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Source of this article - Los Angeles Times, March 18, 2006

WASHINGTON — Dealing a sharp setback to the Bush administration, a federal appeals court Friday threw out a controversial regulation in the federal government's clean-air program that would have allowed older factories, refineries and power plants to install new equipment without using the most modern anti-pollution devices.

The U.S. Circuit Court of Appeals for the District of Columbia, which decides some of the most far-reaching cases dealing with federal regulations, said the Environmental Protection Agency had relied on "Humpty Dumpty" reasoning in arriving at a rule that critics said would have eased enforcement of a law intended to reduce industrial air pollution.

If the regulation were allowed to take effect, the court said, "a law intended to limit increases in air pollution would allow sources operating below applicable emission limits to increase significantly the pollution they emit without government review."

California and 13 other states had challenged the EPA ruling.

The Clean Air Act requires major industrial sites that modernize their equipment to install the most modern pollution-reducing devices. But in August 2003, the Bush administration altered enforcement of the regulation to allow companies to avoid installing the most expensive new emissions-cutting equipment if the price of the modernization was less than 20% of what it would cost to replace a major component of the plant. In California, whose air pollution rules are among the strictest in the nation, it takes less pollution to count as a major emitter than elsewhere. Many smaller facilities, among them some auto body paint shops, bakeries and small-parts manufacturers, fall into that category and come under the regulation.

Manufacturers, power plant operators and others had worked for years to win the revision in a section of the law known as "new source review." Almost as soon as it was announced, it faced legal challenges. Since then, court actions have chipped away at the administration's relaxation of the landmark 1970 law that has cleaned up some of the nation's worst air pollution. In December 2003, the appeals court here stayed enforcement of the administration's revision.

Last June, the court delivered a divided verdict on the measure. It upheld the rule change itself, but it decided that the EPA had erred in declaring that power plants and other large polluters did not have to keep records of their emissions. It concluded that without the documentation, regulators would not know whether the facilities were breaking clean-air laws.

The case decided Friday, which can be appealed to the Supreme Court, reaches further. Representatives of industry and environmental groups disagreed sharply over the impact.

The National Assn. of Manufacturers said the court was applying unnecessary limits on an EPA effort to ease what proponents of the change consider a burdensome aspect of the clean-air law. John Engler, the association's president, said the clean-air law could "trigger an endless review process for power plants and other stationary sources of air emissions that merely want to repair or upgrade existing facilities."

New York Atty. Gen. Eliot Spitzer, whose office played a leading role in opposing the administration's rule, called the decision "an enormous victory for clean air and for the enforcement of the law, and an overwhelming rejection of the Bush administration's efforts to gut the law."

Spitzer's top environmental lawyer, Peter Lehner, said 800 power plants and up to 17,000 factories nationwide would be affected.

"This is a victory for public health," said Howard Fox, an attorney at Earthjustice, which represented six groups in the case. "It makes no sense to allow huge multimillion-dollar projects that drastically increase air pollution without installing up-to-date pollution controls or even notifying nearby residents."

The case was decided unanimously by a panel made up of two judges appointed by President Clinton — Judith W. Rogers and David S. Tatel — and Judge Janice Rogers Brown, a former California Supreme Court justice, whose nomination to the appeals court by Bush encountered a filibuster by Democrats.

The new-source-review regulation was intended to bring aging facilities, which are responsible for a disproportionate share of the nation's air pollution, up to current standards when their operators modernized for efficiency and profitability. The administration said relaxing the rule would encourage plants to increase their efficiency and provide more affordable energy. Critics said it would make it easier for plants to increase emissions, causing more asthma and premature deaths, and choking cities and national parks with smog.

That argument continued Friday: Scott Segal, director of the Electric Reliability Coordinating Council, said the ruling would "delay efficiency improvements … at the heart of effective emissions control."

Sen. Barbara Boxer (D-Calif.) said the rule was written "to allow polluters to get away with not installing modern pollution controls on upgraded plants," and was "nothing more than a free ride for polluters."

The Associated Press contributed to this report.