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Nelson submits revised severance tax proposal Tuesday, Feb 5, 2008 By John Lyon Arkansas News Bureau LITTLE ROCK - Working swiftly, former gas company executive Sheffield Nelson on Monday filed a revised version of his proposed initiated act to raise Arkansas' severance tax on natural gas. Nelson said the revised proposal addresses concerns Attorney General Dustin McDaniel raised when he rejected Nelson's original version on Friday. "What we filed this morning I truly believe will meet the requirements of the attorney general," Nelson said at a news conference. He is seeking to place on the November ballot a measure that would raise the state's severance tax from three-tenths of a cent per 1,000 cubic feet, one of the lowest rates in the nation, to 7 percent of the market value of the gas at the time of extraction. He said the tax increase - coming at a time when natural gas activity in the Fayetteville shale play is booming - would raise between $60 million and $100 million annually, to be used for highways, higher education and county and city aid. The attorney general's certification is required before Nelson can begin collecting the nearly 62,000 valid signatures needed to get the measure on the November ballot. McDaniel said Friday the wording of Nelson's original proposal was ambiguous about how the money would flow from the gas companies to the state, how it would be appropriated and how much money would continue to be allocated in the current manner. The attorney general also said it was unclear why the proposal stated that the money distributed to higher education would be "supplemental." McDaniel also expressed concern about a provision to distribute higher education funds in accordance with the funding formula in effect on the date of the act. That language apparently would not allow the distribution to change if the funding formula is amended by the Legislature in the future, McDaniel said. Nelson's revised proposal calls for the creation of a fund for severance tax revenue and specifies that the Legislature would appropriate the money. The amount of tax revenue that would have been collected under the old rate would continue to be allocated in the current manner, the measure now states. Nelson said the original proposal described higher education allocations as "supplemental" to make it clear that revenue from the tax increase was intended to supplement existing higher education funding, but he removed that language to satisfy McDaniel's concerns. The new wording also adds that money would be distributed to higher education under the existing funding formula "or such other funding formula ... as the General Assembly may enact." Gov. Mike Beebe has said he is seeking a compromise with the natural gas industry on a tax increase, and has said he'd be willing to call a special session on the issue if there is enough support among lawmakers for an increase to pass. Beebe also has said he wants to spend all the revenue from a tax increase on highways. Nelson said Monday he has not considered altering his proposal to direct all the money to highways, but he said that either his approach or Beebe's would produce positive results if successful. "I am confident from observing the governor and the way he handled the Legislature in the regular session that he will be able to get the Legislature to go along with him if the natural gas companies will come to the table and deal," he said. Natural gas companies should pay their fair share for depleting Arkansas' natural resources, Nelson said. He dismissed arguments that raising the severance tax would discourage gas companies from investing in the state. "They're not in here because they love the state of Arkansas, and they're not going to be here a minute longer than the natural gas is found and they're through with it," he said. John Thaeler, senior vice president of SEECO, Inc., a subsidiary of Southwestern Energy Corp., said in an interview Monday that natural gas companies do see gas wells as economic ventures - and wells that are not going to be economical do not get drilled. "We know that these wells take about $3 million apiece to drill and complete. If you take $3 million in severance tax, that's a well that won't be drilled, and it's an economic impact that won't be seen by the economy there in Arkansas. The royalty owner won't have a well drilled in his area, and he won't be receiving royalty checks," he said. |
