Nelson promises severance tax initiative | Arkansas Blog

Monday, February 7, 2011

Nelson promises severance tax initiative

Posted By on Mon, Feb 7, 2011 at 10:42 AM

As predicted here Friday, former gas executive and political candidate Sheffield Nelson announced this morning an initiative campaign to put a 7 percent gas severance tax on the 2012 general election ballot. You can read a summary of the proposed act, along with some background information here. Nelson also provided the text of the proposed "Natural Gas Severance Tax Act of 2012." The increase — Nelson said his tax would produce five times the roughly $50 million a 2008 increase produced annually — would go to state and local roads.

Is the Nelson announcement a ploy to encourage the legislature to improve the 2008 increase — which gave away far too much in cost recovery and allowances for old wells — as a compromise to a potentially much more expensive tax in the initiative? That worked in 2008. In the anti-tax era of 2011, it seems a long shot. Let's have a vote. The gas lobby is hard at work already compiling figures on their economic benefits and states with lower tax burdens. Will they move their operations from the shale to save a few pennies that are passed along to purchases already? They will not.

Matt DeCample, a spokesperson for Gov. Mike Beebe, said the governor had received a copy of the act from Nelson. "The governor has been talking with some legislative leaders and they're looking at some things that might be able to be done within the current law, some changes that might be able to be made. So that's where the governor's focus is right now. Like [Nelson] said in the press conference, it's a marathon not a sprint, so we'll see where everything's at after the session."

Nelson said he'd contribute to the cause, but didn't mention a specific amount he was willing to spend. He said the current tax fluctuates depending from 1 to 5 percent, depending on givebacks on types of wells, and that his proposal would put Arkanas in-line with such major producers as Texas and Oklahoma. He said companies are lined up to drill here and an increase wouldn't discourage activity. He said he's pitched his idea to legislators for the current session as a way to address highway construction needs.

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