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AG rejects Nelson's proposal to raise natural gas severance tax Saturday, Feb 2, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - Attorney General Dustin McDaniel on Friday rejected the wording of former gas company executive Sheffield Nelson's proposed initiated act to raise the state severance tax on natural gas. McDaniel said the proposal did not clearly designate how the proceeds would benefit higher education and made it unclear as to how much money would continue to be allocated in the manner it is currently allocated. How the money would flow from gas companies to the state and then on to state agencies, while of less concern to voters, was also unclear, the attorney generalsaid. Nelson said he expected to resubmit the proposal next week. "I really don't see the ambiguities, but we're going to look at it again to comply with what they want," Nelson said. "If in fact there were problems, I'd much rather have them raised at this level rather than have them raised and challenged in the Supreme Court." Arkansas' severance tax is among the nation's lowest at three-tenths of a cent per 1,000 cubic feet. It raised $619,417 last year. Nelson's proposal would raise the tax to 7 percent of the market value of natural gas at the time of extraction and would generate between $60 and $100 million annually, to be used for highways, county and city aid, and higher education. The proposal comes at a time when gas companies are rapidly ramping up production in the Fayetteville Shale play, a rock formation in North-Central Arkansas. McDaniel rejected the proposal for a number of reasons, including confusion about the amount of money that would continue to be distributed as set forth in current law. "In my judgment, uncertainty may arise in the mind of voters as to whether this summarization of your measure refers to a set dollar amount that was raised in the last year the current severance tax was levied, or whether the 'amount of funds raised under the current severance tax law' refers to the amount that would have been collected by applying the current law rate on each future year's extractions," McDaniel wrote. He said there also was ambiguity in a portion of the proposal that said higher education funds were to be distributed "in accordance with the funding formula for such institutions in effect on the date of this Act," McDaniel said, quoting the proposal. "It appears that the impact of this language is to require future distribution according to the formula in effect on January 1, 2009, and not in accordance with the formula as it may later be amended," McDaniel wrote. "I am uncertain, however, whether this is your intention ...," he wrote. McDaniel must certify the language of the proposal before supporters of the initiated act can begin to collect the 61,974 voter signatures required by July 7 to place it on the November 7 ballot. "We'll still be in good shape well in advance of the time we need to get after the signatures," Nelson said. Gov. Mike Beebe opposes Nelson's measure because it would fund more than just roads improvements, which are estimated to cost $19 billion over the next 10 years. Beebe would prefer to reach a compromise with industry officials, get the support from enough legislators to pass a tax hike, then call a special session to do so ahead of the Nov. 7 election, if Nelson's proposal is on it. However, Beebe said Friday before McDaniel rejected Nelson's proposal that he might initiate his own proposal if it seems that less than the required three-fourths vote of both the House and Senate will support the hike. Some legislators, most notably incoming Senate President Pro Tem Bob Johnson, D-Bigelow, oppose a severance tax increase. Beebe spokesman Matt DeCample said the governor was still trying to have as many conversations with industry leaders and legislators as possible, but that the possibility of an initiated act led by Beebe was still on the table. |
