The Clean Air Act, 42 U.S.C. 7401 et seq., has long been the foundation of the Environmental Protection Agency’s (“EPA”) authority to regulate air pollution. Under the Clean Air Act, the EPA has the power to regulate the major sources of certain air pollutants where it is “appropriate and necessary.” Pursuant to this power, the EPA in 2012 issued regulations targeting the spread of mercury and other air pollutants from oil- and coal-fired power plants, aptly titled the Mercury and Air Toxics Standards (“MATS”) (discussed here). To the affected power plants, the MATS translate into an enormous cost ($9.6 billion per year)—a cost the EPA did not consider in promulgating the regulations.

This issue was brought to the Supreme Court by twenty-one states, the Utility Air Regulatory Group, and the National Mining Association. The Court heard oral argument last week regarding whether the EPA unreasonably refused to consider costs of compliance in determining the appropriateness of regulating hazardous air pollutants emitted by electric utilities. The EPA argued that it does not have to take costs into account when, as is the situation here, it has only determined the specific pollutants and sources it is targeting for regulation; the Petitioners claim, however, that the EPA must determine costs prior to the development of specific regulatory standards for each pollutant. Further complicating the analysis is the distinction between the EPA’s treatment of power plants and other air pollutants.

Oral argument appeared to split the Court among party lines, with Justice Kennedy remaining as the potential swing vote. At oral argument, Justice Ginsburg noted the lack of any precedent finding that the absence of explicit instructions to consider costs requires that the EPA consider such costs. Justice Scalia, on the other hand, explained that he is “not even sure [he] agree[s] with the premise that when – when Congress says nothing about cost, the agency is entitled to disregard cost,” and labeled the MATS a “classic arbitrary and capricious agency action.”

Though he asked only a few questions, Justice Kennedy seemed concerned with the EPA’s claim that it does not have to initially consider cost because the agency implicitly considers costs at a later point. “[A]t that point,” Justice Kennedy noted, “the game is over.”