Conway, Faulkner County Leaders Hit the Road to Oppose Severance Tax Hike

(Note: A correction has been made to this story. See the end of the story for more.)

City of Conway and Faulkner County government officials, as well as Conway Area Chamber of Commerce leaders, are taking to the road Wednesday to show opposition to a natural gas severance tax increase proposal for Arkansas.  

Conway Mayor Tab Townsell, county Judge Preston Scroggin and, from the chamber, Jamie Gates and Brad Lacy, are scheduled to make a 250-mile trip via a vehicle powered with compressed natural gas. The group plans to stop in Clinton, Conway, Damascus, Fort Smith, Morrilton, Russellville and Searcy to collect resolutions that express local opposition to the tax increase.

Former natural gas executive Sheffield Nelson has filed a proposed ballot measure to raise the severance tax on natural gas from 5 percent to 7 percent. Nelson now has to gain 62,507 signatures by July 6 to get the proposal on the ballot.

Nelson has said the measure is necessary because heavy equipment used by the gas companies has damaged Arkansas roads and highways.

"I’m not saying do away with drilling," Nelson said last month, according to The Associated Press. "I’m saying do what’s fair for Arkansas and make the companies that are destroying this state a little bit at a time pay a fair amount."

Business and government interests, particularly those in central Arkansas’ Fayetteville Shale Play, however, oppose a tax increase, saying it will harm the state’s growing natural gas industry.

"Arkansas has weathered the recession as well as it has almost solely due to the natural gas activity," Scroggin said. "To try to pull an additional $200 million in taxes from Arkansas companies, land owners and small businesses in this economy is foolish by any standard. If passed, it will cost Arkansans jobs and money."

Arkansas legislators raised the severance tax during the 2008 session from three-tenths of a cent per thousand cubic feet of gas to 5 percent of market value. Five percent of the proceeds go toward the state’s general revenue fund. Ninety-five percent goes to roads: state highways receive 70 percent and counties and cities each receive 15 percent.

Nelson’s plan would raise the state’s severance tax to 7 percent and eliminate exemptions in the current tax. As with the current law, 5 percent of the proceeds would go toward the general revenue fund.

Of the remaining 95 percent, the first $20 million would go to a "state street aid fund." The remaining money would go to state highways, counties and cities using the current 70/15/15 formula.

If the proposal makes the ballot, Arkansans would vote on the title in November. 

(Correction: Feb. 1, 2012: In the final paragraphs describing Sheffield Nelson’s proposal, we incorrectly said 100 percent of the tax proceeds would go to highways. We have corrected that error.)

(The Associated Press contibuted to this story.)