Beebe firm on pushing for severance tax rise
Posted on Friday, February 1, 2008
Gov. Mike Beebe said Thursday that if the natural-gas-production industry and the Legislature won’t agree to raise the severance tax, he’ll consider another option: pushing his own ballot initiative this year.
He said Arkansas’ severance tax is so low it’s “unfair” and that the production companies should pay more.
“I’m not interested in a settlement or compromise,” Beebe said. “If it’s something that’s not comparable to Texas and Oklahoma, we’ll go to the people with an initiated act. I’d rather lose than succumb to something that in effect just isn’t fair.”
Beebe said one reason he would push his own initiated act is that he opposes an initiated act put forth by former utility executive Sheffield Nelson of Little Rock.
Beebe wants all the proceeds to go to highways. Nelson’s proposal would send 20 percent to higher education.
Nelson said he’s fine if Beebe goes forward with his own act.
“We’ve talked about it, with the understanding that if he and I can’t get totally together on my act, he will submit an act,” Nelson said. “I encourage him to do that if the producers aren’t sensible in the negotiations.”
Nelson added, “I hope he’s able to get the producers to the table to reach an agreement. That would save a lot of blood- letting.”
Nelson said he was told that the state Ethics Commission would take up his proposal to have energy companies publicly report money spent opposing the measure.
Today, the attorney general’s office is to release its opinion regarding whether Nelson’s proposal will be certified for the Nov. 4 ballot.
Two weeks ago, Beebe floated the idea of calling a special session to raise the tax if he could get the industry to agree to an increase. He said that was necessary to make sure he had support from 75 percent of the Legislature, the threshold necessary for increasing the tax. He said a special session could happen in March if the support was there.
State Sen. Bob Johnson, D-Bigelow, who is to be Senate president pro tempore next year, has said he opposes the severancetax increase. He is closely aligned with the Stephens family of Little Rock, which controls a naturalgas-production company in Fort Smith.
State Sen. Shane Broadway, DBryant, who favors the increase, said some senators who don’t want to vote for a tax increase may do so if the proceeds would fund a highway plan that would benefit their districts.
“But you’d have to have a map [of the highway improvements ],” Broadway said. “Nobody is going to vote for something unless they see what it’s going to look like. You’d want to look at and see what impact it would have on your part of the state.”
If Beebe is going to push his own initiated act, he would have to do something in the next few months.
The deadline for turning in the petition for proposed initiated acts is July 7. The petition to the secretary of state’s office must contain 61, 974 signatures from registered Arkansas voters to be placed on the general election ballot.
Beebe has said the prime signature gathering period is leading up to the May 20 party primaries.
Last week, an official from one major production company, Chesapeake Energy Corp. of Oklahoma City, said a deal was near among producers.
But industry officials appear to have started limiting their comments.
“For now, our public comments on this matter need to be very limited. It is critically important that we communicate directly and precisely with others in the energy industry, the governor, legislative leaders and other key stakeholders,” said Tom Price Jr., Chesapeake senior vice president for corporate development.
Stephens Production Co. President William Walker said he had no comment.
A spokesman for SEECO Inc., a subsidiary of Houston-based Southwestern Energy Co., didn’t return a message.
Beebe spokesman Matt De-Cample said Beebe talking about pushing an initiated act of his own shouldn’t be taken as a sign that the negotiations with the production companies aren’t bearing fruit.
“It’s simply another option on the table,” he said.
Currently, the state’s severance tax on natural gas is threetenths of 1 cent per 1, 000 cubic feet of gas. That was set in 1957, and, because it’s based on volume, the tax rate doesn’t take into account the inflation of the price of gas since then. The tax takes in about $ 600, 000 a year.
Nelson’s proposal would set Arkansas’ rate at 7 percent of the purchase price. He estimates it would raise between $ 60 million and $ 100 million a year. Beebe has said his plan would yield at least $ 50 million annually but possibly as much as $ 100 million. He said he wants to take into account the entire tax structure in surrounding states, including temporary exemptions production companies get in Oklahoma and Texas for higher-risk drilling such as is involved in the Fayetteville Shale deposits in Arkansas.
Supporters of the tax emphasize that the increase wouldn’t affect Arkansas natural-gas users because gas mined in the state would be used in other states. They say Arkansans are already paying higher severance taxes in other state that produce gas used here.
But Johnson argues that the increase would affect the cost of numerous item Arkansans use that are produced with the help of natural gas.
The Southern Good Faith Fund has long called for a higher severance tax on natural gas. Earlier this week the fund said an increase should finance a trust fund for higher education. Spending more money on higher education would help reduce remediation and help more people go to college, the group contends.
The fund is a nonprofit organization that advocates for low-income people. It is affiliated with Southern Bancorp, a rural development bank with operations in Arkansas and Mississippi.
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