UPDATE 2-U.S. EPA Compromises on Industrial Pollution

(Corrects costs in third paragraph to $2.1 billion from $1.8 billion)

* Cuts costs for industry by half to $1.8 bln

* Limits toxic emissions from industrial boilers

* Similar rules on power plants expected soon

By Timothy Gardner

WASHINGTON (Reuters) - The Obama administration scaled back on demands for heavy industrial boilers to cut toxic air emissions, a sign it may be willing to compromise with businesses and Republicans on future air pollution rules.

The Environmental Protection Agency on Wednesday issued final regulations on cutting air pollutants such as mercury and soot at boilers, which provide heat and power at factories, and incinerators.

The new standards will cost paper product makers, chemical plants and manufacturers $2.1 billion a year, down from $3.9 billion annually rules proposed last year would have cost, the EPA said.

While the rules are only a minor part of the EPA's agenda this year, they come at a time when the agency is racing to deliver on President Barack Obama's promise to show the world that the United States is taking action on climate change.

Manufacturers and other industries have complained that a slate of looming EPA rules on toxic pollution and greenhouse gases would kill jobs while the economy is fragile. Many lawmakers in the Republican-controlled House of Representatives have said the EPA would unfairly burden business.

EPA Administrator Lisa Jackson is battling fierce legal and legislative challenges in her drive to crack down on greenhouse gas emissions, but Wednesday's decision -- which came after receiving about 4,800 comments from industry and communities -- suggests the agency is able to compromise.

"Because the final standards have been informed by a robust data set and comments we've received following the proposal, they are realistic, they are achievable ... and come at about half the cost to industry," Gina McCarthy, an EPA assistant administrator for air, told reporters in a teleconference.

The final rules were more flexible than the proposed regulation, by allowing, for example, companies to fine-tune their pollution systems rather than add costly new controls.

It was unclear how much more pollution would be emitted as a result of the EPA rules rewrite, but the agency said many health benefits would be achieved.

The standards will avert between 2,600 and 6,600 premature deaths, prevent 4,100 heart attacks and forestall 42,000 asthma attacks per year in 2014, it said. The rules will create a net of about 2,000 jobs, it added.

"In the end it still provides huge health protections, not as much as before, but enough," considering the pressures on the EPA to compromise, said Bill Becker, executive director of the National Association of Clean Air Agencies.

The somewhat arcane boiler rules aim to reduce emissions with so-called "maximum achievable control technology" or MACT.

Next month the EPA is expected to propose more widely watched MACT rules on toxic emissions from power plants. Those will likely be opposed by some power companies and lawmakers from states with economies that depend heavily on fossil fuels.

The EPA also plans to issue rules on emissions of greenhouse gases from oil refineries and power plants later this year. [ID:nN23440737]

Environmentalists and industry expressed cautious optimism about the rules, though neither group was completely pleased.

Bob Bessette, president of the Council of Industrial Boiler Owners, said the rules still need work but "decrease the economic impacts and achieve greater health benefits".

Shelley Vinyard, a toxics advocate for Environment America, said: "While this rule is modest in comparison to the standard proposed last April, we applaud the EPA for its continued commitment to our health and our environment."

The EPA said because the final rule had been changed substantially from the proposal, it would allow further public review of the standards. (Reporting by Timothy Gardner; Editing by Dale Hudson and Marguerita Choy)