Gas pains | Arkansas Blog

Friday, February 29, 2008

Gas pains

Posted By on Fri, Feb 29, 2008 at 9:13 AM

UCA President Lu Hardin has been trying to arrange a debate between Sheffield Nelson and representatives of major gas producers over Nelson's proposal to raise the severance tax on natural gas.

Not surprisingly, Southwestern Energy, which has been perhaps the least forthcoming of the four major gas producers exploiting the Fayetteville shale, wants no part of public debate. It prefers to put out its talking points in a vacuum. Southwestern's CEO Harold M. Korell wrote Hardin: "As I stated in my comments the evening of the Chamber meeting, 'Southwestern Energy Company and others have been working to propose a plan that would not unduly burden our activities in the play and yet meet objectives stated by the leadership of Arkansas.' We continue to work with others in the industry and elected officials to develop a severance tax proposal that will provide a balanced, fair resolution."

Don't you wish  a consumer could have a seat when the gas companies meet with elected officials? Silly me.

Hardin will continue to pursue others to debate Nelson, assuming the issue isn't resolved by Gov. Mike Beebe's ongoing negotiations with gas producers and some legislators. I keep hearing that the sides are very close to an agreement, believe it or not. We'll see.

Let's guess: a 4 percent rather than 7 percent rate and some sort of forbearance on that rate for recapture of drilling expense. The amount of the forbearance and the time Arkansas has to wait for a meaningful return on the taking of natural resources that other states have assumed as a given for decades are critical issues.

UPDATE: I'm informed I'm too low on my guess, which is good. The rub is the number of exemptions some gas producers want and the uncertainty of how those exemptions might affect the net take. Why not a simple flat tax rate, lower than what Nelson proposed, but with no funny business on the exemption. Let's say 5.5 percent.

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