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Special session chances dwindling, House-speaker elect says Saturday, Feb 9, 2008 By Doug Thompson Arkansas News Bureau FAYETTEVILLE - Every day that passes without a specific proposal on the table, chances become less likely for a special legislative session to raise the state severance tax on natural gas, the House speaker-elect said Friday. Gov. Mike Beebe has raised the prospects of a special session, possibly in early March, if a broad consensus could be reached among lawmakers on increasing the severance tax rate, which is among the lowest in the nation. But Beebe has not offered a particular proposal, which makes reaching consensus difficult, House Speaker-elect Robbie Wills, D-Conway, told the Fayetteville Political Animals Club. "This is like selling a car and being asked 'What kind of car is it?' Well, I don't know. 'How much does it cost?' I don't know. 'What's the make and the model? What color is it?' I don't know," Wills said, responding to a question about the severance tax. Former natural gas executive Sheffield Nelson has a submitted to the state attorney general a proposed initiated act that would raise the severance tax from three-tenths of a cent per 1,000 cubic feet of gas produced to 7 percent of the market value. Nelson wants to put the measure on the November general election ballot. Beebe, who wants proceeds from a severance tax increase earmarked exclusively for highways, opposes Nelson's proposal because it would divvy the money among higher education, roads and city and county aid. Beebe and lawmakers have discussed the possibility of a special session before an initiated act on the severance tax could make the November ballot. The governor has said lawmakers want any special session to be held ahead of the state election season. The week-long filing period for state and district offices begins March 3 and primaries will be held March 20. Wills said Friday he knows the governor has met with gas industry representatives and is working on a proposal, and that lawmakers have discussed their own ideas among themselves. But, so far, no one has come forward with a detailed plan that takes all factors into account, he said. For instance, Nelson's proposal would set the tax rate at the same level as Oklahoma. "However, that state also has a lot of incentives for exploration," Wills said, adding that the full 7 percent tax does not kick in until the company that opened the gas field recoups the expense of finding and developing natural gas. "We're looking at a rate of 2.5 to 3 percent," Wills said of House members. "It might be higher." Wills, elected in January to lead the House in 2009, said he agrees with Beebe's insistence that additional severance tax revenue be earmarked for highways. "Higher education has access to state general revenue funds" raised by income and sales taxes, among others, Wills said. "Roads don't have that." In another severance tax development Friday, Nelson said he had responded this week to a letter from a group of royalty owners concerned about how a possible tax hike would affect them. In a letter to Nelson, Beebe and legislators, members of the National Association of Royalty owners said a tax hike would dip into their pockets because gas companies deduct the tax before giving royalty owners their share of the profit. Nelson responded with a letter, saying royalty owners have been getting a free ride from the state because of its low severance tax and that it was time to pay up. "Nobody bought land speculating that natural gas would be discovered, so (royalty owners) are the true beneficiaries of this windfall," Nelson wrote. Royalty owners, like producers, can deduct the severance tax as an expense on their tax returns, Nelson said. An increase in the price for natural gas since October 2007 that has bolstered royalty owners' payments would more than cover royalty owners' tax burden after the increase, Nelson wrote. "Not bad for a person who just happened to own the royalty interest," Nelson wrote. He also dismissed the group's complaint that royalty owners are being taxed twice - once for the severance tax, and again for property taxes assessed for their mineral rights. "It is legal and it is just part of being a citizen of this great state," Nelson wrote. Reporter Jason Wiest contributed to this report |
