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Lawmakers in Fayetteville Shale play endorse severance tax hike Wednesday, Mar 19, 2008 By John Lyon Arkansas News Bureau LITTLE ROCK - Ten Arkansas lawmakers who represent districts in the area of the Fayetteville Shale play sent a letter to state House members Tuesday, urging support for Gov. Mike Beebe's plan to raise the severance tax on natural gas. Also Tuesday, House Speaker Benny Petrus, D-Stuttgart, said he hopes to overcome Beebe's resistance to linking a severance tax increase to tax relief for consumers. House Speaker-elect Rep. Robbie Wills, D-Conway, said he and nine other House members sent a letter Tuesday endorsing Beebe's plan to all of the other members of the House. "I have been asked by a lot of legislators what I think," Wills said. "They say, 'Hey, this is your part of the state. What do you think about this?' We wanted to make an effort to explain to people why we were in support of it." Beebe has said he wants to call a special session to raise the severance tax, now one of the lowest in the nation at three-tenths of a cent per 1,000 cubic feet of gas. Beebe's proposal, arrived at through negotiations between the governor and natural gas companies, would set the tax at 5 percent of the market value of the gas extracted, with reductions for some new or expensive wells. Revenue from the tax increase would be earmarked for roads and highways. Wills said he wrote the letter with help from the other signers, Reps. Eddie Hawkins, D-Vilonia; Johnny Hoyt, D-Morrilton; David Wyatt, D-Batesville; Stan Berry, R-Dover; Lance Reynolds, D-Quitman; Nathan George, D-Dardanelle; Jerry Brown, D-Wynne; Bobby Pierce, D-Sheridan; and George Overby, D-Lamar. "As representatives of the area most affected by the consensus severance tax plan, we ask you to join us in supporting this plan," the lawmakers wrote. They argued in the letter that Beebe's proposal is "the best opportunity we'll have in the foreseeable future for a major road program," and would benefit city and county roads across the state, not just in the counties of the Fayetteville Shale. They said the governor's plan would not result in higher natural gas prices for Arkansas consumers, and that it includes exemptions that are not part of the initiated act that former gas company executive Sheffield Nelson has proposed to raise the severance tax. Nelson's proposed initiated act would raise the tax to 7 percent of market value, with no exemptions. Nelson has said his efforts to place the measure on the November ballot are on hold while Beebe seeks to raise the tax through legislative action. House Minority Leader Johnny Key, R-Mountain Home, and state Republican Party Chairman Dennis Milligan issued statements last week opposing Beebe's plan. Rep. Aaron Burkes, R-Lowell, issued a statement Tuesday arguing that the question to ask about raising the severance tax is not whether it will stop gas companies from investing in Arkansas, but how much greater that investment would be if the tax were kept low. "It would be difficult to forecast the scale of that impact without a substantial study, but considering the operating margins of most businesses, it is certainly reasonable to assume that a 5 percent increase in costs for a producer (in a competitive market where not all of the cost increase can be passed on to consumers) will have a large impact," Burkes wrote. Some lawmakers have said they would be more favorably inclined toward Beebe's proposal if it were joined with tax relief for Arkansas consumers. Rep. Keven Anderson, R-Rogers, chairman of the House Revenue and Taxation Committee, noted Tuesday that Arkansas, unlike any surrounding state, charges a tax on sales of natural gas to residential customers. "If that's the argument we're using to raise this (severance) tax, because it's not fair that it's lower than the states around us, then let's eliminate the sales tax on natural gas utilities to the average person out there," Anderson said. Beebe has said he will not agree to any changes to his proposal. House Speaker Benny Petrus, D-Stuttgart, said Tuesday that despite Beebe's statements, he plans to meet with the governor Thursday and ask him to consider modifying his plan. Petrus said he does not have a specific proposal to put before the governor, but he suggested that if annual revenue from a severance tax increase surpassed a cap of, say, $100 million, revenue in excess of that amount could go to general revenue to offset a cut to the natural gas sales tax. "I think it would truly help the people that need it," he said. The state Department of Finance and Administration has projected that annual revenue from a 5 percent severance tax would be a little over $101 million at its peak, assuming a market value for the extracted gas of $8 per million BTUs. "What if the collection is a lot bigger than projection?" Petrus said. "This is based on $7 or $8 gas. What if gas is $10 or $12, and what if this thing is a $300 million deal instead of $100 (million)?" Beebe spokesman Matt DeCample said Tuesday there would not be any excess revenue from raising the severance tax because highway needs would exceed whatever revenue the tax generated. "If we get additional money beyond what is projected for highways, it's still going to highways," DeCample said. |
