A settlement is still possible.
That’s the take of Sheffield Nelson,
who called me back this morning with his reaction to Gov. Mike Beebe’s
statement Monday that negotiations appeared to be at an impasse with major gas producers on legislation for an increase in the severance tax on natural gas. Nelson is the former gas company executive who’s taken on the cause of pushing an increase in the severance tax for road building and colleges, by initiative campaign if necessary.
Nelson’s thinking: “I don’t think the gas producers can afford to stay there. They can’t afford to be at odds with a popular, effective governor for seven years. The governor can make it very difficult on companies drilling in the Fayetteville shale. … They don’t want that fight. I believe they’ll come back and settle.”
Talks apparently broke down because of a difference over how long production from new wells would be exempt from a new severance tax. The gas companies want an exemption well beyond their typical pay-back period on a well. There’s a widespread belief that a subsidiary of Southwestern Energy, the biggest player in the shale, has been the major impediment to a settlement.
Talk of an initiative campaign, with a stiffer tax than Beebe is now offering in private, might bring gas producers back to the table. Or they might calculate that they can beat an initiated act. But they’d have to spend a lot of money to do it. And they can count on a strong campaign for a tax from the highway lobby, the Municipal League and the Association of Arkansas Counties, a formidable alliance. The relative handful of generally lightly populated counties that are seeing a job boom from gas production might be friendly to gas companies in such an election, but these are also counties seeing the environmental and road costs of exploration. Also, the tide of exploration hasn’t lifted all boats in those counties. Some people have been left out entirely – or sold out cheap early – and have gripes against the gas companies.
Interesting politics, in short.