By Valerie Volcovici

WASHINGTON (Reuters) - The Obama administration on Wednesday proposed stricter curbs on ground-level ozone, a pollutant linked to several serious health conditions, in a move industry groups said would place a heavy burden on the U.S. economy.

The Environmental Protection Agency said it would set National Ambient Air Quality Standard between 65 and 70 parts per billion concentration of ozone and consider public comments on standards within a 60 to 75 ppb range.

The EPA must finalize the rule by October. It will replace the current standard of 75 ppb set in 2008.

The lower limit would mean less smoke from power plants and car exhaust pipes, leading to slightly cleaner air and reduced smog.

"Bringing ozone pollution standards in line with the latest science will clean up our air, improve access to crucial air quality information, and protect those most at-risk," said EPA Administrator Gina McCarthy. "It empowers the American people with updated air quality information to protect our loved ones."

The proposal will apply cars and power plants as well as oil and gas facilities. Health advocates and environmentalists hailed the plan as a way to cut down on asthma, heart disease and other respiratory illnesses.

The tougher standards would be closer to a proposal drafted in 2011 but unexpectedly withdrawn by President Barack Obama before its release because of cost concerns while the nation was recovering from a recession.

Obama then directed the EPA to craft a new proposal. When it failed to act, groups including the American Lung Association, the Sierra Club and the Environmental Defense Fund sued for a court-ordered deadline.

"EPA’s proposal to strengthen the standard is a vital step forward in the fight to protect all Americans from the dangers of breathing ozone pollution," said American Lung Association President Harold Wimmer.

Industry groups had braced for a standard as low as 60 ppb and estimated a price tag of $270 billion a year at that level, according to the National Association of Manufacturers.

"This new standard comes at the same time dozens of other new EPA regulations are being imposed that collectively place increased costs, burdens and delays on manufacturers, threaten our international competitiveness and make it nearly impossible to grow jobs," said the association's president, Jay Timmons.

Howard Feldman, regulatory affairs director at the American Petroleum Institute, said U.S. air quality was improving without regulatory change and that meeting the new standards would be extremely difficult.

But McCarthy said the economic cost of inaction was great because of health problems that cause people to miss work or school.

"If the standards are finalized, every dollar we invest to meet them will return up to three dollars in health benefits," McCarthy said. That could add up to $38 billion to the U.S. economy by 2025 if the emissions rate is set at 65 ppb, while compliance costs would be $15 billion, she added.

"Healthy communities attract new businesses, new investment, and new jobs," McCarthy wrote in an editorial published on CNN's website.

In making the rule, EPA scientists reviewed more than 1,000 studies published since the last standards were set.

Terry McGuire, the Sierra Club's Washington representative on smog pollution, said Obama, who is not up for re-election, was now freer to act aggressively and should push the limit down as far as 60 ppb.

"This should be a centerpiece of his environmental legacy," McGuire said.

Under the proposal, U.S. states would have from 2020 to 2037 to implement the new standards, based on their current pollution levels. The EPA also cited flexibility to allow for "unique" situations, such as in California, a massive state with a varied environment.

 

(Reporting by Valerie Volcovici and Susan Heavey; Editing by Ros Krasny, Peter Cooney and Lisa Von Ahn)