Alaska Governor Sean Parnell invoked a little-used mechanism late Sunday night to adjourn the state Legislature after lawmakers hit an impasse over budget issues.
Meanwhile, Parnell's key initiative for the 2011 legislative session, a bill that would reduce the state's production tax on oil and gas, is now on the back burner and will await action in the 2012 legislative session.
"I acted to adjourn the mess," Parnell said during a midnight news conference.
The state House and Senate have been at odds for several days over priorities in a multi-billion dollar state construction budget. Late Sunday night, the House passed a resolution asking the governor to declare the session adjourned.
Disputes over Parnell's oil tax bill has played indirectly into the dispute. The tax bill is in the Senate Labor and Commerce Committee, the first of three committees it has been referred to in the Senate after it earlier passed the 40-member House.
Parnell had threatened to veto spending items from the $2.9 billion construction budget developed by the Senate if that body refused to act on his oil tax bill.
To prevent vetoes, the Senate Finance Committee inserted language that invalidates appropriations for $450 million in energy projects if Parnell vetoes any single item, and also delays appropriation on $100 million in other construction priorities requested by the governor.
The House disagreed with the conditions on the appropriations, supporting Parnell in his threat of vetoes over the Senate's inaction on the oil tax bill.
The governor is proposing to cap the state's tax on producers' net profits at 50% for existing fields and 40% for new fields, and to make other changes that effectively reduce the tax burden.
Alaska's production now has a formula that increases the tax as crude oil prices rise, to as much as 70% and 80% of net profits.
Producers argue the tax needs an overhaul because the high tax, combined with high costs on the North Slope, make many projects uneconomic, even at higher oil prices.
A major concern is the continuing decline in production along the North Slope and throughput through the Trans Alaska Pipeline System, which is expected to average about 600,000 b/d next year, down from about 640,000 b/d this year.
With a tax change, the improved economic environment could spur more development, even in existing fields.
BP's Alaska president, John Minge, told a business group in Anchorage last week that a $2 billion project in the west side of the Prudhoe Bay field aimed mainly at viscous oil prospects would likely proceed if the tax change were made.
