The proposed Mackenzie Valley natural gas pipeline could face some competition for southern markets, after Alaska officially announced it's seeking bids to build a North Slope pipeline through the state.

Alaska Gov. Sarah Palin announced Tuesday that the state is ready to receive applications to build the 5,600-kilometre pipeline, which is expected to cost more than $20 billion US.

The pipeline would transport the North Slope's vast natural gas reserves to markets in the U.S. Midwest. In February, Palin pledged to put up $500 million for the project, to be given to the company that submits the best application.

Alaska's formal request for applications, introduced Tuesday, outlines the project's conditions and all the incentives a winning bidder would receive.

Oil and independent pipeline companies have until Oct. 1 to submit an application that must outline details such as the pipeline's route, the market it will serve, and how it can build a pipeline and avoid cost overruns. The best proposals will be submitted for legislative approval next year.

A potential multibillion-dollar pipeline carries implications for North America's long-term energy supply, and has been widely discussed by lawmakers, energy regulators and company executives throughout North America since Palin outlined her plans in March.

Palin said Tuesday's development reflects progress toward building a pipeline that one day will "feed hungry markets with Alaska's energy."

She warned that the state and the country cannot afford to let the natural gas supplies — estimated at about 35 trillion cubic feet on the North Slope — sit untapped any longer.

But the North Slope proposal could also pose another challenge to the 1,220-kilometre proposed Mackenzie Valley Pipeline, which would run from the Beaufort Delta in the Northwest Territories, and down the Mackenzie Valley to the Alberta border, where it could connect to southern markets.

The $16.2-billion proposal, backed by a consortium led by Imperial Oil that includes Exxon Mobil, ConocoPhillips, Shell Canada and the Aboriginal Pipeline Group, is already beleaguered by ballooning costs and construction delays.

A joint review panel examining the environmental and social impacts of the project is scheduled to hold its next hearing in Inuvik, N.W.T., on Monday.

With files from the Associated Press