The appeals court ruled that Duke did not need a permit from the Environmental Protection Agency because hourly emissions from the plants would not increase.

It rejected the government's argument that the law also applied to changes that result in a plant operating more hours each year. The appeals court upheld a decision by a federal judge in North Carolina.

Attorneys from an environmental group involved in the appeal hailed the US Supreme Court's decision to hear the case.

"Over 160 million Americans, more than half of the country, live in communities out of compliance with the nation's health standards and today the Supreme Court took a big step toward aiding those communities in their efforts to restore healthy air," said Environmental Defense attorney Vickie Patton.

"We're very pleased that the court agreed to review the Duke Energy decision, which rests on a flawed interpretation of the Clean Air Act, and which industry has been citing in numerous other cases in an effort to undermine essential pollution controls applicable to some of the nation's largest sources of air pollution" said another attorney, Sean Donahue.

The lawsuit was brought by the Clinton administration's Justice Department in 2000 in an effort to require power-plant operators to upgrade pollution equipment as part of projects that expand their facilities.

Several environmental groups intervened in the lawsuit. They appealed to the Supreme Court and said the case presented "recurring issues of national importance."

Thirteen states -- California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Oklahoma and Vermont -- supported the appeal.

Even though it lost before the appeals court, the Justice Department told the Supreme Court to reject the appeal. It said the EPA under the Bush administration has proposed new regulations that "can address any difficulties caused by the court of appeals' decision."