UPDATE 2-Canada resets search for fighters, may still buy F-35
* Says to look at all available options to replace CF-18s
* Independent panel to be given guidelines for evaluation
* Cost of F-35s, including operating them, would be C$45.8 bln
* Cost over 20 years would be C$25.8 billion
OTTAWA, Dec 12 (Reuters) - Canada scrapped a controversial plan to buy F-35 jets from Lockheed Martin Corp on Wednesday, saying that instead it would evaluate all available options for acquiring new jet fighters.
The Conservative government - stressing it could still buy the F-35 if it turns out to be the best option - said it would set up an independent panel to look at replacements for the country's aging fleet of CF-18 fighters, which are due to go out of service by 2020.
"We are pressing the reset button on this acquisition in order to ensure a balance between military needs and taxpayer interests," Defence Minister Peter MacKay said.
The announcement marks the government's most far-reaching attempt yet to put an end to a scandal that has grown steadily since the Conservatives announced in July 2010 they would buy 65 F-35 Joint Strike Fighters for C$9 billion ($9 billion) without holding an open competition.
The government said it would give the independent panel a series of detailed guidelines to help it evaluate the contenders.
It also released a report showing the full cost of buying, equipping, maintaining and operating the 65 F-35 jets would be C$45.8 billion, far higher than earlier estimates.
"We are demonstrating that we are serious about looking at all available options to replace the CF-18s," Public Works Minister Rona Ambrose said in a statement.
The C$45.8 billion includes C$1 billion for attrition.
The cost would be over a 42-year operating life, longer than the 20-year period the government said it had used as a matter of course until now for military purchases. If only 20 years were used, the cost would be C$25.8 billion, said Michelle d'Auray, deputy minister of public works.
Opposition parties said the F-35 debacle shows the government is incompetent and cannot be trusted.
Government sources said the main contenders for fighter jets were the F-35s, Boeing Co's F-18 Super Hornet and the EADS Eurofighter.
The Conservatives have a majority of seats in the House of Commons and are in no immediate threat politically, given that the next election is due in late 2015.
Reuters reported the main outlines of the government's revised plan to acquire fighter jets last Friday.
The initial plan called for the F-35s to be delivered between 2017 and 2023. Officials, insisting the F-35 had not been ruled out, declined to say how long it would be before planes would be delivered under the new plan.
"We will take the time needed to complete this work, to get it right and ensure ministers have the best possible information," a senior government official told reporters.
As part of the overall review, the defense ministry will look at whether the lifespan of the CF-18s can be extended beyond 2020.
Despite announcing in July 2010 it would buy the F-35, Ottawa never signed a binding contract with Lockheed Martin.