Although Arizona Sen. Jon Kyl’s (R) future political plans remain a mystery, Democrats fully expect him to run for a third term in 2006 and are scrambling to analyze the results of the disappointing 2004 Grand Canyon State election in hopes of fielding a quality candidate in two years time.

Kyl has been the focus of retirement speculation in Republican circles of late because of a confluence of factors, including his repeated assertion that he “intended” to serve just two terms as well as the fact that his chances to move up to the highest echelon of Republican leadership seem blocked.

“Although it’s a minority opinion, there are some who feel strongly that Kyl will not run again,” said a Republican consultant familiar with the state’s politics.

The Arizona Senator has not yet formally announced for re-election, but those who purport to know his intentions expect him to make another bid.

As of Sept. 30 he had almost $1.7 million in his Senate account, a solid base on which to begin a race for a third term.

Even as Republicans are puzzled over what Kyl’s next move may be, the most likely Democratic candidate, state party Chairman Jim Pederson, appears to be backing away from a bid.

Pederson had long said that he would step down as party chairman after the 2004 election but has recently indicated that he is open to serving another two-year term.

In a recent interview, Pederson said his decision to stay on as party chairman should not be read as a signal that he will forgo the Senate race.

“Right now is not the time to rock the boat,” he explained. “The recent election proved we don’t know the state as well as we should.”

Pederson, a wealthy real estate developer, spent $1.8 million of his own money last cycle to modernize the state party apparatus in hopes of winning Arizona for Massachusetts Sen. John Kerry (D), reclaiming the 1st district seat held by Rep. Rick Renzi (R) and making gains in the state Legislature.

President Bush won the state by 11 points — far wider than his 6-point margin in 2000 — while Renzi won a huge 59 percent to 36 percent re-election victory and Democrats barely broke even in the state House and Senate.

Pederson said he would be doing “a lot of research [and] a lot of polling” to ascertain why Arizona went so strongly for Republicans in 2004.

He added that he was “very optimistic” about Democratic prospects in the 2006 Senate race until seeing the results of the recent election; he expects to make a final decision on the contest in the next 60 to 90 days.

Gov. Janet Napolitano (D) remains the wild card in GOP calculations as they believe she remains a possible Senate candidate against Kyl, noting that she has never ruled out the contest even when announcing she “intended” to run for a second term in 2006.

First elected in an open-seat race in 2002, Napolitano has high popularity ratings and is seen as a rising star on the national stage for Democrats.

In his second term, Kyl has emerged as a star in his own right, albeit one with low visibility.

He was interviewed by Dick Cheney as a potential vice presidential candidate in 2000 and took over as chairman of the Republican Policy Committee — the fourth ranking Senate leadership position — in November 2002.

Little-known in state circles, however, is the fact that Kyl came to the Senate as an advocate of term limits, saying in 1994 that he would probably serve no more than 12 years.

In a 2001 interview with Roll Call, Kyl reiterated that serving two terms “was my intention then, and it’s probably still my intention, although I’m not going to make any decision for another three or four years.”

Bob Grossfeld, a Democratic media consultant, said he has “every expectation that Senator Kyl will go back on his term-limits pledge” but that the electoral impact will likely be slight.

“The price is paid if it is extracted,” said Grossfeld.

As for his leadership aspirations, Kyl saw a major chance go by the board earlier this month when incoming Judiciary Chairman Arlen Specter (R-Pa.) survived a firestorm of controversy after he said that anti-abortion judges would not win confirmation because of a Democratic filibuster. Kyl would have likely taken over the chairmanship if Specter had been bypassed.

Kyl’s path to either Senate Majority Leader or Majority Whip is also blocked.

When Tennessee Sen. Bill Frist (R) departs Congress in keeping with his two-term-limit pledge in 2006, Majority Whip Mitch McConnell (R-Ky.) will move up to leader with Conference Chairman Rick Santorum (R-Pa.) taking over as Whip.

That would leave Kyl as the most likely candidate for Conference chairman, a slight step up the leadership ladder but still out of the real decision-making positions in the Senate.

A number of ambitious House Republicans are privately hoping that these factors will lead the 62-year-old Senator to choose the private sector.

That list includes Rep. Jeff Flake, who recently announced he was breaking his own three-term-limit pledge to seek re-election, as well as Reps. J.D. Hayworth and John Shadegg.

“Flake and Hayworth would likely go for the Senate seat, possibly Shadegg too, and each of their House districts would see spirited Republican primaries” to replace them, said a Republican strategist.

None of the three House Members returned calls seeking comment on his interest in a possible open Senate seat.

Hayworth has long been rumored to be considering a challenge to Napolitano in 2006, though a gubernatorial bid is far from set in stone.

Flake is clearly ambitious, having long weighed a primary challenge to Sen. John McCain in 2004 before backing away.

Shadegg is expected to take over the Republican Policy Committee chairmanship in the 109th Congress, but an open Senate seat could prove tempting.