A federal court has struck down a rule from the U.S. Environmental Protection Agency that prohibited state and local governments from raising emissions-monitoring requirements for industrial plants, including power plants and oil refineries.

In a 2-1 decision, the U.S. Court of Appeals for the District of Columbia Circuit sided with the plaintiff, the Sierra Club, and issued a ruling Tuesday that the EPA erred by establishing a regulation that was contrary to the intent of the federal Clean Air Act.

The 1990 amendments to the federal Clean Air Act require industrial plants to get permits from state and local authorities that would include emission limits and monitoring requirements.

The process was supposed to give state and local governments the authority to add monitoring requirements to each permit above what federal law already mandates. If the permitting agency determines that the federal monitoring requirements are not adequate, the Clean Air Act allows the agency to add additional requirements to ensure that the power plants and refineries comply with emission limits spelled out in the permits, the court said.

But the EPA rule, called the Operating Permits Program (Title V of the Clean Air Act), doesn't allow states and local governments to add additional requirements, even though the EPA has acknowledged that some of its monitoring requirements might not be adequate. The court said that the EPA needs to fix the requirements deemed inadequate or allow local authorities to do so.

"We vacate this rule because it is contrary to the statutory directive that each permit must include adequate monitoring requirements," Judge Thomas Griffith wrote in the court ruling. Chief Judge David Sentelle also sided with the Sierra Club.

The EPA had argued in court that it is the only agency authorized to add monitoring requirements, under the permitting provision in the Clean Air Act.

The EPA and the U.S. Department of Justice, which represented the EPA in court, haven't decided whether to appeal the decision.

"We're reviewing the court decision, and will determine an appropriate course of action once that review is complete," EPA spokeswoman Catherine C. Milbourn said.

The Sierra Club posted a statement on its Website that heralded the court decision and criticized the Bush Administration for what it called lax enforcement of environmental law.

"Public health should be the top priority, not polluter's profits," Sierra Club Executive Director Carl Pope said in a statement.

Judge Brett Kavanaugh, who disagreed with the majority opinion, said the EPA has the authority to enforce the Clean Air Act, and to decide whether certain monitoring requirements are adequate. If state and local authorities complain about inadequacies, those issues should be resolved by modifying existing rules or setting new ones, not through the permitting process, Kavanaugh wrote in his dissent.

The EPA already requires the state and local governments to mandate their own monitoring rules if such rules weren't already in place.

The ruling marks the latest of many court challenges to the national permitting program.

Industry groups challenged the EPA about a decade ago when the agency said the Clean Air Act allowed for additional monitoring requirements. The same court ruled then that the EPA made a mistake because it didn't follow the proper procedure to reach that interpretation. But the court didn't address whether the monitoring rule set by the EPA violated the Clean Air Act, said the court when laying out its decision for the latest case brought by the Sierra Club.

The agency then changed its view and issued a rule in 2004 that said nothing about allowing states and local authorities to require additional monitoring while issuing permits. Another legal challenged ensued, and the court said the EPA shouldn't have set the rule without allowing the public to comment.

In 2006, after allowing for public comment, the EPA established the same rule, which brought the lawsuit that was decided this week.

"[The] EPA's about-face means that some permit programs currently in place do not comply with Title V because the agency failed to fix inadequate monitoring requirements before new permits were issued, and prohibited state and local authorities from doing so," the court said in a ruling.

More than 16,000 permits have been issued since the 1990 change to the Clean Air Act, the court noted. Chemical and power plants, refineries and other similar industrial operations have to renew their permits at least every five years.

The same federal court also ruled against the EPA last month, tossing out a regulation that manages power-plant emissions among 28 eastern states on the East Coast (see Court Rejects EPA Rule).

In that decision, the court said the EPA didn't have the authority under the Clean Air Act to establish a 2005 regulation to cap sulfur dioxide and nitrogen oxide emissions from power plants. The regulation also created a program for companies to buy and sell emissions allowances.

The American Petroleum Institute filed court papers in support of the EPA in the most recent case. An institute spokeswoman, Judy Penniman, said the API won't comment until after it has fully reviewed the court ruling.