Whew! Now that the primary elections are over, let’s look ahead to the big battles in November.
There’s an effort to get an initiated act on the ballot that would increase the severance tax on natural gas production to 7 percent. If it’s successful, folks need to understand a few things before they vote this fall.
No. 1: This is not - I repeat, not - a tax on you, an ordinary taxpayer, unless you own gas royalty on wells that are producing or own a working interest in a gas production company. So it’s important to know it would affect very few people, yet would benefi t everyone in the state.
The goal of the ballot issue is to raise the taxes on the market value of gas, when it is sold to itsfi rst purchaser, from a variable 5 percent to a fl at 7 percent, doing away with the existing exclusions and exemptions the 5 percent rate now enjoys. Currently the tax rules allow for the deduction of the “actual costs of dehydrating, treating, compressing and delivering the gas to the purchaser,” before the taxes are calculated. This allows the citizens of Arkansas the privilege of subsidizing the gas companies’ expenses in doing their business of severing non-renewable resources, which they sell at a profit, of course.
No. 2: In addition to covering these costs of preparing a product for market, the residents arealso picking up most of the tab for repairing the damage done in the north-central counties of Arkansas by this heavy industry.
In all the projections for how great a boost to the economy the natural gas exploration in our state would be, no one seems to have deducted the unpaid damages to highways ($455 million by 2010) or to county roads and city streets from the thousands of heavy truck trips across them.
Also not deducted from the glories of this industrialization are the costs of treating silted water runoff from drilling pads, pipelines and roads that washes into rural watersheds, something small facilities are ill-equipped to handle. And, completely missing, it seems, from the discussions about the grand economic boon from thegas patch is the harm that has been done to tourism in areas such as Greers Ferry, where hundreds of wells have been drilled. Farming, livestock and wildlife losses and harm to the health of individuals in the path of gas operations have also been completely ignored by our state legislators.
Shefteld Nelson, a former gas company executive and chairman of the Committee for a Fair Severance Tax (on Facebook, or call 501-708-7541) has been the driving force for the initiated act.
He believes “arrogance and greed” are playing out in our state at the hands of multi-billion-dollar natural gas companies that moan about a 5 percent severance tax, one of the lowest in the country, when in truth they pay only 1.5 percent during a well’s fi rst three years, when the wells are themost productive. Essentially they are paying 1.5 percent tax for the cream, and fi ve years later may have to pay a 5 percent tax until such time that the well “matures,” when the rate drops further to only 1.25 percent.
Nelson likes to use a “$3-per-thousand cubic feet” example to explain what the cost of a 7 percent tax would actually be on a $3 sale. Working interests (gas companies) would pay about 18 cents on that $3 and royalty owners would pay less than 3 cents. Nelson points out that in 2010 the industry sold $3.6 billion of Arkansas’ gas and took its profit out of state. Arkansas got only $54.5 million in severance tax, whereas if we’d had a flat 7 percent tax, the state could have made around $250 million. That would have made a dent in repairing industry-damagedroads, creating jobs in the process!
The One-Two Punch of a vote to raise the gas severance tax boils down to us, the state taxpayers, deciding if we like paying for the privilege of having an industry make huge money off of Arkansas’ non-renewable resources, while we pay their bills, or if the industry should at least cover their own business and damage costs.
When you see petitioners who ask you to help get this issue on the ballot, please sign so we can all vote our opinions. Or call the number noted above for your own petition.
FRAN ALEXANDER IS A FAYETTEVILLE RESIDENT WITH A LONGSTANDING INTEREST IN THE ENVIRONMENT AND AN OPINION ON ALMOST ANYTHING ELSE.
Opinion, Pages 15 on 05/27/2012