Sheffield Nelson: Beebe's Proposal on Severance Tax 'Acceptable'

by Mark Hengel and Gwen Moritz  on Tuesday, Mar. 11, 2008 2:25 pm  

Sheffield Nelson says that a tentative agreement between the government and natural gas companies in Arkansas is "acceptable" to him.

Sheffield Nelson, a past Republican candidate for Arkansas governor and former natural gas utility executive, said Tuesday afternoon that a tentative agreement between the government and natural gas companies in Arkansas is "acceptable" to him.

Earlier Tuesday, Gov. Mike Beebe announced that he representatives from several natural gas companies doing business in Arkansas had agreed on a plan to raise the state severance tax to 5 percent of market value.

The proposed plan would have to be approved by the state Legislature in a special session that could take place by the end of the month, the governor said.

Nelson had been working on his own proposal, an initiated act to appear on the November ballot. His plan called for a 7 percent tax rate.

Nelson told ArkansasBusiness.com on Tuesday that he would put his petition drive on hold until he learns whether Beebe's proposal makes it into law.

"Yes, it's acceptable," Nelson said of Beebe's proposal. "Even though [Beebe and I] had some minor disagreements ... neither of us ever lost sight of the main goal, which was to get a major increase in the severance tax this year."

But Nelson said he and his supporters will continue preparing to gather signatures in case Beebe's proposal does not pass.

"We've got everything geared up and ready to go for May 20," Nelson said.

Primaries for state offices will take place May 20, and Nelson said he is confident his supporters could use the day to collect the 70,000 signatures needed to put the measure on the November ballot.

What About Royalty Owners?

Jonathan Dismang of Cabot, a Republican candidate for the District 49 House seat, wrote a commentary for Arkansas Business in February on the severance tax, particularly what royalty owners might face if the tax were increased.

On Tuesday, Dismang said that while he hasn't seen the full details of Beebe's plan, he likes what he's heard about it so far when compared to Nelson's plan.

"I like that he worked with the gas companies and that they will be provided a lower severance tax rate in Arkansas than the surrounding states," Dismang said in an e-mail to ArkansasBusiness.com. "That should help keep the needed incentive to drill the Fayetteville Shale before other formations."

But Dismang said he is still concerned with "how Little emphasis has been placed on the royalty owner and the royalty owner's stake in the severance tax increase.

"Almost nothing has been done to recognize that these individuals will be bearing an estimated 20 percent of the severance tax burden," he said. "Unlike the gas companies, royalty owners will not be able to pass this tax on to anyone else. Hopefully the governor plans on allowing the royalty owners the same incentives? I will also be waiting to see if any provisions have been or will be made to allocate a certain amount back to the impacted areas."

 

 

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