Gas firms misleading public, Nelson asserts

He requests SEC to conduct inquiry

— Sheffield Nelson asked the Securities and Exchange Commission on Tuesday to investigate an Exxon Mobil subsidiary and Southwestern Energy, alleging that they have misled the public and their shareholders in the course of opposing an increase in the severance tax on natural gas.

But an industry-funded group opposing the severance tax said Nelson misrepresented its position.

Nelson, the former gas company executive who is behind a proposal to raise the tax, said the companies have funded a misinformation campaign designed to convince Arkansans that gas companies will leave the state if the tax is increased.

At the same time, heargued, the companies have not disclosed any such plans to shareholders in regular filings with the commission - a situation he said implies that the tax is actually not very significant to their bottom line.

“It either gave [Arkansan shareholders] inside information or it perpetuated a lie. Either one is unacceptable,” Nelson said at a news conference Tuesday.

Nelson aims to increase the severance tax to 7 percent on the market value of natural gas when it is taken from the ground. The tax currently varies between 1.25and 5 percent, depending on the type of well and other factors.

In order for the act to be on the ballot in November, Nelson must turn in signatures of 62,507 registered Arkansas voters on his petition next week.

“We have the signatures, and the issue will be on the ballot, take my word,” he said Tuesday.

Some natural-gas companies have expressed their opposition to the measure through Arkansans for Jobs and Affordable Energy, which was created with the aim of keeping the increased severance tax from being passed and is headed by Randy Zook, president of the Arkansas State Chamber of Commerce.

The group has reported raising $1.57 million, with $1.55 million of that coming from three natural-gas producers: XTO Energy, a subsidiary of Exxon Mobil Corp.; Southwestern Energy; and Stephens Production Co.

The group said in a statement that Nelson’s letter was a “publicity stunt” in the final days of signature gathering and that his allegations have no merit.

Zook said he has not claimed raising the severance tax would kill gas drilling or drive companies from the state altogether, but rather that it would make Arkansas less competitive with other oil- and gas-producing states, resulting in less new drilling and fewer jobs.

“Our statements have always been look, this is a wonderful business, it’s had a profound impact on the state. Let’s nurture it and not punish it.”

Asked whether someone could have read the organization’s material and come away with the impression that the industry would abandon the state, Zook replied “not a rational person who knows how to read.”

Lucas Hargraves, a partner at the Markham Group and spokesman for Arkansans for Jobs and Affordable Energy, said the message has notchanged.

“Would the industry leave Arkansas completely? No. But would thousands of Arkansas jobs be put in jeopardy and the gas companies redirect those jobs to states that are competitive? Yes, absolutely,” he said.

But Nelson said many in Arkansas got the message that the industry would pack up and leave if the tax were passed. Arkansans who own shares of those companies might have bought or sold them based on that information, which Nelson said was not widely available outside the state.

“In essence, these multibillion-dollar companies backed a message that was established to defeat us in the election, but could have influence - or did influence - shareholders who got the message along with other Arkansans,” he wrote to the SEC.

“In Arkansas, we’ve been bombarded. In the rest of the country, it’s been a void. I’m saying that’s a problem,” he said.

He asked the SEC to make the companies remedy the situation.

“They should either have to notify all shareholders of their position, if they do plan to leave the state if the proposal passes, or they should have to spend a significant amount of money with the Arkansas news media to correct the misimpression they have intentionally created here,” Nelson wrote.

Jeff Neu, a spokesman for XTO, said raising the severance tax would affect the companies’ futures in Arkansas, but should not require an SEC filing.

“We don’t believe this current debate over a proposal to increase the severance tax merits an SEC filing,” said Neu. “If enacted, a significant severance tax increase would impact our costs to drill in Arkansas, and such costs will be taken into account when making future investment decisions.”

A spokesman for Southwestern did not respond to a request for comment.

A spokesman for the SEC in Washington, D.C., declined to comment.

Northwest Arkansas, Pages 11 on 06/27/2012

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