The Environmental Protection Agency is expected to propose a tougher standard for lead content in gasoline produced by small refiners later this week, responding to arguments by major refiners that EPA had given smaller competitors an unwarranted advantage.

In August the EPA had proposed letting an estimated 85 to 100 refiners produce gasoline with a lead content high enough to amount to a substantial cost savings rather than requiring them to meet tougher standards for lead content by Oct. 1.

The EPA's proposed rule would have required large refineries to produce gasoline with no more than 1.1 grams of lead per gallon while allowing small refiners to have as much as 2.5 grams of lead in each gallon.

The permissible level of lead in gasoline produced by small refiners is now expected to be reduced to 1.9 grams per gallon and allowed only for an eight-month interim period.

After that, all refiners would be required to meet a standard slightly higher than the 1.1 grams per gallon rule.

The final regulation, which must be issued by Nov. 1, is expected to be announced Thursday by EPA Administrator Anne Gorsuch.

Large refiners had argued that the EPA proposal would have rewarded refiners who took no steps to install equipment to produce lower lead gasoline. The 1977 Clean Air Act had allowed small refiners five years in which to modify their plants to produce lower lead gasoline.

Major refiners also warned that more high lead gasoline might be produced under the EPA standard and that the price advantage inherent in the higher lead content might encourage heavier use of higher lead gasoline.

The EPA's proposed less strict lead standard was to apply only to refineries that produced less than 10,000 barrels a day and that were in business on or before Oct. 1, 1976. That deadline was aimed at discouraging production of leaded gasoline by blenders, firms which import inexpensive gasoline and add lead to it.

According to an analysis by Robert Kane Associates, the refineries that would benefit were averaging lead content of only 1.68 grams per gallon for the three quarters ended March 1982.

Kane, a former DOE official, identified as refineries that would benefit some 79 plants, including ones owned by the Hunt Oil Co., Pennzoil Co., Quaker State and Husky Oil Co., as Canadian firm. The EPA had not identified the refineries that would meet its definition.

Many small refiners had already made the investments necessary to meet the lower standards that were expected to apply as of Oct. 1. According to officials of Crown Central Co., of 67 small refiners reporting gasoline production to the EPA in the third quarter of 1981, 52 had already installed facilities to produce unleaded gasoline.

"Suddenly they're rewarding those who failed to comply, who bet against the system," said Clem Malin, general manager for government affairs for Texaco Inc.