Columns » John Brummett

In the severance cross hairs



CHARLESTON — Lonnie Turner was so evidently displeased to see me that you might have thought he was a Razorback fan who had booed Texas. But, no, he was an oil and gas lawyer from Ozark, distressed about the imminent rise in the severance tax on natural gas. He spent the next several minutes apologizing for his instinctive and visible revulsion. He had recoiled, as if I were contagious. He needn't have apologized. Honest revulsion can break the ice. I'm not much for pretense. Apparently he isn't either.

This was Saturday evening at the Charleston home of Kriss Schaffer. He is Dale Bumpers' nephew-in-law, a member of the Charleston City Council and a Democratic activist. We were having a social hour before the Charleston Chamber of Commerce banquet. There I would deliver remarks abbreviated by a sentiment I sensed to get finished in time to catch the second half of the North Carolina-Louisville game. Monday would bring the start of Gov. Mike Beebe's historic special session to secure three-fourths legislative majorities to raise the long uncommonly low severance tax on natural gas. This will send the money to state highways, county roads and city streets.

I favor raising the severance tax. As the lawyer for folks in this area of the state with long-time gas interests, Turner doesn't. He seems pretty much to morph me with the governor, which is fine, on this issue at least. Beebe is getting something remarkable accomplished here, something Bill Clinton couldn't, or wouldn't, achieve. With Turner chagrined by any increase, and with a few liberals saying Beebe's negotiated and deduction-laden proposal is so anemic as to be a joke, you have to figure the governor has this one about right. But Turner, who served on Beebe's inaugural committee and calls the governor one of his “all-time favorite people,” says it all hurts his heart. He says he's saddened by what people elsewhere in the state are getting ready to do to a relatively few people, many of them low-income, in this area of the state. He refers to a few counties in hilly and rural west-central Arkansas, all around Charleston. These counties form an old and productive gas basin where, for decades, folks have collected payments from royalties from gas drilling rights on their land or through their mineral rights. This is different from the Fayetteville Shale explosion in north-central Arkansas, which is a new-money boon. These old royalty arrangements, Turner explains, are based on a simple percentage of the net profit at the wellhead — a calculation sometimes encompassing the gas companies' complex small print asserting deductions and expenses, and which the state does not effectively audit. If the gas company pays more in a severance tax, then so does the royalty owner. What this amounts to, Turner argues, is that Arkansas is getting ready to tax common folks in a few sparsely populated and relatively poor counties so that it can build roads elsewhere in the state. It is as if, he says, we raised the personal income tax on a targeted few people, which would be unconstitutional. Turner points out that royalty owners pay incomes taxes, too, on those royalties. He says he's suggested giving the royalty owners a mitigating break, perhaps by exempting a portion of the gas from this severance tax increase, or exempting royalties from the personal income tax, or extending an income tax credit for severance taxes. He says he's gotten nowhere.

I am sympathetic to Turner's surely sincere objections. But I am unpersuaded. Sometimes a policy decision is compelling in broad and general terms even if it treats a few people unequally in its narrow and specific application. But unequal does not mean the same thing as inequitable. A man getting money for gas under his land has an unequal advantage over a man who has no gas under his land. Charging a man a tax for what he has that the other man doesn't is, while unequal, not inequitable. I should mention what a local woman told me Saturday in Charleston. She happened to relate in conversation that she and her husband get gas-well money. So I said I rather suspected she also was hostile to the severance tax increase. Gas on her land was “just a blessing from God. That's how I look at it, either way,” she said. I said let me give you a hug. I think she recoiled a little, too.

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