EDITORIALS>>Cooking with gas
So there he was last week promising to lead an effort to require big energy companies to pay a modest severance tax on the gas they siphon from the Arkansas earth and pipe to the industrial centers to the east. When he took office in January he said that was not on his agenda. Weeks ago he said a severance tax actually was a moral imperative but that he was unwilling to lead the suicide effort to combat the political power of the energy companies. It takes a three-fourths vote in each house of the legislature to pass severance taxes and most other business taxes.
Last week, Beebe let it be known that he was talking to the gas executives and telling them they must settle on a severance tax that was comparable to those in other states and help him pass it in the legislature in 2009. If not, he said, he would lead a petition drive to put it on the 2010 ballot as an initiated act. Backroom consensus building was Beebe’s forte in two decades in the state Senate and his leverage is even better in the governor’s office. We have no doubt he can do it.
But 2010? Why wait three-and-a-half years when it could be done easily next year? Find a settlement and offer it to the legislature at a special session whenever one is called or put it on the 2008 ballot.
The settlement should be simple to reach. Severance taxes on natural resources run generally from 5 to 7.5 percent of the fair market value of gas at the wellhead.
Five percent of wellhead value should be a rock-bottom rate. Our current rate (a fixed three-tenths of a penny on each 1,000 cubic feet) is an almost infinitesimal fraction of the lowest rate in other states. If we are competing with other states, our biggest competitor is Texas, from which comes much of the gas that we consume. If the producers there pass on the tax to consumers, we are paying the 7.5 percent tax in our monthly gas bill. Why shouldn’t factories in the Ohio River Valley contribute something to our public schools and colleges when they burn our shale gas?
They should, of course, just as we support the schools of Wyoming when we pay our monthly electricity bills.
Wyoming charges a whopping severance tax on its coal, which is shipped to Arkansas and used to generate much of our electricity. Arkansas alone sends its vanishing natural resources abroad virtually free, apropos a colony rather than a state. There is another consideration. The gas severance tax would enable Beebe to take the other 3 percent of state sales tax off groceries. Generations would rise up and call him blessed.
— Ernie Dumas