The agency's internal watchdog determined that EPA officials failed to fully assess the health costs of mercury and understated how much emissions could reasonably be reduced.

In its mercury proposal, the EPA included two approaches, both of which Tinsley criticized.

The one preferred by the administration would set a national limit on emissions and then permit companies to choose whether to reduce their emissions or buy "credits" from other companies that make reductions. The EPA and industry contend this would be an incentive to cut emissions quickly without imposing financial burdens that would cause utilities to switch from coal to more expensive natural gas.

But this "cap-and-trade" approach, she said, could result in mercury "hot spots" -- areas with higher concentrations of the pollutant in bodies of water near smokestacks.

In her report, Inspector General Nikki L. Tinsley said the EPA's political appointees instructed the agency's staff last year to use a predetermined target for reducing mercury, rather than doing the necessary studies to find the lowest possible emission levels that could be achieved in the shortest possible time.

Rather than relying on "an unbiased calculation" to make this determination, she said, the process "was compromised" by intervention from top officials.

A Washington lobbyist for the industry, Scott Segal, director of the Electric Reliability Coordinating Council, said the 70% reduction was an ambitious target for an industry working hard both to generate power and to meet clean air standards. He also said Tinsley was unqualified to examine such complex technical questions.