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The U.S. Supreme Court Wednesday said the Environmental Protection Agency can weigh upgrade costs against the potential environmental benefits when deciding whether electric power plant cooling towers should be modernized.

In a 6-3 ruling, the high court overturned a federal appeals court ruling that rejected a Bush Administration rule change aimed to make it easier for plants to avoid expensive upgrades to aging cooling towers.

"We conclude that the EPA permissibly relied on cost-benefit analysis in setting the national performance standards," Justice Antonin Scalia said in the majority opinion.

The opinion could give power plants significantly more leeway in deciding how to spend on reducing the environmental impact of cooling towers, as required by the Clean Air Act. But the environmental groups that sued over the EPA regulations said the Supreme Court ruling gives the Obama Administration flexibility to alter the Bush-era rules. "We are looking forward to working with EPA's new administrator, whom we are confident will agree that the Bush EPA regulations failed to satisfy the Clean Water Act's mandate that the adverse environmental impacts of cooling water intake structures be minimized," said Alex Matthiessen, president of Hudson Riverkeeper Inc., an environmental group.

Voting with Scalia were Chief Justice John Roberts and Justices Stephen Breyer, Anthony Kennedy, Clarence Thomas and Samuel Alito. Breyer's support came in a qualified concurring opinion where he agreed Congress meant to allow a cost benefit analysis but only a narrow one.

Justices John Paul Stevens, Ruth Bader Ginsburg and David Souter dissented, arguing they believe Congress clearly meant to restrict the weighing of upgrade costs against environmental benefits.

The appeal with the Supreme Court was filed by Entergy Corp. (ETR), utility industry groups and power companies. They asked the high court to reinstate 2004 EPA rules giving power companies more control over the cost of upgrades aimed at minimizing environmental damage, such as sucking fish into water intakes.

The 2nd U.S. Circuit Court of Appeals in New York struck down EPA regulations developed to end case-by-case analysis of power plant changes. The rules at issue would allow the cost-and-benefit analysis be done before a power plant is forced to change an open-cycle system that withdraws and discharges large amounts of water from streams, lakes or dam impoundments.

The high court ordered the Second Circuit to reinstate the rules as it continues its review of the EPA regulations.

The process is common in electricity generation, but both the intake and discharge of water has a larger environmental impact than closed-cycle systems that recycle water repeatedly or dry-cycle systems that rely on air for cooling.

The cases are Entergy v. EPA, 07-588; PSEG Fossil LLC v. Riverkeeper Inc., 07-589; and Utility Water Act Group v. Riverkeeper Inc., 07-597.

Separately, the justices ruled 5-4 that security guards at a New York office building must fight their reassignment to cleaning and porter jobs through arbitration, as required by their union contract. The workers had filed age discrimination lawsuits in the federal court system. The majority decision, written by Thomas, overturned a Second Circuit ruling that had allowed the discrimination lawsuits to proceed. The outcome of the case, 14 Penn Plaza LLC v. Pyett, 07-581, split along liberal and conservative lines.

-By Mark H. Anderson, Dow Jones Newswires; 202-862-9254; mark.anderson@dowjones.com