Increase the severance tax | Arkansas Blog

Monday, November 22, 2010

Increase the severance tax

Posted By on Mon, Nov 22, 2010 at 11:41 AM

Sheffield Nelson, the former gas executive and Republican gubernatorial candidate, wrote an op-ed for the Democrat-Gazette over the weekend and has been quoted about the state's need to revisit the gas severance tax, increased at Nelson's instigation in 2008.

The increase wasn't high enough. Revenues haven't met forecasts. State roads are being torn up by drillling rigs.

Coincidentally, Nelson's op-ed follows his recent interview with Ernest Dumas, who's been working on a story for us about the shortcomings of the severance tax increase. It will run in a future issue, but in light of recent items published about Nelson, an excerpt From Dumas' article follows, beginning with a key question: Could this legislature pass a tax increase?

The reactionary political climate, put in stark relief in the general election this month, makes all of those [Blue Ribbon Commission highway tax] options remote. With a legislature dominated by freshmen, most of them pledged to vote against all taxes, the prospect of passing a tax program of any size, much less one of the magnitude the Highway Department says it needs, seems preposterous.

Could the natural-gas severance tax still be the solution?

Sheffield Nelson thinks so. Nelson, the former president of the state’s largest gas-distribution company, engineered the severance tax law in 2008 by starting a petition drive to put an initiated act on the ballot that would tax natural gas production at the rate of 7 percent of the wellhead price, the same rate as Texas, the nation’s No. 1 producer of gas. When Beebe, at the urging of the gas industry and business interests, called a special session to levy a smaller tax, Nelson dropped his initiative effort and supported the Beebe and industry bill.
But Nelson says it is time to make a stab at a real severance tax.

The state needs a big infusion of road revenues, Nelson said this month, and the need is magnified by the immense destruction of roads in the swath of counties in the shale play. Gas producers who are reaping healthy profits from shale exploration, not everyday road users, are the ones who should pay in Nelson’s estimation.

Unlike most other business taxes, a production tax cannot be passed on to consumers because it is not sold directly to the distributor. The tax has to be borne by the producer and, to a small extent, by royalty owners
But no matter if the tax wouldn’t raise consumer prices, the legislature is not apt to pass a severance tax, even one calibrated to pass with a simple majority in both houses. The General Assembly will include 44 Republican House members and 15 Republican senators, nearly all committed to vote against taxes. In that case, Nelson said, he might push again for an initiated act that would produce a better stream of revenue.

He did not regret striking a deal with Beebe to withdraw his initiative petition, and he said the governor deserved credit for passing even the anemic act that taxes gas at a rate far below that of nearly every other gas-producing state. But the state must do better, he said.

Sign up for the Daily Update email

Comments (7)

Showing 1-7 of 7

Add a comment

Subscribe to this thread:
Showing 1-7 of 7

Add a comment

More by Max Brantley

  • Where's the outrage?

    Am I the only person, apart from federal prosecutors, outraged about the criminal enterprise that inveigled itself into a privileged position as an Arkansas taxpayer-financed human services provider to the tune, today, of $43 million a year?
    • Jun 21, 2018
  • Where's the outrage?

    • Jun 21, 2018
  • Rutledge opponent hits her socializing with corporate interests

    Mike Lee, the Democratic candidate for attorney general, has criticized Attorney General Leslie Rutledge over recent reports of her participation at private meetings where corporate interests make big contributions to a political group she heads for access to state legal officers.
    • Jun 21, 2018
  • More »

Readers also liked…

  • Women's March planned in Arkansas to mark Trump inauguration

    Speaking of Donald Trump and in answer to a reader's question: There will be a women's march in Arkansas on Jan. 21, the day after inauguration, as well as the national march planned in Washington.
    • Dec 30, 2016
  • Honeymoon appears over for Sarah Huckabee Sanders, Baghdad Barbie of Trump White House

    The reviews aren't kind for Sarah Huckabee Sanders' honesty as White House press secretary
    • Feb 9, 2018
  • Trump immigration protest at LR: Quick and fierce

    It was not even 24 hours ago that Sophia Said, director of the Interfaith Center; City Director Kathy Webb and others decided to organize a protest today of Donald Trump's executive order that has left people from Muslim countries languishing in airports or unable to come to the US at all — people with visas, green cards,a  post-doc graduate student en route to Harvard, Google employees abroad, families. I got the message today before noon; others didn't find out until it was going on. But however folks found out, they turned out in huge numbers, more than thousand men, women and children, on the grounds of the state Capitol to listen to speakers from all faiths and many countries.
    • Jan 29, 2017

Most Viewed

Most Recent Comments



© 2018 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation