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Talks continuing on severance tax hike, Beebe says Thursday, Feb 28, 2008 By Rob Moritz Arkansas News Bureau LITTLE ROCK - Gov. Mike Beebe said Wednesday that negotiations with natural gas industry executives are progressing and that he is not ready to throw in the towel on a possible March special session to raise the state severance tax. "We're close enough, it's worth continuing to discuss it," Beebe told reporters, though he acknowledged time is running out on calling a special session. The governor said industry executives have "moved a whole lot" in recent days from a proposed tax increase they suggested two weeks ago which Beebe said at the time was unacceptable. He would not discuss details. Beebe said he still aims to forge an agreement before presenting legislators with draft legislation, and wants to call a special session before the end of March, before legislators become engrossed in election campaigns. The filing period for the May primary begins Monday and ends March 10. Earlier Wednesday, Senate Pro Tem Jack Critcher, D-Batesville, said the window of opportunity for a special session was quickly closing. "The governor has said the end of February or the first of March and he's cutting it really close," Critcher said. Passing a severance tax increase would require a three-fourths vote in the House and Senate. Arkansas' severance tax on natural gas is one of the lowest in the nation. At three-tenths of one cent per 1,000 cubic feet of natural gas, it netted less than $700,000 for the state last year. Former natural gas executive Sheffield Nelson of Little Rock has proposed an initiated act to raise the severance tax to 7 percent of market value, which he estimates would generate $60 million to $100 million annually. Beebe said Wednesday he would be willing to provide exemptions to natural gas companies drilling in North-Central Arkansas' Fayetteville Shale play, which researchers estimate will have a $5.5 billion impact on the state economy through the end of the year. The percentage taken under Nelson's proposal would be equal to Oklahoma's severance tax and a half-percent lower than Texas' 7.5 percent. However, the measure does not include exemptions those states allow, such as for more expensive wells drilled and for start-up costs. The governor also said he still might try to get an initiated act on the November general election ballot. Beebe opposes Nelson's plan because it would divvy proceeds of the tax increase among higher education, highway improvements and local governments. The governor wants to earmark an increase strictly to highways. Nelson plans to begin collecting signatures in May in an effort to get his proposed initiated act on the general election ballot. The governor declined to disclose information about his talks with gas industry executives, other than he has met with some and talked to others on the phone. Tom Price, Jr., senior vice president of corporate development with Chesapeake Energy Corp., the second-largest player in the Fayetteville Shale play, declined to discuss specifics of the negotiations. "For now, our public comments on this matter need to be very limited," Price said. "It is critically important that we communicate directly and precisely with others in the energy industry, the governor, legislative leaders and other key stakeholders." John Thaeler, senior vice president of SEECO Inc., a subsidiary of Southwestern Energy Corp., said industry executives "are actively working with the leadership of Arkansas to find a fair solution that will benefit the state but not unduly burden the industry." Industry officials have said raising the severance tax would lower drilling activity. |
