NEW YORK, Jan 11 (Reuters) - Gov. Sarah Palin of Alaska sent a letter to ConocoPhillips (COP.N: Quote, Profile, Research) this week calling the company's proposal to build a long-sought natural gas pipeline "critically short of meeting the state's objectives."

The apparent rejection of ConocoPhillips' bid came as a boost for TransCanada Corp (TRP.TO: Quote, Profile, Research), which was named the sole finalist this month for state sponsorship of the project under the Alaska Gasline Inducement Act.

Alaska's main criticism of ConocoPhillips' proposal, which was submitted outside of the AGIA process, was a request that state taxes be fixed on the project for decades.

"That approach is no more acceptable now than it was before AGIA," Palin wrote in the letter to ConocoPhillips' CEO James Mulva, dated Jan. 9. A copy of the letter was provided to Reuters late Thursday.

"Your alternative does not give the state a reason to deviate from the AGIA process," Palin added.

Alaska launched its competitive AGIA bidding strategy after decades of frustration over failure to develop the North Slope's natural gas amid staggering costs and an uncertain U.S. market for the fuel.

The North Slope has about 35 trillion cubic feet of proven gas reserves, enough to supply the United States for 18 months at current consumption rates, and it is believed to hold several times as much in undiscovered reserves.

Alaska rejected four other bids under the AGIA process, including those from China's Sinopec (SNP.N: Quote, Profile, Research) (0386.HK: Quote, Profile, Research) and California's AEnergia LLC, leaving TransCanada as the sole remaining bidder.

TransCanada's proposal would connect Alaska gas with its Alberta system, where supplies can be shipped on to Eastern Canada, the U.S. Midwest and Northeast, as well as California.