By SARAH CAMPBELL
Leader staff writer
Sheffield Nelson, the driving force behind an initiative to raise the state’s severance tax on natural gas from 5 to 7 percent, told Sherwood residents that Arkansans deserve to recover more than $455 million in damage to roads.
He was the speaker at the city’s chamber of commerce luncheon on Thursday.
Nelson, a former natural gas company executive and candidate for governor, said the hike would not discourage the development of oil and gas fields or affect employment prospects.
“We will not lose jobs. Jobs aren’t leaving natural gas. These companies are here to stay. They’ll find no better prospects than here in central and northwest Arkansas. They’re making money hand over fist,” he said, adding that the average drilling time is eight days, compared to as many as 150 days in other areas.
Of the current tax, Nelson said, “(What is being generated now) will barely cover your interest on $455 million to get started on roads.”
The 5 percent tax is designed to generate about $100 million a year.
Nelson said after the luncheon that thousands of signatures have been gathered to put the measure on the November 2012 ballot as an initiated state statute.
July 6 is the deadline for about 62,000 signatures he needs and Nelson didn’t seem worried.
He said if that goal is not reached, supporters are allowed one more month, but they wouldn’t need it.
Nelson said the plan would mandate that 70 percent of revenue from the severance tax go to the state Highway and Transportation Department, while the remaining revenue would be divided among cities and counties. The proposal would also create a $20 million fund to go toward repairing city streets.
He also warned that a lot of misinformation is being circulated.
“Look at who is saying what and remember I have absolutely no reason to lie. I understand this business. I have no reason to distort. I do want to help the state of Arkansas to get this problem addressed,” Nelson told the chamber luncheon.
That $455 million in damages to roads is a figure from 2010, he said.
“The number has been going up since then. (Gas companies, the state chamber of commerce and others are) trying to make it complex and convoluted. The real issue is we’ve got damages taking place. Do we make the companies that are making billions of dollars, that’s with a B, pay fair severance tax, similar to other states? Or do you let them pay a penance and leave? They will leave the state when they drill this gas out. When they leave, who do you think pays for it? These damages are being done and they will continue. If we stick tight to where we are today, it will be the good old taxpayers footing the bill. What we make (the gas companies) pay is what they’re going to pay. (Other states) are making at least three times what we are,” Nelson said.
Arkansas gets most of its natural gas from Texas, Louisiana and Oklahoma and pays their severance tax rates of 7 percent or higher.
He said, “The funny thing about this natural-gas severance tax this is that some of the people, particularly the state chamber, are trying to act like this is a new thing. There is nothing further from the truth.”
Nelson explained that he was involved in changing the severance tax from three-tenths of a cent in 2008 to the 5 percent Arkansas has now.
“To go from three-tenths of a cent to a percentage, to any percentage, was a big jump because it set up our future for doing something like what we’re trying to do today. I can assure you that this is going to be a difficult task, but I think it’s going to be one that can be done,” Nelson said.
He also criticized a poll by Talk Business and Hendrix College showing that 55 percent opposed the measure. The poll claimed that 28 percent supported it and 17 percent said they didn’t know.
“You can get any answer you want by asking the right question. If the 7 percent severance tax proposed by Sheffield Nelson would cost jobs in the shale area, would you be in favor of it? Of course you’re not going to be in favor of it,” Nelson said.
But he praised the Arkansas Municipal League for supporting the proposal.
