(Adds comment from Obama, Senate minority leader, electricity utilities, updates share prices)
By Valerie Volcovici and Jeff Mason
WASHINGTON, June 2 (Reuters) - The U.S. power sector must cut carbon dioxide emissions 30 percent by 2030 from 2005 levels under federal regulations unveiled on Monday that form the centerpiece of the Obama administration's climate change strategy.
The Environmental Protection Agency's proposal is one of the most significant environmental rules proposed by the United States, and could transform the power sector, which relies on coal for nearly 38 percent of electricity. It also set off a political backlash likely to run well into next year.
Gina McCarthy, EPA administrator, said on Monday that between 2020 and 2030, the amount of carbon dioxide the proposal would reduce would be more than double the carbon pollution from the entire U.S. power sector in 2012.
States will have flexible means to achieve ambitious but attainable targets, regardless of their current energy mixes. States which rely heavily on coal-fired power plants are thought to have the toughest tasks ahead.
"The flexibility of our Clean Power Plan affords states the choices that lead them to a healthier future. Choices that level the playing field, and keep options on the table, not off," McCarthy said in remarks at EPA headquarters on Monday.
The plan had come under pre-emptive attack from business groups and many Republican lawmakers as well as Democrats from coal-heavy states like West Virginia before it was unveiled.
But the 645-page plan looked less restrictive than some had feared, with targets easier to reach because emissions had already fallen by about 10 percent by 2013 from the 2005 baseline level, partly due to retirement of coal plants in favor of cleaner-burning natural gas.
The plan gives states multiple options to achieve their emission targets, such as improving power plant heat rates; using more natural gas plants to replace coal plants; ramping up zero-carbon energy, such as solar or nuclear; and increasing energy efficiency.
States can also use measures such as carbon cap-and-trade systems as a way to meet their goals.
Share prices for major U.S. coal producers like Arch Coal , Peabody Energy and Alpha Natural Resources closed at or near multi-year lows on Monday.
A LEGACY ISSUE
Monday's rules cap months of outreach by the EPA and White House officials to an array of interests groups.
The country's roughly 1,000 power plants, which account for nearly 40 percent of U.S. carbon emissions, face limits on carbon pollution for the first time.
Climate change is a legacy issue for President Barack Obama, who has struggled to make headway on foreign and domestic policy goals since his re-election.
But major hurdles remain. The EPA's rules are expected to stir legal challenges on whether the agency has overstepped its authority. A 120-day public comment period follows the rules' release.
The National Association of Manufacturers, a long-time EPA foe, argued on Monday that the power plant plan was "a direct threat" to its members' competitiveness.
The electric utility industry, encompassing plants that use resources from coal and natural gas to wind was more circumspect about the plan.
"While the 2030 reduction target is ambitious, it appears that utilities may be allowed to take advantage of some of their early actions," the Edison Electric Institute said.
Lawmakers representing big coal states lashed out.
Mitch McConnell of Kentucky, Republican leader in the U.S. Senate, termed the rules a "dagger to the heart of the middle class" that would damage the economy.
Republicans are trying to wrest control of the Senate from Democrats in November's elections. Four of the states with Senate seats in play are among the top 10 coal producers nationally: West Virginia, Kentucky, Montana and Colorado.
Obama, on a conference call with public health groups, said Americans' electricity bills would shrink, not rise, as the rules spur investment in new technologies.
The EPA's McCarthy also forecast that the regulations could yield over $90 billion dollars in climate and health benefits.
Soot and smog reductions that would be achieved through the plan would translate into a $7 health benefit for every dollar invested in the plan, she said.
The EPA estimates that reducing exposure to particle pollution and ozone could prevent up to 150,000 asthma attacks in children and as many as 3,300 heart attacks by 2030, among other impacts.
The rules, when finalized, could give Washington more clout in international talks next year to develop a framework for fighting climate change. The United States is eager for emerging industrial economies such as China and India to do more to reduce their emissions. (Reporting By Valerie Volcovici and Jeff Mason; additional reporting by Mark Felsenthal; Editing by Ros Krasny and Alden Bentley)