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State fiscal office: UA study overestimated economic impact of Fayetteville Shale Thursday, May 8, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - Flaws in the original University of Arkansas study caused an overstatement in the projected economic impact of the Fayetteville Shale play, the deputy director of the state's fiscal office said Wednesday. The UA's Center for Business and Economic Research updated the study in March by upping its estimate to a $17.9 billion economic impact for the state's economy through 2012. Leathers said his criticism would still apply to the updated study because the methodologies were the same. "We do not think that that study was accurate in a lot of areas and that they overstated some of the economic, and particularly the tax, impact," Tim Leathers, deputy director of the Department of Finance and Administration, told members of the legislative Joint Committee on Economic and Tax Policy. Kathy Deck, director of the UA center, said she stood by the study's conclusion. Leathers took issue with the way the study calculated corporate income tax collections from the companies operating in the shale play, saying it attributed all the money to Arkansas. "Well, that's not the way corporations pay their income tax," he said. "They apportion it based on all the state's they do business in." The study showed an income tax assessment of $54 million in 2005 and 2006 one period, but only between $6 million and $8 million of that went to Arkansas, Leathers said. Leathers also said the study's assumption that 83 percent of what employees associated with the gas industry in the play spend would be subject to sales tax was high. "You don't pay sales tax on your rent, your doctor's bill, your house payment and your car payments and all the financing that you do, so they were high there," Leather said. Deck said estimating the tax impact was the most difficult part of the study, but said the center used the best available information to make the best estimates. "We've now had the CEO of Chesapeake come out and say they (the study's results) are going to be so understated as to not even be funny," Deck said. Chesapeake CEO Aubrey McClendon said last month he thought gas companies would spend between $75 billion and $100 billion in the play over the next decade, making the study "completely irrelevant." Leathers said the play has produced a positive economic impact so far and was optimistic about it's future impact. "I hope it grows to be what the study says it's going to be even with those factors taken into account," Leathers said. |
