WASHINGTON (Reuters) - President Barack Obama unexpectedly backtracked on a key piece of his environmental agenda on Friday, bowing to arguments from big business that new rules to limit smog pollution would kill jobs at the worst possible time.

 

Obama said the decision to withdraw a clean-air initiative by the Environmental Protection Agency formed part of an effort to reduce regulatory burdens for business, but the move will be seen as another slap against his supporters on the left.

 

"The Obama administration is caving to big polluters at the expense of protecting the air we breathe. This is a huge win for corporate polluters and a huge loss for public health," said Gene Karpinski, president of the League of Conservation Voters.

 

Business groups and Republicans said the White House was making the right decision as the country's economy continued to struggle.

 

Opponents have argued the tougher regulations would cost thousands of jobs and purge billions of dollars from the bottom line of corporate America.

 

"The president took a step today that highlights the devastating impact on jobs that has been created by this administration's regulatory overreach," said Mitch McConnell, the Senate's top Republican.

 

"This action alone will prevent more job losses than any speech the president has given."

 

Obama's announcement followed data on Friday that showed U.S. employment growth ground to a halt in August, with the jobless rate stuck at 9.1 percent.

 

The EPA, under pressure from business and Republican lawmakers, had delayed several times issuing the new rule that would limit smog pollution in the United States.

 

Democrats in Congress called the White House's decision disappointing, and urged the administration to move aggressively on other clean-air challenges.

 

"I am disappointed that the president chose to further delay important clean-air protections that would have helped to prevent respiratory and cardiac disease in thousands of Americans," said Ed Markey, the top Democrat on the House Natural Resources Committee.

 

EPA Administrator Lisa Jackson, supported by a broad range of environmental groups, has said the ozone rules would save as much as $100 billion in health costs, and help prevent as many as 12,000 premature deaths from heart and lung complications.

 

Jackson said in a statement the EPA would revisit the ozone standard, in compliance with the Clean Air Act.

 

In a call with reporters, White House officials defended the administration's environmental record, saying it would "vigorously oppose" efforts to weaken the EPA's authority or regress on progress.

 

"This is not a product of industry pressure. This is a judgment of the merits," a White House official said.

 

The initial standards, proposed near the start of last year, would limit ground-level ozone, or smog, to between 60 and 70 parts per billion measured over eight hours.

 

The proposal was stronger than 2008 standards set by the Bush administration. Environmentalists blasted those as less aggressive than government scientists had recommended.

 

Under the rule, factories and oil, natural gas and power generators would be forced to cut emissions of nitrogen oxides and other chemicals called volatile organic compounds. Smog forms when those chemicals react with sunlight.

 

Dow Chemical has said the rule could cost as much as $90 billion. Several companies including Dow have urged the administration to delay the rule until 2013.

 

(Editing by Russell Blinch, Dale Hudson and Jim Marshall)

 

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