A new Environmental Protection Agency rule on interstate air pollution, which was challenged by Dallas-based Energy Future Holdings, the state of Texas and other energy companies, is unlawful and cannot be enforced, a federal appeals court in Washington ruled.A three-judge panel of the U.S. Court of Appeals in Washington today sided with more than three dozen challengers to the EPA's Cross-State Air Pollution Rule, which imposes caps on emissions for 27 states. The rule was put on hold in December by the court while it considered the legality of the regulation.The court ordered the agency to instead enforce a 2005 rule known as the Clear Air Interstate Rule until a viable replacement to the cross-state pollution rule is made. The new rules, issued in July and revised in October, apply to emissions that cross state lines.Energy Future Holdings is the corporate parent of Luminant Generation, the state's largest electricity generator and operator of a number of coal-fired power plants. Following the EPA's October revision, EFH had said it would be forced to idle two of three generating units at its Monticello facility near Mount Pleasant, as well as three coal mines in the area.Those units were brought online earlier this year amid concerns the state's largest power grid, the Electric Reliability Council of Texas, would not have enough capacity to meet peak demand. ERCOT serves about 75 percent of the state.In a prepared release, Luminant applauded the court's decision and said it "remains committed to its legacy of meeting or outperforming all environmental laws, rules and regulations. Luminant said that it spent $142 million last year on emissions reduction and "currently estimates that capital expenditures for environmental compliance will reach approximately $300 million in 2012." With this litigation behind us, we look forward to continuing to provide safe and environmentally responsible operations across our generation fleet and to meeting or outperforming all environmental laws and regulations, said Luminant CEO David Campbell.ERCOT CEO Trip Doggett, in a prepared release, said "the rule, as originally proposed, had potentially far-reaching reliability impacts for a grid in which electric use is growing far more rapidly than new generation resources are being built to serve that need." As EPA formulates a new approach, he said, "ERCOT hopes to serve as a resource to help ensure that the long-term solution considers the electric reliability issues."John Walke, clean air director at the Natural Resources Defense Council. said the decision "allows harmful power plant air pollution to continue to aggravate major health problems and foul up our air. This is a loss for all of us, but especially for those living downwind from major polluters.Mary Anne Hitt, director of the Sierra Clubs Beyond Coal Campaign, said her group "is disappointed with the courts decision today. Americans have been waiting for the clean air they deserve for decades and the courts ruling today further delays the Clean Air Acts promise of safe, breathable air for our children." Other groups that had contested the rule included the National Mining Association and the International Brotherhood of Electrical Workers. Those parties in various cases said the rule puts an undue financial burden on power producers and threatens electricity reliability by forcing companies to shut some older plants.The EPA rules impose caps on sulfur dioxide, which can lead to acid rain and soot harmful to humans and ecosystems, and nitrogen oxide, a component of ground-level ozone and a main ingredient of smog.Staff writer Jim Fuquay contributed to this report, which contains material from Bloomberg News.