Beebe lays out tax-rise strategy
Posted on Tuesday, January 29, 2008
Gov. Mike Beebe said Monday that legislators opposing his call to raise the severance tax would probably change their minds if he reaches a deal with the major natural gas production companies.
More than 100 firms in Arkansas pay the natural gas severance tax. Beebe wouldn’t say how many would have to sign on to the plan before he will call a special legislative session.
He said it would be however many it takes to get threefourths of the Legislature to agree to it. That’s how many legislative votes would be needed to pass a severance tax increase.
“Obviously, it’s the major players,” Beebe said. “Certain members of the General Assembly say they’re opposed to it. I have a strong belief that a lot of that opposition is based upon the opposition of some or all of the major companies. If you reach a consensus with the major companies, then that opposition melts away.” Permits to pay the tax are held by 150 production companies, the state Department of Finance and Administration said Wednesday. Of those, 132 have paid it.
Major producers Chesapeake Energy Corp. of Oklahoma City and SEECO Inc., a subsidiary of Houston-based Southwestern Energy Co., have said they are open to considering a severance tax increase. Another major producer, Stephens Production Co. of Fort Smith, has declined comment.
The major legislative opponent to the increase is Sen. Bob Johnson, D-Bigelow, an ally of Stephens officials. Johnson, who is to be Senate president pro tempore in 2009, has said he wouldn’t close the door to agreeing to an increase if the industry agrees to it.
Currently, the state’s severance tax on natural gas is three-tenths of 1 cent per 1, 000 cubic feet of gas. That was set in 1957 and, because it’s based on volume, the tax rate doesn’t take into account the inflation of the price of gas since that time. It takes in about $ 600, 000 a year.
Beebe has said his plan would yield at least $ 50 million. He wants it to be used for highways.
Beebe said negotiations are ongoing. If they fail, he said an initiated act procedure is a “really good alternative.” An initiated act that has been proposed would raise the tax rate to 7 percent on the purchase price. It was filed with the attorney general’s office Jan. 17 by Little Rock lawyer Sheffield Nelson, who is a former natural gas utility executive and a former Republican gubernatorial nominee.
Nelson has said this is about the same as Oklahoma’s rate.
He’s said that, unlike Beebe, he wants to spend some of the proceeds on higher education.
Monday, Nelson made public a letter he wrote to Ethics Commission Director Graham Sloan asking about an apparent “real weakness” in financial disclosure rules.
“It appears on the surface that these large companies which have millions upon millions of dollars at their disposal to try to defeat our proposal... may not be held to the same level of accountability that we are,” Nelson wrote.
Sloan said groups forming ballot committees to oppose or support an initiated act must report contributions and expenditures. Individuals who act on their own must do the same.
But he said the law doesn’t specifically address whether a corporation can on its own, without forming a committee, spend money to support or oppose an initiated act without reporting it.
“It’s a fair question,” Sloan said, adding that the commission will research it.
If the wording of Nelson’s proposal is certified by the attorney general, he would then have until July 7 to gather 61, 974 signatures of registered Arkansas voters to place it on the Nov. 4 general election ballot.
The attorney general is to make a decision on the measure’s wording this week.
Nelson said he expects to form a ballot committee next month sometime after he hears from the attorney general.
Supporters of raising the severance tax say the time is right because producers are making money off the new discoveries of natural gas in the Fayetteville Shale formation in north-central Arkansas. They also point out that Arkansas has one of the lowest rates in the country.
Opponents say raising it would send a bad message to business and that there is no pressing need for money in state government. They cite the surplus the state had during the 2007 regular legislative session.
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