Alaska Sen Murkowski upset by Tea Party-backed rival

U.S. Sen. Lamar Alexander (R), U.S. Sen. Lisa Murkowski (2nd R), and U.S. Sen. Judd Gregg (3rd R) talk after meeting with U.S. President Barack Obama and a bipartisan group of U.S. Senators to discuss passing comprehensive energy and climate legislation in Washington, June 29, 2010.

ANCHORAGE, Alaska (Reuters) - Senator Lisa Murkowski dropped out of the Republican Senate primary in Alaska on Tuesday, conceding to a Tea Party-backed insurgent in a stunning upset fueled by conservative supporters.

Joe Miller, a Fairbanks attorney who was heavily backed by former Alaska governor and potential 2012 presidential contender Sarah Palin, had a thin lead over Murkowski as the last ballots from the August 24 primary election were counted.

"Based on where we are right now, I don't see a scenario where the primary will turn out in my favor," Murkowski told supporters as she conceded defeat at her campaign headquarters in Anchorage.

Murkowski becomes the seventh member of Congress, and the third senator, ousted amid anti-incumbent fervor fanned largely by a weak economy and the conservative Tea Party movement.

In an election year marked by voter anger over lost jobs and spiraling deficits, Republicans hope to take back control of Congress in the November 2 midterm elections, when 435 seats are up for grabs in the House and 37 seats in the Senate.

Murkowski joins three-term Republican Senator Robert Bennett of Utah, who lost his renomination bid at a state party convention in May, and five-term Senator Arlen Specter, who lost the Democratic primary in Pennsylvania.

Tea Party-supported candidates have won primary victories in Florida, Nevada, Colorado and Utah.

Miller thanked the conservatives who backed him, including Palin, Mike Huckabee and "the national Tea Party movement."

"Now is the time for all Alaskans to come together and reach out with our core message of taking power from the federal government and bringing it back home to the people,": he said in a statement.

"On to November!" a triumphant Palin said on Twitter, congratulating Miller and thanking Murkowski for her service.

Palin's endorsement of Miller was credited with inspiring the California-based Tea Party Express to pour about $600,000 into his campaign, money that was used in a late-campaign advertising blitz.

Murkowski, the most senior Republican on the Senate Energy Committee, has been considered a moderate on several issues and a potential compromise vote on national climate legislation.

Miller is on record as denying that human-caused emissions are responsible for climate change.

Murkowski is also the scion of a prominent Alaska family. Her father, Frank Murkowski, served for 22 years in the Senate before being elected governor in 2002. One of his first actions as governor was to appoint his daughter, then a state legislator, to fill the Senate seat he had just vacated.

Palin ousted the elder Murkowski from office when she soundly defeated him in the 2006 GOP gubernatorial primary.

(Writing by Joanne Allen, editing by Anthony Boadle)