Michigan Gov. John Engler's administration has abandoned efforts to significantly ease state standards for toxic dioxin pollution that would likely have allowed Dow Chemical Co. to avoid huge cleanup costs near its Midland, Mich., plant.

The proposed rule change, negotiated by the outgoing Republican governor's Department of Environmental Quality and Dow officials, had drawn fire from Gov.-elect Jennifer M. Granholm (D) and regional officials of the U.S. Environmental Protection Agency, and was the subject of a lawsuit filed earlier this month by a coalition of environmental groups.

The proposed deal -- a consent order -- fell apart last Friday when Dow rejected language demanded by the state attorney general's office.

"While it continues to be my belief that a consent order to address the dioxin contamination in Midland is the appropriate solution, it has become impossible at this late date to prepare a final document that not only complies with the environmental statute, but also reflects the substantive comments received from all parties," said Russell Harding, director of the state's Department of Environmental Quality.

Chris Bzdok, a Traverse City attorney who represented the environmental groups, said that while he would drop the suit, "We're still going to keep a careful eye on the process and the dioxin in Midland."

Earlier this month, The Washington Post reported on the controversy, in which environmental groups charged that Engler was handing Dow a "sweetheart deal" that would essentially relieve the company of a large part of its liability for contamination of a major watershed in the Great Lakes.

Dioxin is a potent toxin that can cause cancer and disrupt the immune and reproductive systems. Experts say that elevated levels of dioxin found in Midland soil likely came from the burning of chlorinated compounds, while the dioxin in the Tittabawassee flood plain likely came from Dow waste ponds that overflowed in a 1986 flood.

The proposed rule change would have increased by more than ninefold the amount of dioxin allowed in Midland's soil. Some environmentalists said that if the rule change had prevailed, it would become the de facto standard for the state -- an assumption that state and Dow officials disputed.