An obscure forestry lawsuit has developed into a major legal battle to be played out in the Supreme Court next Wednesday, which could have major repercussions for the future shape of US environmental legislation and the regulatory risks faced by businesses.

The US Government will try to persuade judges that regulations cannot be legally overruled. Federal attorneys will argue that "facial" challenges, in which a government regulation is overturned on a nationwide basis, are invalid, and should instead only be overturned in individual cases.

Green groups are concerned that this could mean that public interest bodies wanting to challenge a regulation would have to repeatedly sue the Government each time it was applied, draining their funds.

The case stems from a 2005 court judgement against the US Forestry Service. That judgement dismissed regulations introduced in 2003 that prohibited public review and appeal of decisions relating to forest management. These decisions included the sale of up to 250 acres of timber salvaged from national forests.

Environmental groups and federal government representatives challenged nine regulations and got five of them overruled by the court in a "facial challenge" , meaning that the regulations can no longer be applied anywhere in the US. The appeals court then upheld the decision.

But now the Government is asking the Supreme Court to rule that the facial ruling on the regulations were invalid, and should be applied only to the particular cases in question.

Rolf Skar, senior forest campaigner for Greenpeace, argued against the sale of timber from old growth national forests on ecological and economic grounds. "It's important to realise that the whole timber industry isn't banging on the door asking for national forest access," he said. "There's a segment that wants that, and they haven't adapted to new economic and social realities, and simply expect a national subsidy for their industry."

Old growth forests need preserving, he added, arguing that their makeup helps to mitigate wildfires and more effectively sequesters carbon.

Matt Kenna, the attorney for the Western Environmental Law Center, who will argue the case on Tuesday, was also concerned over the broader ramifications for future legal challenges.

"If the Government wins as fully as it's arguing, it will restrict the public's ability to sue over any illegal regulations," he said.

Public interest groups opposed to timber sales from national forests would have to sue the Government over each sale, rather than have a single ruling used as a precedent, but that could just as easily apply to regulations on everything from water management through to air pollution and Medicare. "The Government is swinging for the fences with this one. They're trying to push the envelope," he warned.

The current administration has aggressively imposed regulations, which are essentially orders for federal agencies to interpret legislation, which are applied without consulting Congress.

"This case represents another attempt by the Bush Administration to change agency regulations in an attempt to decrease substantive protections and reduce public oversight for projects on our public lands, instead of more openly seeking these important changes through Congress," said Marc Fink, a senior attorney for the Center for Biological Diversity, which is one of the plaintiffs in the suit.