By Emily Cadei, CQ Staff

Rep. Stephen F. Lynch unexpectedly took himself out of consideration for the Massachusetts Democratic nomination to replace the late Sen. Edward M. Kennedy on Tuesday, shaking up the race just as it looked like the field for the Dec. 8 primary was solidifying.

In a short statement, Lynch said he concluded that “the challenge of putting together the resources and organization necessary to wage a competitive statewide campaign in less than 90 days is insurmountable.” Observers have estimated it will cost between $3 million and $5 million to fund a competitive campaign.

Lynch had appeared to be ready to launch his bid in the primary to choose the Democratic nominee for the Jan. 19 special election, which will fill the seat left vacant by the Kennedy’s death Aug. 25. Lynch had been widely expected to run as a more moderate alternative to other, more liberal Democrats in the race.

Lynch — who has represented the Boston-based 9th Congressional District since 2001 — obtained nomination papers from the office of Massachusetts’ secretary of state Sept. 4. Candidates have to gather 10,000 signatures in support of their campaign by Oct. 20.

Lynch’s campaign spokesman did not immediately return a call for further comment.

Lynch’s withdrawal may benefit fellow Rep. Michael E. Capuano , who also has a Boston base in his 8th Congressional District. Capuano can now position himself as the only candidate in the race with federal legislative experience.

For the moment, the primary contest looms as a two-way battle between Capuano and state Attorney General Martha Coakley for party establishment support, as well as organized labor backing. Coakley, who enjoys a name ID advantage across Massachusetts from her previous bids for statewide office, has already secured the endorsements of Pipefitters’ Association Local 537 and Utility Workers Union of America Local 369.

But another development Tuesday raised a question about whether the Democratic field now is set or may yet expand before the Oct. 20 candidate filing deadline. Stephen Pagliuca, a wealthy investor and co-owner of the Boston Celtics basketball team, is seriously considering a race and is prepared to spend his own considerable fortune on a campaign, according to a report published by The Boston Globe Monday night. Pagliuca has reportedly hired Democratic consultants Tad Devine and Doug Rubin, who is also working on Gov. Deval Patrick ’s 2010 re-election campaign.

Neither Devine nor Rubin returned calls Tuesday, but another longtime Massachusetts Democratic consultant, Dan Payne, suggested Pagliuca would have a tough time winning over the party rank-and-file. “To be frank I think they’re offended by the fact that someone would enter the race for Sen. Kennedy’s seat with zero experience in public office,” Payne said of the reaction among Democratic leaders in the state. He added, “I just think this is a cynical move for him to parachute in to this campaign.”

State Sen. Scott P. Brown looks to have the Republican nomination for the special election all but sewn up.

CQ Politics rates the special general election contest as Democrat Favored.

To see how all the 2010 Senate races are shaping up, check out the CQ Politics’ election map.