EDITORIALS : Some reformer
Posted on Friday, March 28, 2008
SHEFFIELD NELSON, who began this whole campaign to raise the state’s severance tax on natural gas, says he’s willing to abandon his effort if the governor succeeds in his place. And all indications are that Mike Beebe’s tax increase (5 percent, with exemptions ) will become law a lot faster than Sheffield Nelson’s (7 percent, no exemptions ). Which isn’t a surprise, but it is a shame.
Because the more we learn about Mike Beebe’s plan to raise the tax on natural gas, the less we like it. And the more we’re reminded of why we liked Sheffield Nelson’s simple, clear, up-front tax increase. Because it seems that Mike Beebe’s 5-percent tax will apply to only 5 percent of the wells in Arkansas. As in around 220 of the roughly 4, 300 natural gas wells in the state. Some sort of exemption or maybe just excuse—high construction costs, marginal production, use your imaginationwould cover the other 95 percent of wells. Which means the owners of those 4, 100-odd wells will pay a tax of only 1. 25 or 1. 5 percent a year for the next few years. Gentle Reader might remember that Mike Beebe kept saying his tax would be “a little less” than the 7 percent that is now levied in Oklahoma. Talk about the New Math: Now we learn that a little less than 7 is 1. 25 or 1. 5.
REMEMBER those weeks of talks that almost broke down, then picked back up again ? What ever happened to all those oh-so-intense negotiations ? Mike Beebe’s exemptions—big enough to sail an oil tanker throughmake the governor’s negotiating style seem less tenacious than collegial. If not downright cozy. How tough could the bargaining have been if 95 percent of the industry is now in line for some kind of exemption ? No wonder your average citizen begins to suspect that they’re all in it together, they being the politicians and special interests.
What did the owners of the remaining 5 percent of the wells do wrong ? Were they sick the day these exemptions were handed out ? Any natural-gas producer who ends up paying the full 5 percent should strongly consider hiring a new lobbyist. Whoever they had in Little Rock didn’t get the job done. Besides, there’s talent on the market. Namely, Ruth Whitney, who used to be Mike Beebe’s chief of staff when he was attorney general, and who has since found a new career. To wit, representing, among others, Chesapeake Energy. In negotiations with her former boss. Yes, downright cozy. You’d think it was 1957, Orval Faubus was still governor, and Arkla’s Witt Stephens was still setting the tax rates, as in the “Fair” Field Price Act of 1957.
Yes, other states have exemptions for the oil-and-gas industry, too, including Oklahoma. But Oklahoma adopted its exemptions in the 1990 s, when gas prices were lower. Back then, the industry needed a boost. Compare that picture to today’s high gas prices, and ask: Do the Chesapeakes and the Southwestern Energys need any more incentives to drill like mad and pump like crazy ?
Yes, Mike Beebe’s exemptions do end after a few yearsor more if a natural gas production company can persuade the state to grant an extension. So some time around 2011 or 2012, the owners of all those new wells might finally have to pay the full 5 percent—on whatever gas their wells may still be producing after years of round-the-clock production. Which may not be much.
JUST A few weeks ago, the only tax plan on the table was Sheffield Nelson’s. In no time, we’ve gone from debating his solid, straight-up 7 percent tax to all but ratifying Mike Beebe’s 1. 5 or 1. 25 percent. How did the tax get so riddled with loopholes so fast ? Just who got exemptions, and why did they get them ? And is this the governor’s idea of genuine tax reform or just the mocked-up appearance of it ? We the People may never know the answer to those fair questions, or what all went on in Mike Beebe’s backroom negotiations with the gas producers, but the result is clear enough: The state is to get a 5 percent tax on only 5 percent of the producing wells, and the rest of the natural gas industry gets... off lightly. Some reform.
It’s all enough to make you wish for a simple up-or-down vote on a clear, fair, straightforward tax. The kind that Sheffield Nelson, an old oil-and-gas man and public-spirited citizen, started to put on the ballot.
Is it too late to give the people of this state a chance to vote on this thing and maybe even a fair shake ? Or has Mike Beebe succeeded in negotiating away the public interest behind those closed doors of his ?
Some reformer.
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