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ANCHORAGE - U.S. Sen. Ted Stevens sought to minimize reports of friction between him and Gov. Sarah Palin as she joined him Wednesday at a press conference laying out Stevens' proposals for relief from high energy prices.

"We're each free to make comments about what the other does and every once in while she'll say I'm stupid," said the 84-year-old Stevens, drawing laughter. "She may be right."

Palin quickly jumped in to say she had never called the longest serving Republican in Senate history "stupid." There has been a great difference, she said, between perception and reality when it comes to their relationship.

"I have great respect for the senator," she said. "He needs to be heard across America. His voice, his experience, his passion needs to be heard across America so Alaska can contribute more."

Palin was directly responsible for bouncing one long-term Republican from office, former U.S. Sen. and Gov. Frank Murkowski, defeating him in the 2006 GOP primary. Her public comments about Stevens gave the impression she might have been trying to oust another.

Palin made openness in politics a cornerstone of her campaign and took aim at congressional earmarks, or direct appropriations, that send money to states outside bureaucratic review. Stevens as a member of the Senate Appropriations Committee has masterfully directed billions to Alaska and makes no apology for it, citing the state's dearth of infrastructure.

Palin in September called on Stevens to explain why the FBI is investigating the remodel of his home in Girdwood and his ties to former VECO Corp. CEO Bill Allen, who has pleaded guilty to bribing Alaska state legislators.

The FBI and the IRS in July 2007 searched Stevens' home in Girdwood, a ski resort community that makes up Anchorage's southern edge. Allen in trials last year testified he sent company employees to work on the remodel in 2000.

Stevens has said he paid all the bills presented to him, and that the investigation should work to its conclusion without any appearance that he attempted to influence the outcome with comments.

Stevens on Wednesday insisted he was not offended by any of the governor's remarks. They were part of Alaska's period of need, he said, and with the oil revenue flowing in, there probably will be fewer earmarks.

As for the investigation, "I do think the governor had every right to say what she did. I didn't entertain any umbrage about it. I never talked to her about it at all. I wish I had her freedom to speak about it, but I don't. It's there, it's continuing and that's all there is to it."

On energy plans, Stevens laid out short- and long-term ideas. He said he backed Palin's idea of cash relief for Alaskans from the state's swelling coffers.

"We need to return some of that surplus money to the people who are hurting," he said.

On the federal level, he's pushing legislation to restrict energy futures speculation that he said has driven up costs.

Long-term, Stevens called for opening the coastal plain of the Arctic National Wildlife Refuge to exploration and development, federal revenue from the region directed toward alternative and renewable energy that could someday replace petroleum.

Stevens faces a challenge in the August primary from former state lawmaker Dave Cuddy and four other Republicans.

His likely Democratic opponent in November is Anchorage Mayor Mark Begich, whose own energy plan calls opening ANWR and establishing a national and state target of generating at least 25 percent of domestic electricity from renewable resources by 2025.

Begich also called for setting a goal of reducing energy consumption by 25 percent by 2018 through energy efficiency.