The Supreme Court heard oral arguments yesterday on whether the Environmental Protection Agency (EPA) unreasonably decided not to consider the cost of regulation when the EPA determined it was “appropriate and necessary” to regulate such emissions in the 2012 mercury and air toxics standards (MATS). Michigan v. EPA, U.S., No. 14-46, 14-47, 14-49 (argued 3/25/15) In a split decision, the U.S. Court of Appeals for the District of Columbia Circuit had upheld the MATS rule after concluding that the EPA's interpretation of the Clean Air Act was plausible and entitled to deference. White Stallion Energy Ctr. LLC v. EPA, 748 F.3d 1222 (D.C. Cir. 2014).

Three of the justices–Ginsburg, Sotomayor and Kagan–appeared willing to agree with the D.C. Circuit that the EPA’s interpretation of the statute was plausible. Chief Justice Roberts, along with Justices Scalia, Breyer, Alito and Kennedy, expressed skepticism that the statute allowed the EPA to establish control standards irrespective of the costs of compliance. Justice Thomas, as is his practice, asked no questions.

Solicitor General Verrilli, arguing on behalf of the government and counsel for industry respondents who support the EPA rule, attempted to assuage the justices’ concerns by asserting that the EPA did consider costs as part of its determinations of the specific source categories and subcategories to which the standards would apply.

The final rule established four subcategories for oil-fired units and two subcategories for coal-fired units. The government and the industry respondents argued that the process of categorization implicitly included consideration of costs. Chief Justice Roberts cautioned that implicit consideration might not be sufficient, since the Court can uphold agency action upon only issues considered and addressed by the EPA.

None of the counsel identified specific citations to the record to determine whether the categorization process considered and addressed costs. The final rule preamble seems to indicate that the agency did not do so:

“Failing to demonstrate that coal-fired EGUs are different based on emissions, the commenters turn to economic arguments, asserting that failing to subcategorize will impose an economic hardship on certain sources. Congress precluded consideration of costs in setting MACT floors, and it is not appropriate to premise subcategorization on costs either. See S. Rep No. 101–228 at 166–67 (5 Legislative History at 8506–07) (rejecting the implication that separate categories could be based on ‘‘assertions of extraordinary economic effects’’); see also NRDC v. EPA 489 F.3d 1364 (D.C. Cir. 2007) (holding that the EPA properly declined to create a subcategory for a particular source and rejecting the argument that the source may have to incur more costs to comply with the rule without such subcategory).”

77 Fed. Reg. 9304, 9395 (Feb. 16, 2012)(Emphasis added). Unless Justices inclined to uphold EPA’s rule are able to find record evidence that, notwithstanding this unambiguous refusal to consider costs in establishing subcategories, the Agency did consider costs, the MATS rule appears doomed.