ALBANY, N.Y., Dec 15 (Reuters) - Companies that own land in New York polluted by hazardous waste can be made to restore the sites to pre-contamination conditions, the state's top court has ruled.

A group of private developers who own contaminated land, known as Superfund sites, argued in a 2007 lawsuit that regulations created in 1992 by the state Department of Environmental Conservation (DEC) to guide the clean-up of the sites contradict the more limited scope of state environmental law by requiring "a complete cleanup" that restores sites to "pre-disposal" conditions, instead of simply addressing pollution that poses a threat to the environment.

In a 5-2 decision released Thursday, the Court of Appeals ruled that the DEC regulations are in line with state law as long as the agency considers a landowner's technological capability and the cost-effectiveness of any remediation.

"While the cleanup of a (Superfund) site is triggered by a finding of a 'significant threat (to the environment),' that standard does not limit the scope of the ensuing remedial program when a more thorough cleanup is justified," Judge Theodore Jones wrote for the majority.

Chief Judge Jonathan Lippman and Judges Carmen Ciparick, Victoria Graffeo and Susan Read concurred.

In an unrelated 1989 suit brought by some of the same plaintiffs, the court threw out DEC regulations that identified Superfund sites based only on the potential for contamination, and not the actual presence of a "significant threat" to the environment. The rules challenged in the suit decided Thursday were created three years later.

'QUESTIONABLE POLICY'

Two judges on Thursday agreed with the landowners, collectively known as the New York Superfund Coalition, that the regulations represent an abuse of authority by DEC and force developers to pay large sums -- often millions of dollars -- to remedy minor pollution.

"These regulations, as upheld by the majority, codify a questionable policy of imposing upon private landowners the financial burden of eliminating insignificant threats to the environment, which, in my view, is hardly a goal that justifies compelling private citizens to expend large sums of money," Judge Eugene Pigott wrote in dissent.

As of March 31, there were 951 Superfund sites around the state still in need of remediation, DEC spokeswoman Emily DeSantis said, and those sites will continue to be restored under the existing rules.

Thomas Walsh of Hiscock & Barclay in Rochester, who argued for the Superfund Coalition, said he was disappointed with the decision, but pleased the majority noted that the necessary amount of remediation should be based heavily on the cost-effectivness of a cleanup and the intended use of the site.

"The judges are saying, 'once you make (a Superfund site) safe for industrial use, is it cost-effective to spend a couple million more so the cows can graze on it,'" Walsh said. "Before this decision, you didn't have that dialogue."

The DEC framed Thursday's ruling as a victory for the environment.

"We are pleased the Court of Appeals recognized the importance of DEC's authority to require polluters to reach complete cleanup requirements at state Superfund sites," the agency said in a statement.

The case is the Matter of New York State Superfund Coalition v. New York State Department of Environmental Conservation, et al, New York State Court of Appeals No. 189.

For the Superfund Coalition: Thomas Walsh of Hiscock & Barclay in Rochester.

For the DEC: Assistant Solicitor General Andrew Ayers.

(Reporting by Dan Wiessner)

Follow us on Twitter: @ReutersLegal