* EPA: rules to cost industry $2.3 bln/yr, not $3.8 bln
* Lets companies fine tune existing boilers
(Adds reaction from boiler owner group, paragraphs 13, 14)
WASHINGTON, Dec 2 (Reuters) - The U.S. environmental regulator said on Friday it slashed the cost of proposed pollution rules on industrial boilers by $1.5 billion year by allowing some plants to fine tune existing equipment or burn cleaner fuels.
The Environmental Protection Agency, under pressure from Republicans and industrial groups who accuse it of pushing for clean air rules that will cost companies with billions of dollars, has been looking for ways to ease costs and increase flexibility. For a factbox see [ID:nN1E7AT1UN]
The EPA on Friday proposed rules it says are more flexible than ones the agency introduced in 2010. The rules allow some plants to do maintenance on equipment, avoiding costs from adding new controls or replacing boilers.
More than 99 percent of the country's boilers, from heavy industry to small businesses and universities, are either clean enough and not subject to the new rules, or will only need to undergo tune ups and maintenance to comply.
The agency said health benefits from reduced pollution would be maintained.
"Gathering the latest and best technical information and real-world data has helped us find ... the sweet spot that's affordable, practical regulations that provide the vital and long overdue health benefits Americans demand and deserve," Gina McCarthy, the EPA assistant administrator for air, told reporters in a teleconference.
The EPA said the rules would cost industry about $2.3 billion a year, not the $3.8 billion in a previous proposal made last year.
The boiler rule would set limits on mercury and other toxic emissions on about 5,500 boilers at refineries, chemical plants, and heavy industry plants, the EPA said.
About 196,000 boilers would need to do annual tune ups and take other steps to minimize toxic emissions.
The agency estimates that for every dollar spent to cut the pollutants, the public will save some $12 to $30 in health costs.
Babcock and Wilcox Co BWC.N and other boiler makers could benefit from the rules, while some big chemical and heavy industry companies could see extra costs.
Boilers burn fuel including coal, fuel oil and biomass to produce steam to make electricity.
Both industrial and health groups cautiously welcomed the proposal of the long-delayed rules.
"At first glance, it looks like EPA made some adjustments to the rules that will improve the ability of sources to comply," said Robert Bessette, the president of the Council of Industrial Boiler Owners. His group had said last year's more costly proposal would have forced companies to shut or relocate plants.
A health group was also optimistic. "This is an important step forward by the EPA," the American Lung Association said.
It encouraged the agency to "uphold its responsibility as required by the Clean Air Act" to prevent cancer, heart attacks, and other health problems resulting from particulates and other pollution from boilers and incinerators.
The EPA will hold a 60-day comment period on the rules and expects to finalize them by spring 2012.
(Reporting by Timothy Gardner; Editing by David Gregorio and Bob Burgdorfer)