By Lawrence Hurley

WASHINGTON (Reuters) - U.S. Supreme Court justices offered President Barack Obama's administration some encouragement on Tuesday as they weighed the lawfulness of a federal regulation limiting air pollution that crosses state lines, mostly emissions from coal-fired power plants.

Although it was unclear how the court would rule, a majority of the eight justices hearing the case at points in the 90-minute argument voiced some support for the regulation, which has been challenged by some states and industry groups.

The government is defending a regulation issued under the federal Clean Air Act that had been due to go into effect in January 2012, requiring some states to cut the smog and soot that travels from their power plants downwind to states further east.

The ninth justice, Samuel Alito, recused himself from the case for undisclosed reasons.

The regulation, which requires 28 states to reduce emissions of sulfur dioxide and nitrogen oxides, was put on hold while courts weighed the challenges.

Among the challengers are Entergy Corp, Luminant Holding Company and the United Mineworkers of America.

In striking down the rule in an August 2012 ruling, the U.S. Court of Appeals for the District of Columbia Circuit wrote in part that the U.S. Environmental Protection Agency could not impose a federal plan on a state until the state was given notice of the amount of pollution it emitted that makes it more difficult for other states, downwind, to meet government-set air quality standards.

The appeals court also found that EPA authority was limited over what factors it could consider when setting targets for the states.

The Obama administration appealed the decision to the Supreme Court.


Both Chief Justice John Roberts and Justice Anthony Kennedy, two members of the conservative wing of the court, offered some encouragement to the administration.

Roberts challenged Jonathan Mitchell, a lawyer representing Texas and other states that object to the regulation.

Mitchell said the EPA had "left states completely in the dark" about what their obligations were.

In his response, Roberts seemed to defend the EPA's approach while acknowledging the difficulties facing the states.

"It seems to me that if EPA had taken a different view, it would have been contrary to the statute," he said.

Roberts also appeared receptive to the administration's argument that it could consider cost-effectiveness when determining what emissions reduction goals a state should face.

The administration says that the Clean Air Act requirement that the EPA and states limit pollution that will "contribute significantly" to another state's air quality problems is not limited to consideration of the amount of pollution. The agency can also take into account how difficult it is to reach a particular target, government lawyers say.


Roberts used a basketball analogy in an exchange with Peter Keisler, a lawyer representing business interests challenging the EPA rule.

"If you ask the coach what significantly contributed to the loss, he's going to talk about the missed layup rather than the missed desperation throw, even though, as far as amount, each was going to count for two points," he said.

Kennedy also seemed sympathetic to the cost-effectiveness argument.

"Can't you say that the contribution in one case is more significant than the other, based on feasibility?" he asked Keisler.

Throughout the argument, the liberal members of the bench stressed that states could still have a say in the process even after EPA has told them what their targets should be. Under the Clean Air Act, states can make a counter-proposal at a later date, Justice Elena Kagan and others said.

A ruling for the EPA would not be "the end of the game," she said.

Justice Stephen Breyer, another justice on the liberal wing, noted that the approach taken by the EPA might actually be the least troublesome way of addressing the issue. In an exchange with Mitchell, he indicated that the alternative would be to burden states with expensive targets that do not have a huge impact on air pollution.

"It sounds to me like you are asking them to do the impossible," he said.

A ruling is expected by the end of June. The two consolidated cases are EPA v. EME Homer City Generation and American Lung Association v. EME Homer City Generation, U.S. Supreme Court, 12-1182 and 11-1183.

(Reporting by Lawrence Hurley; Editing by Howard Goller, Leslie Adler and David Gregorio)