WASHINGTON--A federal appeals court on Tuesday upheld the nation's first-ever national standards requiring power plants to cut emissions of mercury and other hazardous air pollution.

The federal rules, scheduled to take effect in April 2015, require the nation's 600 coal and oil-fired power plants to comply with emissions limits set by the Environmental Protection Agency. The standards are a notable environmental accomplishment for President Barack Obama and a blow to the coal industry, which is the biggest source of mercury emissions in the U.S., according to EPA.

A divided three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit in a 61-page ruling rejected several legal attacks raised by challengers. These challengers include more than 20 states with utilities that depend heavily on coal for energy production, and several industry groups and companies, including Peabody Energy Corp., FirstEnergy Corp., and the National Mining Association.

The regulations, among several major air-pollution rules rolled out by the Obama administration in the past few years, have been a factor behind utility-company decisions to retire coal-fired units. Cheap supplies of cleaner-burning natural gas and stagnant electricity demand are other factors.

Since November 2013, companies have announced plans to close nearly two dozen units at nine coal-fired power plants producing a total of 5.4 gigawatts of coal-fired capacity, according to the Energy Information Administration. Between 2012 and 2020, EIA projects that the capacity to produce a total of 60 gigawatts will be retired due to stricter emissions rules and other factors, with 90% of these retirements coming by 2016. U.S. utilities have more than 1,000 gigawatts in capacity.

The EPA rules were first mandated by Congress in 1990 but were delayed by litigation, lobbying and legislative battles. They require coal utilities to cut at least 90% of their emissions of mercury, a neurotoxin the EPA says is known to cause brain damage and other health problems, particularly in developing fetuses and young children. The rules require coal-fired utilities to install so-called scrubber technology, which is widely available, to reduce their air emissions.

The outcome of the appeals-court ruling was expected. "Industry was always facing an uphill battle with this case," said Brian Potts of Foley & Lardner LLP in Madison, Wis., who represents utilities but doesn't have any clients involved in the case. "EPA knew what it had to do to get it through the courts."

The court's majority ruled the EPA acted reasonably in issuing the rules, rejecting arguments that the agency should have considered the costs of its regulations before moving forward. A dissenting judge, Brett Kavanaugh, warned the regulations would cost utilities more than $9 billion a year.

FirstEnergy spokesman Todd Schneider said his company doesn't plan to appeal and will continue to work on plans to bring its plants into compliance with the new rules. A spokeswoman for Michigan Attorney General Bill Schuette, one of the states in the lawsuit, was less definitive. "We are reviewing the opinion and considering our options in consultation with other states," said spokeswoman Joy Yearout.

Write to Brent Kendall at brent.kendall@wsj.com and Amy Harder at amy.harder@wsj.com

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