UPDATE: Legislature overrides governor's veto of tax break for fracking business | Arkansas Blog

Wednesday, March 19, 2014

UPDATE: Legislature overrides governor's veto of tax break for fracking business

Posted By and on Wed, Mar 19, 2014 at 1:55 PM

By a vote of 55-41, the House today overrode Gov. Mike Beebe's veto of a $5 million tax break for suppliers of fracking sand and other materials used in the fracking process to drill for gas and oil. 

The Senate followed soon after, voting 26-7 to override.

Here's the House roll call. Though Beebe lobbyists thought there was some hope of picking up Republican support for the governor, it didn't happen. Only Democrats opposed the override. And four Democrats crossed over in support — Stephen Magie of Conway, Mark Perry of Jacksonville, Nate Steel of Nashville and Tommy Thompson of Morrilton. Steel is the Democratic candidate for attorney general, not a particularly hopeful commentary on his obedience to the law, though a clear representation of the Republican belief that tax cuts for industry, no matter the downside, conquer all.

In the Senate, Democratic Sens. Robert Thompson and David Burnett did not vote. Voting no were seven Democrats — Linda Chesterfield, Joyce Elliott, Stephanie Flowers, Keith Ingram, David Johnson, Uvalde Lindsey and David Wyatt.

The tax break declares that sand injected into wells is "equipment" and thus exempt from the sales tax. Stuck into an appropriation bill via special language during the fiscal session, the tax break didn't get the required two-thirds support legally required to take up a non-fiscal matter during the fiscal session. It likely wouldn't withstand a court challenge. 

Speaking for the override, Rep. Stephen Meeks claimed that the special language was merely a matter of providing "clarity" to the law. Meeks noted that he represented the Fayetteville shale area. He claimed that Arkansas tax policies were leading to job losses in the natural gas industry, despite the fact many neighboring states actually have tougher tax laws on the industry. 

There was no debate in the Senate. Afterward, the victorious fracker's advocate, Sen. Jonathan Dismang, said he hoped to "open a conversation" about the role of special language. Sorry. It is hard to credit a promise of a meaningful discussion when the Constitution is so blithely ignored in this case. Those in charge will continue to use and abuse the special language power because they can. I (Max here) also don't much believe the House Republican speaker candidates who talked today of bipartisanship. If they consolidate their power, Republicans will govern ruthlessly according to party dogma. Democrats would be similarly inclined if only they had a cohesive organizing agenda, but they don't. It is the Democrats' strength and their weakness.

UPDATE: The election of Jeremy Gillam outright as House speaker designate from among three Republican candidates suggests strongly that's another bipartisan coalitioni candidate, as current Speaker Davy Carter was. So maybe there's still a chance for some crumbs for Democrats in the House.

See here and here and here and here for more on the fracking tax break and the legal issues brought up by special language shenanigans. 

In short, the Constitution says explicitly that fiscal sessions may only deal with appropriation matters unless the rule is suspended. There is no exception for "clarity." Meeks and other Republicans have cited a court ruling, but that ruling doesn't have value as precedent until reviewed by an appellate court. His implication that fracking activity had somehow declined because of tax policies is, of course, not true. Declining prices because of a gas glut have concentrated activity in the most profitable areas. Nonethless, one major producer recently announced a $900 million investment in Arkansas exploration activity this year.

UPDATE: The Arkansas Citizens First Congress says it is contemplating a lawsuit over the legislation. The Arkansas Public Law Center is also studying the issue. Though the likelihood of eventual passage of  the law is high, the case presents a clear opportunity to challenge the legislature's increasing abuse of special language.

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