Thursday, March 27, 2008

Arkansas Democrat-Gazette says Governor calls special legislative session to pass severance tax

Governor calls special session
Posted on Thursday, March 27, 2008
Gov. Mike Beebe issued the proclamation late Wednesday calling the 86 th General Assembly into special session starting Monday at noon to raise the severance tax on natural gas.
The proclamation, commonly referred to as the “call,” states that Arkansas is “rich in natural resources that enhance the economic well-being” but that they must be removed “responsibly and with the appropriate returns to the people.” Beebe, a Democrat, said earlier in the day that he now has 32 votes in the 35-member Senate to pass the tax and 81 votes in the 100-member House.
The measure has bipartisan support with at least six of the eight Republican senators signaling their support and about a dozen likely House yes votes from GOP members.
The administration has forecast that as much as $ 100 million a year could be received from the tax within a few years.
Beebe has said he wants to put 95 percent of that money toward state highways, and city and county roads. The other 5 percent could go for state general revenue.
The tax now collects about $ 660, 000 a year and is based on the volume of gas extracted. Beebe’s plan would make its market value a factor in the tax rate.
Natural-gas production companies pay the tax and will deduct a proportion of the money royalty owners get from them to help pay the tax. The percentage will depend on the percentage of returns that the royalty owners receive, usually about one-eighth.
Natural-gas experts have said the tax won’t be passed on to utility customers’ bills. Beebe’s plan contains a number of exemptions for new wells and for existing wells with low production. They will pay a rate that will be lower than the new rate but higher than the existing one.
Beebe has said some people wanted a higher tax and some wanted a smaller tax and that the final rate and exemptions in his plan were results of compromise with the industry.
Without that compromise, Beebe has said the tax couldn’t get through the Legislature. Under Amendment 19 to the state constitution, the rate of the severance tax cannot be raised apart from approval by the voters in an election or, in an emergency, by a three-fourths majority of the House of Representatives and the Senate. That would be 27 votes in the Senate, 75 in the House.
There are four other items on the special-session agenda.
One has to do with a marriage law passed in 2007 that left open the possibility that girls of any age could get married with their parents’ consent. Legislators have said that wasn’t their intent. Beebe said he’d like to strike that law and defer the cleanup in the state’s marriage-age laws to the 2009 regular session, which will begin in January.
Another issue has to do with a 2007 law that allows Pulaski County school districts to receive state dollars to offset legal fees if the districts are declared by a federal judge to be “unitary” (meeting desegregation requirements ). The law sets a June deadline, and Beebe would like to extend the deadline to November because a federal judge needs more time to consider the matter. Beebe expects the special session to last no more than three days, which is the minimum time needed to pass legislation and follow constitutional requirements in doing so.
Special sessions are generally short. Governors set their agendas and usually try to seek consensus from the Legislature beforehand to avoid drawn-out debate that could kill legislation and end up being a waste of time.
The longest special session in modern times was during the winter of 2003-04 when education funding was the topic. It lasted 61 days.
Special sessions cost the House and Senate about $ 25,000 a day combined, according to the estimates of legislative employees.
The proclamation’s agenda also calls for appropriations to pay the expenses of the special session and to confirm gubernatorial appointments. Hundreds of appointments await consideration, according to Beebe spokesman Matt DeCample.
Arkansas’ severance tax is three-tenths of 1 cent per 1, 000 cubic feet of gas. Set in 1957, it doesn’t take into account growth in the price of gas, which has greatly increased since then.
Beebe’s tax would be 5 percent on the proceeds production companies get on the sale of the gas, minus the cost of delivery.
Natural-gas industry experts have said the cost wouldn’t be passed on to customers’ utility bills because the price utilities pay production companies is largely set by the national market.
The plan calls for a 36-month reduced rate of 1. 5 percent for high-cost new wells and a 24-month reduced rate of 1. 5 percent for all other new wells. Another reduced rate of 1. 25 percent is possible indefinitely for low-producing wells, new or old.
Beebe announced Friday that he would call the special session.
Information for this article was contributed by Charlie Frago and Michael R. Wickline of the Arkansas Democrat-Gazette.

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