Legislators hear Beebe’s update on severance tax
Posted on Saturday, February 16, 2008
Gov. Mike Beebe invited legislators to hear the lowdown directly from him Friday about his efforts to negotiate an agreement to raise the severance tax on natural gas.
He said he had gotten the message from some legislators who had complained about not being in the loop about his talks with the production companies.
“I just wanted to tell the leadership firsthand what I’ve been saying and ya’ll been writing,” Beebe told reporters afterward. “We keep getting the feedback that ‘Well, [the governor ] hasn’t talked to me, he hasn’t talked to me. ’” Beebe met for an hour in the governor’s conference room in the Capitol with nine lawmakers, including House Speaker Benny Petrus, D-Stuttgart, and Senate President Pro Tempore Jack Critcher, D-Batesville. He would need their help if he calls a special session to pass the increase.
Also attending was Sen. Bob Johnson, D-Bigelow, tapped to be the Senate leader in 2009 and the most outspoken opponent of raising the severance tax.
Johnson said it’s “too premature” for him to say under what circumstance he would support an increase.
“There aren’t any [legislative ] proposals out there,” Johnson said. “My point from the very beginning has been that I do not want to do anything prematurely to cause our economy to suffer.” Beebe said he still doesn’t have a specific plan to release. But he said he would be open to seeking some help for royalty owners. He said he’d be fine with some exemptions sought by the natural gas production industry for higher-risk drilling but doesn’t want an overall tax structure weaker than those of Oklahoma and Texas.
“To the extent we have people in the industry or legislators who want nothing or something particularly lower, that’s a sticking point,” he said. “We have seen proposals from the industry and they are not close to what I think is fair. Something has got to happen pretty soon in the next couple of weeks or you lose your window [of opportunity ].” Beebe has said he’d prefer to pass a compromise tax increase during a special legislative session instead of through the initiated act process.
Passing a severance tax rate increase takes a three-fourths vote in the Legislature, which can be a difficult hurdle. Beebe has said getting an agreement from the industry is essential toward getting that supermajority in the Legislature.
A spokesman for Chesapeake Energy Corp. of Tulsa declined comment on Friday’s meeting. A spokesman for Southwestern Energy of Houston didn’t return a message.
NELSON’S PROPOSAL Little Rock lawyer Sheffield Nelson, a former gas utility executive and a former Republican gubernatorial candidate, is pushing a proposed initiated act to raise the rate to 7 percent of the market price, which is Oklahoma’s rate. But Nelson’s proposal doesn’t include the exemptions the industry wants. Arkansas’ current rate of threetenths of 1 cent per 1, 000 cubic feet of gas is among the lowest severance tax rates in the country. Nelson said he hopes to gather most of his signatures to place his measure on the ballot on May 20, the day of the party primaries. So, Beebe wants to call the Legislature in before that.
Beebe has said he may even push his own initiated act.
“I’m willing to give [the industry ] less exemptions and take less of a [rate ] as Texas or Oklahoma, or more exemptions and a higher percentage,” Beebe said. “I’m pretty flexible about going either way.” He declined to reveal what rate he prefers and said he didn’t tell lawmakers, either.
“Right now, we’re not close,” Beebe said of negotiations. “But I’m not prepared to say let’s shut down.” The tax now raises about $ 600, 000 a year. Beebe said an increase could raise at least $ 60 million a year for highways or up to $ 100 million if the Fayetteville Shale production continues to grow.
Nelson wants to use most of the money for roads but some for higher education.
Beebe described as “legitimate concerns” criticisms raised by mineral-rights owners who would receive less royalties if the severance tax were increased.
“That is one segment that is paying a whole lot more in the way of income tax because of [royalty ] income that I am willing to look at,” Beebe said without giving specifics.
Critcher said he didn’t know whether a special session would happen.
“[Beebe ] wants [so ] much and [production companies ] want a whole lot less,” Critcher said.
Johnson’s appearance at the meeting was notable in that he rarely visits the Capitol out of legislative sessions.
“It was a great meeting, more or less a briefing session,” he said. “The governor was open and honest about his intentions. [As a former senator, the governor is ] a product of the Legislature. He understands that he won’t call us into session without a consensus from the Legislature.” Petrus noted that the meeting marked “the first conversation” he and Beebe have had about the severance tax.
“We’ll see how it unfolds,” Petrus said. “He wants a slamdunk.” QUAKE BUILDING CODES Also attending the meeting were Rep. Robbie Wills, D-Conway, scheduled to be speaker of the House in 2009; Senate Revenue and Taxation Committee Chairman Jim Hill, D-Nashville; and House Revenue and Taxation Committee Chairman Keven Anderson, R-Rogers. Three other legislators attended to hear what Beebe had to say about state earthquake building codes. They were Sen. Steve Bryles, D-Blytheville; Rep. Tommy Baker, D-Osceola; and Rep. Charolette Wagner, D-Manila.
Bryles and eastern Arkansas economic developers want Arkansas to relax a building code that requires stricter earthquake protections than do surrounding states in the New Madrid Fault region.
Bryles said the governor “wants to get something worked out” but hasn’t committed to including that issue in a potential special session focused on raising the severance tax.
State police and other emergency responders have said they prefer the codes remain as they are.
FEEDBACK:
Something to say about this topic? Submit a Letter to the Editor online
