Official quashes plan to raise tax
Posted on Tuesday, December 18, 2007
Attorney General Dustin McDaniel has nixed a draft of a fledgling group’s proposal to increase the state’s severance tax to pay for a variety of causes.
Formed in April, the group of about five people calls itself the Campaign for Comprehensive Legal Reform. The chairman is Kerry Hicks of Oden, who said he sells “natural products” such as moss and vines to Rich Mountain Natural Products of Mena.
Hicks said his group plans to resubmit the proposal to McDaniel this week. He said it’s intended to draw attention to the group’s other proposals, which would, among other things, waive the state’s sovereign immunity under certain circumstances and limit the disciplining of attorneys under certain circumstances. McDaniel also rejected the initial versions of those proposals.
The severance tax proposal would levy a 7 percent tax on the market value of natural gas “at the time and point of severance.” Hicks estimated the proposal would raise about $ 90 million to $ 100 million a year for the state.
Arkansas took in $ 619, 417 from its severance tax on natural gas in the past fiscal year. The state’s tax rate is threetenths of 1 cent per thousand cubic feet.
The proposal would divide the tax proceeds among counties for roads or facilities and “general purposes”; state highways; the Department of Human Services for child protective services, facilities and foster-care services; and the state to pay for civil judgments, lawsuit settlements or reparations and to combat the environmental impact of natural gas exploration or extraction.
As attorney general, Mc-Daniel’s role is to determine whether the language of the popular name and ballot title accurately reflects the content of the proposal in a way not misleading.
McDaniel said in a letter to Hicks that using the term “reform” in the proposed popular name “gives partisan coloring to the proposal and would be a clear basis for the court to reject your proposed name.” The proposal’s proposed popular name is “The Severance Tax and Expendature Reform Act of 2008.” McDaniel said the ballot title “is wholly deficient in its failure to fairly or completely summarize the effect of your proposed act, particularly with respect to changes in current law, including but not limited to distribution of the proceeds.” He said he’s unable to substitute and certify a more suitable and correct ballot title due to several ambiguities in the proposal’s text. For example, he said a provision for distributing 40 percent of the tax’s proceeds to the counties for roads or facilities is unclear.
Last month, Sheffield Nelson of Little Rock, the former chairman of the board, president and chief executive officer of the biggest gas company in the state, said he would lead an effort to put an initiated act on the ballot next year to increase the severance tax to the level charged by Oklahoma.
The former Republican candidate for governor, who was the top executive for Arkla Inc., said his act should raise more than $ 50 million per year, primarily for higher education.
Nelson has yet to submit a proposal to the attorney general’s office for its review, said McDaniel spokesman Gabe Holmstrom. Nelson could not be reached for comment on Monday at his office, home or on his cell phone.
Hicks said he believes that his group could raise enough money to gather enough signatures to qualify its proposal for the 2008 general election ballot, although it has fewer resources than Nelson does. McDaniel would have to certify the group’s proposal before it could start gathering signatures on a petition.
The signatures of 61, 974 registered Arkansas voters must be turned into the secretary of state’s office by July 7 to get the proposed initiated act on the Nov. 4, 2008, general election ballot.
Gov. Mike Beebe, a Democrat, has said he’ll back a voter-led initiative to raise the severance tax if natural gas companies don’t come up with a proposal they’d support in the 2009 legislative session.
John Thaeler, senior vice president of SEECO Inc., a subsidiary of Southwestern Energy Co., said industry officials are discussing the severance tax issue. “We are looking at all the options,” he said.
In the Arkansas Legislature, it’s difficult to raise the severance tax rate because the state Constitution requires a threefourths favorable majority in the House and the Senate to raise it. The Arkansas rate has been unchanged since 1957.
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