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What severed negotiations? Wednesday, Mar 5, 2008 By David Sanders Word from the governor on Monday was that his on-again-off-again, once-promising-turned-discouraging-then-promising negotiations with the natural gas companies, aimed at producing an "acceptable" severance tax increase, were, in fact, off - again. For Gov. Mike Beebe, an agreement with the industry was indispensable because legislators have neither shared nor understood Beebe's evangelistic zeal for increasing the severance tax. Without an agreement, how could he justify calling a special session and compel lawmakers to take action? He couldn't. Last week, the governor lashed out at skeptical lawmakers, claiming, "They don't know what I know," when a couple of legislative leaders said that an agreement was improbable, thus making a special session nearly impossible. This came after Beebe had been hinting that a deal wasn't far off because, as he said, industry officials had "moved a whole lot." Although on Thursday afternoon, one industry executive who was close to the negotiations, indicated that Beebe was overstating the progress and claimed that they were still a long way off from a deal. That said, for Beebe to suggest he had an informational advantage over some in the legislative branch may have been true, but it was unnecessary, petty and had the undesirable effect of further alienating those whom he had already ignored throughout the negotiating process. But, lawmakers weren't the only ones to feel disadvantaged. A few weeks ago, one gas company official likened Beebe's approach to pointing a gun at the industry and telling them to negotiate on his terms. Their choice: Either face Sheffield Nelson's ballot initiative with a 7 percent rate (assessed on market value) and potentially risk a public campaign in which the natural gas industry would be characterized as being made up of greedy out-of-state companies that are stealing the state's natural resources, or strike a deal on a more palatable increase, get it done legislatively and the industry would retain its untainted image. But when the industry didn't edge closer to an agreement, Beebe went from arbiter to adversary, threatening to go to the voters with his own ballot initiative. Things cooled. But facing the reality Beebe helped create, industry officials wanted to keep trying for a solution. They were slightly hopeful that with a little more work, the governor might begin to see things their way. At least one industry official said the best case would be for Arkansas to copy Texas' treatment of the Barnett Shale and wave the severance tax for a time for production in the Fayetteville Shale, because drilling here, like there, is capital-and-labor intensive since drillers must go through multiple layers of rock. (Texas suspended the severance tax in the Barnett Shale for 10 years to encourage development and job creation.) Last Wednesday, Beebe signaled publicly he would be open to exemptions in the Fayetteville Shale, but on Friday negotiations broke down. It would be easy to blame the lack of a deal on Beebe's ineffectual and nettlesome negotiating style, which has been, at times, thuggish, but, that wouldn't be entirely fair. His problem isn't just tactical or political - it's economic. When University of Arkansas researchers update and release their study measuring the Fayetteville Shale's impact on the Arkansas economy later this month, it's expected that the numbers will show the natural gas industry has had a far greater impact on the economy than estimated last year. According to previous estimates, from 2005 to 2008 the development has had $5.5 billion impact on the economy and created 10,000 jobs. In recent weeks, an increasing number of lawmakers have become more vocal in opposing a severance tax increase out of concern that strapping the industry that already operates on thin margins with more costs, could lead to a slowdown in exploration and drilling in Arkansas and ultimately push the companies into other states where it would be more profitable to operate. With the threat of an economic downturn looming, lawmakers are now asking why Gov. Beebe wants to punish an industry that is having a positive economic impact by creating a record number of jobs with wages over the state average. With a deal off the table, the governor says he will now focus on a ballot initiative. Apparently Beebe didn't know as much as he thought. ------- David Sanders writes twice weekly for the Arkansas News Bureau in Little Rock and is a host of the Arkansas Education Television Network's "Unconventional Wisdom." His e-mail address is DavidJSanders@aol.com. . |
