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UPDATE 3-U.S. formally proposes to scrap Obama's carbon-cutting plan

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WASHINGTON/NEW YORK, Oct 10 (Reuters) - The head of the U.S. Environmental Protection Agency formally proposed on Tuesday to scrap the agency's Obama-era plan to reduce greenhouse gas emissions from power plants, as the Trump administration seeks to slash fossil fuel regulation.

EPA Administrator Scott Pruitt issued a notice that the agency intended to repeal and replace the Clean Power Plan, which it said relied on controversial calculations of economic costs and benefits.

The agency said it is "committed to righting the wrongs of the Obama administration by cleaning the regulatory slate," and that "any replacement rule will be done carefully, properly, and with humility, by listening to all those affected by the rule.

Ending the plan could save up to $33 billion in compliance costs in coming years, it said.

The move is part of Republican President Donald Trump's plan to revive the country's coal industry and boost domestic fossil fuels production. His administration has promised to reduce regulations on coal and drilling, which tend to be in states that form part of Trump's voter base.

But environmentalists and other supporters of the plan said Pruitt's cost estimates did not fully consider billions of dollars in savings from reduced medical bills that would result from steep cuts in pollution from coal.

The estimate also did not fully consider the future damage done from lasting carbon emissions and the costs of U.S. carbon pollution abroad, critics say.

The Clean Power Plan was finalized in 2015 under former President Barack Obama but never came into effect. Last year, the Supreme Court put the brakes on it after energy-producing states complained that the agency had exceeded its legal reach.

The plan had sought to reduce emissions from power plants by 32 percent below 2005 levels by 2030.

Pruitt's proposal said the plan went beyond the law by forcing power plants to take action to cut emissions not just at the plants but also "outside the fence line" - for instance, by investing in renewable energy.

An alternative plan could require plants to make boilers more efficient, but that could result in fewer overall emissions reductions, environmentalists say.

Electricity generators have pressured the Trump administration to not simply kill the Clean Power Plan but to form an alternative strategy, so they can avoid any future lawsuits for not taking action on emissions.

The EPA is obliged to regulate carbon emissions after it proclaimed in 2009 that the pollution endangers human health.

Republicans praised Pruitt's move to repeal Obama's signature climate policy. Senator John Barrasso, chairman of the Senate's environment committee, said the Clean Power Plan would have hurt energy workers in his state of Wyoming, the country's top coal-producing state.

David Doniger, a lawyer at non-profit environmental group the Natural Resources Defense Council, said it would put Americans in greater danger from extreme weather and particulate pollution from coal plants, which is linked to heart and lung problems.

Doniger said Tuesday's action would trigger a legal battle, and promised to take "Pruitt and his Dirty Power Plan to court."

(Reporting by Timothy Gardner and Emily Flitter; editing by Rosalba O'Brien)