industry arguments to weaken the rules even beyond what EPA wanted," said Lehner.
EPA spokeswoman Eryn Witcher said the agency is "working with the Department of Justice to review this decision to determine the appropriate course of action once the review is complete."
The new source review rules apply to some 17,000 facilities around the country, including power plants, refineries, steel mills, and pharmaceutical factories.