In a major decision that could significantly reduce air pollution in New Jersey, a federal court yesterday upheld a U.S. Environmental Protection Agency order that requires coal-burning power plants in the Midwest to reduce smog-causing emissions.

New Jersey environmental officials and power plant owners have long argued that nitrogen oxide emissions - the precursors to ozone - are carried by the winds over long distances into the Garden State. Their case received a major boost late last month when a new scientific study concluded that a million tons per year of harmful Midwest emissions are polluting air in the Northeast.

Yesterday, the court concurred.

The judicial ruling will force companies like American Electric Power in Ohio and the Tennessee Valley Authority, which had challenged the EPA order, to spend billions of dollars upgrading their power plants.

"It is a huge victory for New Jersey (and) the region," said Sharon Southard, spokeswoman for the state Department of Environmental Protection.

In 1998, the EPA required power plants in 22 states and the District of Columbia to reduce their smog-forming nitrogen oxide emissions by 80 percent. Nitrogen oxides emitted from power plants intermingle in the atmosphere, bake in the sunlight and, through chemical processes become ozone.

New Jersey was among the 22 states targeted by the EPA, but was on board with the order. In fact, in 1994, New Jersey and 11 other Northeast states had reached an emissions-reducing agreement among themselves, which was even more stringent than the EPA's criteria.

But many of the Midwest states resisted and challenged the EPA edict in court, arguing their coal-fired plants did not contribute to the pollution in New Jersey and other Northeastern states.

Utility companies in the Midwest argued that the migration of emissions had been exaggerated and the Northeast's inability to meet federal air quality standards stemmed from urban automobile traffic and their own industrial pollution.

Yesterday, in a 2-1 decision, the U.S. Court of Appeals upheld the EPA regulation, meaning the Midwest states must now submit plans for reducing their smokestack emissions.

"This decision means that we again, can move forward to bring cleaner, healthier air to more than 138 million people living in the eastern half of the United States," EPA Administrator Carol Browner said in a statement.

The court ruled that the EPA had acted properly as it applied to 19 of the 22 states: Alabama, Connecticut, Delware, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, North Carolina, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia and West Virginia.

The court said further review was needed regarding the regulation's application to three other states - Wisconsin, Missiouri and Georgia.

Pat Hemlepp, spokesman for American Electric Power in Ohio, said AEP had previously estimated that the EPA's ruling would cost the company more than $1.2 billion capital costs alone. Asked if the company would challenge the ruling, he said, "Our lawyers are reviewing it."

Public Service Enterprise Group, the Newark-based parent company for New Jersey's largest electric company, Public Service Electric & Gas, praised the federal court ruling.

"EPA based its action on solid science and the rule represents good public policy," said Frank Delaney, president and chief operating officer of PSEG Power. "With the court decision behind us, it's my hope the industry will now its attention to getting this job done."

Environmentalists said the court decision would benefit New Jersey.

"It's a very significant decision. What it means is vast improvements for summertime ozone, smog problems," said John Stanton, vice president for clean air programs for the National Environmental Trust, a Washington-based environmental group.