Thousands of older power plants, refineries and factories have been exempted from having to install costly clean air controls when they update equipment to improve efficiency, the Bush administration announced Wednesday.

A new rule adopted by the Environmental Protection Agency (search) is intended to encourage modernization. But environmentalists say it constitutes a major revision to clean air rules that will contribute to pollution.

The EPA will allow up to 20 percent of the costs of replacing each plant's production system to be considered "routine maintenance" that doesn't require costly anti-pollution controls. Under prior rules, any significant changes to equipment required the addition of costly new pollution-fighting devices.

Environmental groups opposed to the rule describe the changes as disastrous for people's health, especially those living near or downwind of some 17,000 industrial plants affected.

They contend that emissions will increase as a result of the rules, which will enable modernized plants to spew out millions of tons of additional pollution.

"It's an accounting gimmick that eliminates any possibility of pollution controls," said John Walke, director of Natural Resources Defense Council's (search) clean air program. "It's a total disaster. It's the effective repeal of this clean air program, through illegal administrative means."

The EPA assistant administrator in charge of air quality said that while industries can now complete upgrades without additional pollution restrictions, they still must operate within a plant's overall permitted limits and other state and federal programs for pollutants.

"We can say categorically that pollution will not increase as a result of this rule," Jeffrey Holmstead said.

Marianne L. Horinko, acting EPA administrator, added factories will still be closely scrutinized when it makes changes under the "routine maintenance" exemption.

"We're going to really, I think, create certainty going forward for industrial facilities, by spelling out what specific replacement is exempt," Horinko said.

Supporters of the rule add that efficiency gains from plant upgrades will benefit the environment while also ensuring that electricity gets to its end.

"Over the last two decades, emissions from the power sector have significantly declined. That trend will continue," said Scott Segal, a lobbyist and attorney for six large utilities.

The new rule, supported by the electricity utilities and oil industries, allows manufacturers, chemical plants and pulp and paper mills to modernize a fifth at a time. An example would be in the case of a 1,500-megawatt plant with two 750-megawatt units that cost $1 billion to replace. Each could be upgraded $200 million at a time, agency officials and outside experts say.

The change is meant to ease frustrations and confusion caused by a long-problematic 1971 maintenance standard. In 1977, Congress revised the rules in the Clean Air Act (search) to include a "new source review" program. The agency has had mixed success in enforcing the maintenance provision of that review since then, officials claim.

Opponents say the EPA ignored concerns expressed by hundreds of thousands of Americans opposed to the new regulations. New York Attorney General Eliot Spitzer (search) has threatened to sue the Bush administration in an effort he said would include other states. Spitzer and other attorneys general have already filed suits challenging earlier changes the administration made to the program.

"If allowed to stand, this flagrantly illegal rule will ensure that, under the watch of the Bush administration, Americans will breathe dirtier air, contract more respiratory disease and suffer more environmental degradation caused by air pollution," said Spitzer, a Democrat.

The Associated Press contributed to this report.