Severance tax details | Arkansas Blog

Severance tax details

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-- Brian Chilson photo

Gov. Mike Beebe's severance tax news conference is beginning.

Give me the kewpie doll for predicting yesterday that the agreed-on tax rate would be 5 percent of market value, up from a tiny fraction of 1 percent.

The tax would only be 1.5 percent for the first 36 months on "high-cost" wells. We're awaiting more details on the definition of that. Gas companies could got another year of the lower rate if they haven't recovered drilling costs in the first 36 months. (With gas at more than $9 per mcf, they should.)

Big point: All other wells, not just the "high-cost" variety, will get the 1.5 percent lower rate for the first two years of production.

Minimal production wells would be taxed at 1.25 percent of value.

For wells in production more than three years, the full rate would be applied.

The rate increase would take effect Jan. 1. Predicted revenue: $57 million the first year, rising to $100 million by 2013. The tax currently nets about $600,000.

Who'd benefit? 95 percent of the money would go to state highways and city and county roads. 5 percent would go to the general fund.

We'll update with the governor's comments on legislative reception.

Early nominee for Arkansas of the Year: Former gas executive Sheffield Nelson, whose threat of an initiated act put these talks in motion. Beebe deserves a nomination, too. He was perhaps singularly qualified for the sort of lobbying interaction and legislative skills necessary to bring this deal near possible passage.

The deal is not done, of course. If the Republican Party decided to throw up a unified anti-tax position, they'd need to add only Death Star Bob Johnson to block the three-fourths needed in the Senate. But with Northwest Arkansas crying for highway and local road money, the Republicans would be fouling their own mess kit.

Beebe says he won't call a special session unless he has the votes. He said the industry had promised to help persuade legislators. If it happens, it will be the end of March. He said he hoped to keep the session short, but it might include a proposal to clean up a botched effort to fix the state's minimum age to marry.

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