EPA Halts Smog Check Sanctions : Pollution: Federal agency cites progress in recent talks with state officials. It had threatened to cut highway funds over failure to improve auto inspection program.

The Clinton Administration backed off again Wednesday from threats to cut California’s federal highway funding because of what it sees as the state’s failure to adequately improve its auto Smog Check program.

“Based on recent progress in talks between U.S. EPA officials and California legislative leaders, U.S. EPA has decided to call a temporary halt to the process of imposing discretionary sanctions against the state of California for failure to enact improvements,” said Mary Nichols, the Environmental Protection Agency’s assistant administrator for air and radiation.

“The discussions indicate that legislative leaders and interested parties are committed to enter into a dialogue that could resolve this longstanding debate,” Nichols added.

“Given the importance of this issue and the progress made during these discussions, U.S. EPA believed that it was important to pause long enough to explore possible solutions with all parties immediately following the Thanksgiving holiday.”

California and the EPA have been battling for months over how to modify the Smog Check program, which calls for most vehicles in the state’s smoggy urban areas to be tested every two years to determine if their smog-control equipment is functioning properly.

The EPA wants the state to scrap its system of allowing auto inspection stations to test as well as repair smog-control systems, saying that combining the two functions at one site leads to fraud, abuse and poor enforcement.

The agency has been threatening to impose sanctions that could cost the California $700 million a year in highway funds.

Earlier this year, state legislators appeared to be on the verge of approving Smog Check modifications opposed by the EPA, but they backed off and the EPA suspended sanction procedures in hopes of reaching a compromise.

Last week, the Wilson Administration gave the EPA a proposal that would retain the current system of inspection and repair stations, crack down on shady smog station operators, beef up a computerized testing system and toughen licensing requirements for smog testers.

But EPA officials criticized the proposals, saying that they were “more committed to preserving the status quo than protecting the health of Californians.”

EPA officials said they had called off a Wednesday news conference on the Smog Check program because of progress in negotiations.