(Reuters) -The U.S. Supreme Court agreed on Friday to hear a bid by fuel producers to challenge California's standards for vehicle emissions and electric cars under a federal air pollution law in a major case testing the Democratic-governed state's power to fight greenhouse gases.

The justices took up an appeal by a Valero Energy subsidiary and fuel industry groups of a lower court's rejection of their challenge to a decision by Democratic President Joe Biden's administration allow California to set its own regulations.

The dispute centers on an exception granted to California in 2022 by the U.S. Environmental Protection Agency to national vehicle emission standards set by the agency under the landmark Clean Air Act anti-pollution law.

Though states and municipalities are generally preempted from enacting their own limits, Congress allowed the EPA to waive the preemption rule to allow California to set certain regulations that are stricter than federal standards.

California, the most-populous U.S. state, has received more than 75 waivers since 1967, requiring increasingly better emissions performance and EV sales.

The EPA's action in March 2022 reinstated a waiver for California to set its own tailpipe emissions limits and zero-emission vehicle mandate through 2025, reversing a 2019 decision under Republican former President Donald Trump's administration rescinding the waiver.

Valero's Diamond Alternative Energy and related groups challenged the reinstatement of California's waiver, arguing that the decision exceeded the EPA's power under the Clean Air Act and inflicted harm on their bottom line by lowering demand for liquid fuels.

The U.S. Court of Appeals for the District of Columbia Circuit threw out the lawsuits in April, finding that Valero and the states lacked the necessary legal standing to bring their claims.

In their appeal to the Supreme Court, the fuel producers said that California is acting as a "junior-varsity EPA" and does not have the power to set regulations to fight climate change and force a transition to electric vehicles. They invoked the "major questions" doctrine embraced by conservative members of the Supreme Court, which gives judges broad discretion to invalidate executive agency actions unless it is deemed that Congress clearly authorized them.

The Supreme Court, which has a 6-3 conservative majority, has taken a skeptical view toward expansive authority for federal regulatory agencies, and has restricted the powers of the EPA in some important rulings in recent years.

In June, the court blocked the EPA's "Good Neighbor" rule aimed at reducing ozone emissions that may worsen air pollution in neighboring states. In 2023, the court hobbled the EPA's power to protect wetlands and fight water pollution. In 2022, it imposed limits on the agency's authority under the Clean Air Act to reduce coal- and gas-fired power plant carbon emissions.