The rules call for a cutback in the amount of sulfur in gasoline to an average of 10 parts per million from the current required 30 ppm, with the reduction going into effect in 2017, an EPA release said Friday.
A senior administration official said the tighter sulfur standard would raise the price of producing gasoline less than a penny a gallon.
But oil industry officials said the cost would be at least 2 cents a gallon and could add up to 9 cents a gallon in some places -- with the extra cost likely be passed on to consumers.
The costs "could easily impact the competitiveness of U.S. refineries," Bob Greco, director of the American Petroleum Institute, which represents refiners, told The Wall Street Journal.
The institute says the standards would cost $10 billion upfront plus $2.4 billion in annual compliance costs.
The senior administration official said the EPA estimates 29 of the 111 U.S. refineries can already meet the tighter standard and 66 others can do so with relatively modest improvements.
The oil and gas industry tried to lobby the Obama administration to delay the decision another year, the Post said. The standard was initially expected in early 2012.
Sulfur, a natural crude-oil ingredient, doesn't itself pose a public health threat but it reduces the performance of a car's catalytic converter, a vehicle emissions-control device, which in turn leads to greater tailpipe emissions.
Lower-sulfur gasoline, by contrast, enables that device to operate more efficiently.
The American Lung Association says the use of lower-sulfur gasoline would deliver the environmental benefit equivalent of taking 33 million cars off the road.
The EPA proposal will impose new tailpipe emissions standards on cars starting with model year 2017 vehicles, requiring automakers to install better-performing catalytic converters.
Automakers say they are generally committed to the EPA's plan because they already face similar requirements in more than a dozen states, including California.
"I think this proposal is the single most effective step EPA can take right now to reduce smog," Clean Air Watch President Frank O'Donnell told the Journal.
The proposal has been ready in its final form for about 15 months but was delayed until after the election because opponents argue it will raise the price of gasoline, sources told The New York Times.
"They didn't want to have a big fight during an election year," said S. William Becker, executive director of the National Association of Clean Air Agencies.