Leader Blues

Wednesday, May 09, 2007

EDITORIALS>>Excited over gas prospect

From Bentonville to Helena, people are starry-eyed at the prospect of riches from the prospecting for natural gas in what is known as the Fayetteville Shale. Thousands of people are already depositing checks for gas leases, and communities down through the impoverished Delta are investing hope in gas for an economic turnaround. The gas boom is to bring royalty checks, jobs and commerce.

Like all booms from the exploitation of resources, the prosperity will never live up to the exuberant hopes, and there will be as many losers as winners — maybe more. Already, the environmental consequences are becoming apparent in some areas: degraded land, despoiled and vanishing water. Drilling in shale is more complicated than drilling in, say, the Arkoma Basin of western Arkansas and the environmental perils are far greater. It requires unusual technology and millions of gallons of water at every well site. Arkansas has a long and sad history as an economic colony. From the early days of the railroad forward to the Fayetteville Shale, Arkansas’ abundant and sometimes rare natural resources have been mined and taken away with little compensation, leaving ravaged land behind. It is the story of bauxite, oil, natural gas, other petrochemicals, coal and timber. So eager has the state been for development that it has taxed the removal of resources lightly and regulated the exploration weakly. States similarly rich in valuable minerals have done much better. Neighboring Texas and Oklahoma are good examples. Western states have demanded better stewardship.

Severance taxes are only an example but they are symptomatic. Texas, a state known to be extremely friendly to the big energy interests, nevertheless demands a heavy severance tax on the removal of any mineral. You pay Texas a tax of 7.5 percent of the market wellhead price of natural gas pulled from its soil. That pays for environmental regulation and a great university system. What does Arkansas charge? An exploration company does not even notice the tax because it is so invisible. The tax is a grand total of three-tenths of one penny per thousand cubic feet of gas, regardless of the market price. The Texas tax is hundreds of times greater. Every state demands that commercial exploiters pay far more back to the public than does Arkansas.

But the legislature this year did not want to take up the tax while the big rigs were rolling into the state. You might discourage them. Fat chance that they would give up vast riches over a few dollars of taxes. Governor Beebe said he did not want to try to raise a tax at this time. Maybe later. The politically potent Stephens family, which owned vast energy deposits and exploration interests, made sure the tax was virtually non-existent for half-a-century while all the exploration occurred. Things have not changed.

Our pollution and mining laws were largely written in the 1950s. We need a thorough and thoughtful environmental code to protect landowners and the general public. The only effort in the legislature that just adjourned was to actually reduce the liability of the drillers and make it harder to sue them for damages to land. Mercifully, it did not pass, but it is the kind of economic regulation that companies have come to expect of Arkansas. Shale gas can provide a modest economic infusion for Arkansas, but we should see to it that it is developed responsibly with a concern for the condition of the land and streams and for the well-being of all the people of the state as taxpayers and stewards of the earth.