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Beebe says severance tax session unlikely, forging ahead with ballot initiative Tuesday, Mar 4, 2008 By John Lyon Arkansas News Bureau LITTLE ROCK - Gov. Mike Beebe said Monday he was stepping up work on a ballot initiative to raise the state severance tax because negotiations with the natural gas industry have so far failed to produce an agreement on an increase that would pass in the Legislature. Beebe said previously he was considering calling a special session in March to ask the Legislature to approve a severance tax increase. "You never give up, but as I stand here today talking to you, the prospects of reaching an agreement do not appear to be very good, and so we've been moving on with other ideas," Beebe told reporters. Beebe had said he would only call a special session if he was confident a proposal to raise the tax would receive the three-fourths vote in both houses required for passage. He said support from the natural gas industry was key, but on Monday he said he and the industry could not agree on terms. The governor said the disagreement centered on the issue of tax incentives. Some states, including Texas and Oklahoma, offer reduced tax rates to natural gas companies in the early stages of exploration, to encourage activity. "Our hangup with the industry was over that issue. I was not willing to go as long as they want to go (with lowered rates)," Beebe said. The governor said he was willing to give the gas companies incentives of the duration they wanted, but only if the companies agreed to a tax rate comparable to that of Texas, which charges 7.5 percent of the market value of the gas extracted, and Oklahoma, which charges 7 percent. The gas companies would not agree to support a comparable tax, he said. "If you can't reach an agreement, you can't reach agreement, and we've always said if you can't, then ultimately it'll be up to the people," Beebe said. Spokespersons for Southwestern Energy Co. and Chesapeake Energy Corp. declined to comment Monday on the governor's announcement. Arkansas currently has one of the lowest severance taxes in the nation. At three-tenths of one cent per 1,000 cubic feet of gas, the tax netted less than $700,000 for the state last year. Beebe would not say how large a tax he plans to propose in an initiated act, but the percentage "might be just a little less than 7," he said. The overwhelming majority of the revenue would go to highways, he said. Former gas company executive Sheffield Nelson is already seeking to gather the nearly 62,000 signatures necessary to place his own proposed initiated act to raise the severance tax on the ballot in November. Nelson has said gas companies exploring the Fayetteville Shale play should pay their fair share for depleting the state's natural resources. He has said that raising the tax to 7 percent of market value would generate between $60 million and $100 million annually. Nelson's proposal would divide revenue from the tax increase between higher education, highways and city and county aid. Beebe was asked Monday if he will ask Nelson to withdraw his proposal. "He has to make those decisions for himself," Beebe said. Nelson did not immediately return calls to his office seeking comment. ------- Arkansas News Bureau Reporter Jason Wiest contributed to this report. |
