The permit's approval clears a major hurdle for the energy project, but others remain.

Environmentalists immediately pledged to fight the decision in court.

"We plan to vigorously contest the permit to prevent a tremendous setback to the efforts of state and local governments and dedicated citizens to rein in global-warming pollution and to protect the health of area residents," said Nick Persampieri, a lawyer for Earthjustice, a California firm representing groups opposed to the permit.

Desert Rock spokesman Frank Maisano acknowledged that legal battles were likely.

"We know environmentalists are going to file appeals on this permit," he said.

Navajo Nation President Joe Shirley Jr. lauded the permit approval. Desert Rock would be built on Navajo land about 30 miles southwest of Farmington.

"As a nation, we're working very hard toward standing on our own two feet, and this permit goes a long ways toward bringing all that into fruition," Shirley said. "We know that there will continue to be challenges, but hopefully at day's end, we will prevail."

Desert Rock is proposed by Sithe Global Power of New York and Diné Power Authority, a Navajo firm. The companies sued the EPA to force a decision on the air permit, saying the agency had far exceeded the one-year time limit allowed under law. Desert Rock formally applied for an air permit in May 2004.

Navajo activist Dailan Long blasted the agency's ruling, saying "EPA's irresponsible, inappropriate decision has failed Navajo communities and needlessly sacrificed our air, land and water."

Desert Rock's supporters have said the power plant will provide vital jobs and economic development to the impoverished Navajo Nation, but detractors have pointed to the plant's emissions of mercury and carbon dioxide, a gas linked to global warming.

A federal analysis estimated that Desert Rock would emit 12.7 million tons of carbon dioxide annually. But Desert Rock officials say it would be one of the cleanest coal-fired plants in the world.

The proposed Desert Rock site is adjacent to rich coal deposits. If approved, a new surface mine would produce 6.2 million tons of coal annually to power Desert Rock.

Besides legal challenges, two other major hurdles remain before Desert Rock can begin construction: It must clear a federal mercury determination and await issuance of a final environmental impact statement.

Maisano said he was confident Desert Rock would pass the mercury determination.

"We have the most advanced controls for this facility, so we're not going to have any problem with that," he said.

The environmental impact statement could be issued as soon as early 2009, Maisano said.

Air-permit approval paves the way for Desert Rock officials to begin approaching regional utilities that could carry the power plant's 1,500 megawatts of electricity to customers, Maisano said.

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