LITTLE ROCK — Leaders from the home of the largest player in the Fayetteville Shale play are going on the offensive against a proposal to raise Arkansas' severance tax on natural gas.
LITTLE ROCK — Leaders from the home of the largest player in the Fayetteville Shale play are going on the offensive against a proposal to raise Arkansas’ severance tax on natural gas.
On Wednesday, Conway Mayor Tab Townsell, Faulkner County Judge Preston Scroggin and members of Conway Area Chamber Leadership embark on a tour of economic development organizations across the state to gather resolutions opposing the severance tax hike drive by former gas company executive Sheffield Nelson.
The tour is scheduled for 6 a.m. to 6 p.m. Wednesday, beginning in Conway with stops in Clinton, Damascus, Fort Smith, Morrilton, Russellville and Searcy.
The group will travel in a vehicle powered by compressed natural gas, and stops will include presentation of resolutions opposing the proposed severance tax increase.
“I’ve seen the economic benefit of having these companies here with thousands of jobs,” said Scroggin, adding that raising the severance tax would place Arkansas at a disadvantage within the natural gas industry and hurt the state’s public and private sectors.
Houston-based Southwestern Energy, which owns the largest number of leases in the shale play area in north-central Arkansas, has its Arkansas headquarters in Conway.
Nelson said Tuesday he was not surprised by the road trip and said he was aware that economic development groups in Faulkner County had concerns about his proposed initiated act that would raise the severance tax on natural gas from 5 percent to 7 percent, and exclude current exemptions.
Nelson’s supporters are now trying to gather at least 62,507 signatures by July 6 to qualify the measure for the general election ballot.
“This is a group that has made it known that they are against our proposal,” Nelson said. “If they are going to take that tour, I hope that they do it the fair way and show the damage that has taken place on those roads in that part of the state.”
Nelson estimates the severance increase would generate about $250 million, with the first $20 million going directly to cities for their road needs.
Scroggin said damage by drilling rigs and trucks traveling throughout north-central Arkansas was bad when natural gas companies began drilling in the region in 2005. In 2010, cities and counties began receiving additional funding, generated by the tax increase, to repair the roads, he said.
“This current severance tax … has had a year or two to build up and we have actually had an excellent (road repair) program this past year and a half to two years with the state on fixing these roads,” Scroggin said.
When the Legislature in 2008 raised the severance tax from three-tenths of 1 percent per 1,000 cubic feet of gas to the current 5 percent of market value of the gas, with reductions and exemptions for some wells, 70 percent of the revenue was steered to the Arkansas Highway and Transportation Department, and cities and counties received 15 percent each.
The state began collecting the additional severance tax in January 2009 and the highway department began receiving its share in April 2009.
The state Highway Commission in 2010 authorized the department to use the agency’s revenue from the natural gas severance tax hike only for repairs in the counties impacted the drilling activity.
Through December 2011, the department has received about $91 million in natural gas severance-tax revenues, said highway department spokesman Randy Ort said Tuesday.
“This is money that we have received and that the highway commission has said that we’re going to spend in the Fayetteville Shale area,” Ort said.
He said he did not know exactly how much has been spent on road repairs in the region.
The commission last July opened bids on six highway improvement projects in the Fayetteville Shale area worth more than $8.7 million. Up until then, work had been completed or started on more than 225 miles of highways in the region. The projects were valued at more than $36 million.
A University of Arkansas study in 2007 projected that exploration in the Fayetteville Shale play would produce an economic impact to the state of $17.8 billion and nearly 11,300 jobs through this year. However, the projection was based on a price of natural gas that was twice as much as the price Tuesday of $2.50 per 1,000 cubic feet.