The U.S. Court of Appeals yesterday overturned an Environmental Protection Agency regulation prohibiting industries from breaking ground for factories before they obtain permits to discharge pollutants into rivers and streams.

In lifting the condition on construction starts, however, the court reaffirmed the EPA requirement for a permit before discharges begin.

Judge Kenneth Starr, writing the opinion for the three-judge panel, said that while the EPA has no authority under the Clean Water Act to regulate construction, "a rational decision-maker would not likely build a facility prior to acquiring (or at least initiating the process of acquiring) an operating permit."

The practical impact of the ruling was not immediately clear. But both the EPA and the Natural Resources Defense Council expressed concern that the agency may have greater difficulty regulating discharges of facilities already constructed.

"Once the plant is sitting there and a lot of money and time is spent on construction, it will be a lot harder to write stringent discharge permits," said Jessica Landman, an NRDC attorney.

The ruling grew out of challenges to the EPA water pollution regulations by the NRDC and more than two dozen industry groups. Industry argued that Congress did not intend the Clean Water Act to give the EPA authority to regulate new factory construction. The groups, which include utilities, chemical manufacturers and coal and steel interests, held that industry should be allowed to bear the risk of not getting a discharge permit.

The 1972 act prohibits release of pollutants into waters without permits establishing limits. In 1979, the EPA began requiring discharge permits prior to construction to prevent economic arguments later.

"It is necessary to prevent construction up front so we had a full chance to consider all the environmental implications before somebody spent a lot of money on plant construction," said George Young, an attorney in the EPA's Office of Water.

The court, favoring the industry argument, ruled that "until the private owner applies for a discharge permit, then, EPA lacks authority to regulate the owner's activities."

"As we read the Clean Water Act, EPA's jurisdiction is limited to regulating the discharge of pollutants, such as formulating effluent standards, issuing or denying permits . . . and securing information pertinent to those tasks," wrote Starr.

Young said that while the effect of yesterday's ruling is uncertain, it "could limit our actions."