Sheffield Nelson to lead severance tax increase

Sheffield Nelson picked up where he left off in 2008 by filing paperwork on Monday (Feb. 7) with the Attorney General’s office to lead an initiated act to raise Arkansas’ severance tax on natural gas to 7%.

Nelson is a former natural gas company executive and two-time Republican gubernatorial candidate who has advocated for lower and less taxes. His age-old dispute with gas and financial tycoons from the influential Stephens family is widely and well known.

Currently, severance tax rates range from 1.25% to 5% and include several "loopholes," Nelson noted in this report from Talk Business. Industry officials have complained in the past that comparing state-to-state percentages is not fair as other states offer a variety of exemptions.

Nelson’s ballot title — "The Natural Gas Severance Tax Act of 2012" — would need 62,507 valid voter signatures to qualify for the ballot if it passes AG muster.

"I’m a businessman who believes in doing what’s right from a business standpoint. And that (higher severance tax) is a cost of business. These people should pay a fair amount for removing our gas from the ground," Nelson said of natural gas companies drilling in Arkansas.

His announcement of the petition drive came on a day when Chesapeake Energy, the second largest player in the Fayetteville Shale, said it would sell its Arkansas assets.

Nelson contends that while a 2008 legislative-sponsored increase in the severance tax to 5% was a "major step," he says gas companies in Arkansas are still getting a break compared to surrounding states’ tax rates.

Gov. Mike Beebe called a special session in 2008 for the purpose of raising the severance tax, which required a supermajority of 75 percent of legislative votes in both chambers.

Nelson’s proposal, if approved, would increase the severance tax on natural gas to 7% tied to the market value of the gas. Five percent of the taxes collected would go to general revenues and 95% would be classified as special revenues dedicated to highways.

State highways would get 70% of the revenue with 15% for county roads and 15% to city roads.

Nelson argued that during the last 12 months, the severance tax in Arkansas had brought in about $54 million to state coffers, but had a 7% rate been in effect with no loopholes, the state would have netted $250.1 million.

Calling his 21-month campaign a "marathon," Nelson said he’s willing to commit the "time, energy and money" to get the act on the ballot in November 2012.

He plans to tap 50 county coordinators from his thwarted 2008 effort. Also, he has spoken to legislative leaders about his latest campaign.