Justice Department lawyer Malcolm Stewart said the EPA is trying to be an honest broker between upwind and downwind states.
Sulfur dioxide and nitrogen oxide pollution from power plants can be carried long distances and the pollutants react with other substances to form smog and soot, which have been linked to illnesses. The cross-border pollution has prevented many cities from complying with health-based standards set by law.
The EPA has long tried to find a way to enforce the so-called good neighbor provision of the federal Clean Air Act that prohibits states from polluting their neighbors' air. The latest effort would cost energy utilities $800 million annually to install pollution controls on plants, according to EPA estimates.
The EPA said the investments would be far outweighed by the hundreds of billions of dollars in health care savings from cleaner air. The agency said the rule would prevent tens of thousands of premature deaths and hundreds of thousands of illnesses each year.
But the U.S. Circuit Court of Appeals for the District of Columbia said the EPA didn't give states a chance to devise their own plans to reduce pollution. Because state-by-state limits on pollution were not matched with each state's contribution to the problem, some were asked to do more to reduce pollution even though their power plants are not the worst offenders, the appeals court said.
At the Supreme Court, though, several justices said the agency appears to have wide latitude to come up with pollution controls.
"What the EPA said here was: We're going to distinguish between states that have put a lot of technology and a lot of money into this already and on the other hand states that have lots of cheap and dirty emissions," Justice Elena Kagan said. "And why isn't that a perfectly rational thing to do?"
Peter Keisler, the Washington-based lawyer representing industry and labor groups, said there should be a link between pollution generated by a state and what it is required to reduce.
"There is no relationship at all under the EPA's methodology between the amounts states contribute and the amounts states have to reduce," Keisler said.
Justice Antonin Scalia was the only member of the court who appeared squarely on the side of industry and the states challenging the rule.
Chief Justice John Roberts asked tough questions of both sides, but at several points seemed to suggest he would ultimately vote in favor of the administration. In an exchange with Texas Solicitor General Jonathan Mitchell, Roberts said EPA appeared to abide by the Clean Air Act in its dealing with the states. "It seems to me that if EPA had taken a different view, it would have been contrary to the statute," Roberts said.
Justice Samuel Alito is not taking part in the case, presumably because he owns stock in companies involved.
The eight participating justices should issue their decision by late June.