The steel industry has decided to drop its long fight against Labor Department rules protecting coke-oven workers in steel plants, thus removing from the U.S. Supreme Court's calendar a potential test case on weighing the costs and benefits of occupational health regulation.

A spokesman for the Amercian Iron and Steel Institute said yesterday that the group's petition to the Supreme Court challenging the coke oven health standards, was expected to be withdrawn today. The court was expected to hear oral arguments in the case this fall.

Sheldon Wesson, speaking for the Steel Institute, said the case has become almost moot since most companies in the industry have already instituted most of the engineering and protective health measurers called for by the standard in the years that the legal appeals have been pending. "It's a little like flogging a dead horse," Wesson said.

The coke-oven standard has provided one of the sharpest battle lines between industry and government on the regulatory front. The standard sets maximum permissible exposure limits on emissions from ovens where coal is heated to produce coke.

The Labor Department's Occupational Safety and Health Administration has found that coke oven workers face a much greater risk of cancer due to exposure to the gasses and vapors formed in coke manufacturing. According to OSHA, the standards could elminate a hig risk of cancer for some 21,000 coke-oven workers.

The Steel Institute and Republican Steel Corp., which joined in the appeal, had challenged the health claims and complained that the emission controls called for by OSHA could not be met in many instances.