Arkansas Severance Tax Increase Question (2012)

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The Arkansas Severance Tax Increase Question did not make the 2012 ballot in the state of Arkansas as an initiated state statute. The measure would have raised the severance tax levy on companies for natural gas from 5 to 7 percent. The initiative, proposed by Sheffield Nelson, a former gas company executive and gubernatorial candidate, sought to help fill an estimated $15 billion gap between highway needs and projected revenues over the next ten years.[1]

The tax that was passed in 2008 was designed to generate about $100 million per year, but Nelson argued that that amount of money was not enough for road projects. Sheffield Nelson stated on June 16, 2011 that he was re-drafting his proposal. According to Nelson at the time, the plan would mandate that 70% of revenue from the severance tax would 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.[2][3][4]

Support

The following is information obtained from the supporting side of the measure:

Opposition

The following is information obtained from the opposing side of the measure:

Opponents

Arguments

  • The County Judges' Association of Arkansas stated opposition to the measure.[6]
  • Fifteen Republicans and three Democrats signed the letter urging the Arkansas Municipal League to oppose the measure during January 2012.[7]
  • Faulkner County Judge Preston Scroggin argued: “We’ve grown with the industry and they’ve grown with us. We have a system that’s working now. To go back and do this (raise the tax) is just, to borrow a term, a money grab. It won’t be the boon some think it is.”[8]
  • A rally was held on March 1, 2012 in opposition to the measure, where opponents of the petition drive for ballot placement marched to the Capitol chanting, "Save our jobs."
    • During that rally, Randy Zook with the Arkansas Chamber of Commerce stated: "The reason we oppose this issue is very straight forward. We're convinced, we're certain that it will threaten the existence of hundreds, if not thousands of jobs across the state of Arkansas. It would harm and hinder our ability to compete with other states."[9]
  • According to U.S. Senator Mark Pryor: “With the price of natural gas at an all-time low, we don’t need a big jump in the severance tax to make it more difficult for Arkansas drillers to compete with other states."[10]
  • Arkansas Lieutenant Governor Mark Darr stated: “During “these trying times we don’t want to do anything that is a hindrance to keeping and creating new jobs in our state. We are also very sensitive to our royalty owners who would be affected.”[10]

Controversies

Alleged intimidation

Sheffield Nelson, the main proponent of the initiative, stated during May 2012 that opponents were trying to intimidate signature gatherers. According to reports, Nelson said that opponents were telling signature gatherers to leave polling places during the May 22, 2012, primary election. People wearing Arkansans for Jobs and Affordable Energy apparel, the group in opposition of the proposal, reportedly informed the petition circulators that they were breaking the law and had to leave. No other developments on this event were reported.[11]

Reports and analysis

Reports in favor of initiative

Around June 13, 2012, Sheffield Nelson stated at the time that his plan to raise Arkansas’ severance tax to 7% would make the ballot. At the same time, he stated that his proposal would not deter from drilling for natural gas. Nelson stated such due to economist Dr. Charles Venus' narrative analysis of the proposal. According to Venus's report during that time:[12]

• The jobs produced by the gas drilling would decrease or become nonexistent when all of drilling stopped.

• The 15,000 jobs created by the measure would last as long as the severance tax was implemented.

• Arkansas gas consumers would not pay the tax, because it would not apply to them.

• Opponents of the measure argued that a higher tax would stunt investments and jobs in the state.

• The measure would require gas companies to pay about on day's profits annually to repair roads in the state.

Polls

See also: Polls, 2012 ballot measures
  • A poll was taken on March 26, 2012 asking voters if they would vote for or against the measure if the election was that day. The results of the poll are found below.[13]
Date of Poll Pollster In favor Opposed Undecided Number polled
Mar. 26, 2012 Talk Business-Hendrix College 28% 55% 17% 759


Path to the ballot

In order to get the measure on the ballot, signatures from at least 8 percent of voters who cast ballots in the last gubernatorial election needed to be collected, according to state law. This amounted to about 62,000 for 2012, according to reports. Nelson filed paperwork with the Arkansas Attorney General in order to get the measure approved for circulation. However, Attorney General Dustin McDaniel rejected the proposed measure on February 22, 2011, citing ambiguities in the text of the proposal. Nelson stated that he would revise and re-submit the proposal in the days following the rejection.

During the week of March 15, 2011, after the measure was re-submitted, McDaniel approved the popular title, clearing the way for petition circulation, despite one recommendation to revise the ballot title. In McDaniel's opinion, the Arkansas Attorney General wrote, "Having analyzed your proposed amendment as well as your proposed popular name and ballot title under the above precepts, it is my conclusion that the popular name is sufficient as submitted. It is therefore hereby approved as submitted. With regard to the ballot title, a minor change is in my opinion necessary to make it more suitable and correct."[2][14][15]

Revised proposal

On June 30, 2011, a new revised version of the proposal was filed by Nelson, with the new measure directing an additional $20 million for city street upgrades. The new addition to the proposal was added after Nelson stated he met with city officials across the state, concluding that more money was needed to fix city streets damaged by trucks coming to and from the Fayetteville Shale play area, where a majority of natural gas was produced in the state. In a letter to Arkansas Attorney General Dustin McDaniel: "We are convinced that a true need exists for such funding and proposed to address the problem with this filing."[16]

McDaniel approved the revised proposal during the week of July 8, 2011.[17]

Signature submission and aftermath

According to the Arkansas Secretary of State's office, signatures were filed by the [[Petition drive deadlines, 2012|petition drive deadline. However, supporters of the statewide question were allowed 30 additional days to circulate petitions after it was found by the secretary's office that not enough valid signatures were collected. Organizers had until August 20 to obtain the additional signatures needed, but Nelson stated later that he would suspend his efforts. Therefore, the measure was not placed on the 2012 ballot.[18][19]

See also

References

  1. The Cabin, "Nelson expects to seek initiated act for severance tax hike," January 1, 2011
  2. 2.0 2.1 Bloomberg.com, "Proposal would raise severance tax on natural gas," February 7, 2011
  3. Arkansas News, "Nelson changing tax plan; Municipal League to support," June 17, 2011
  4. Arkansas Online, "Nelson unveils revised tax plan," June 16, 2011
  5. Business Week, "Ark. governor opposes increase to severance tax," April 3, 2012
  6. Todays THV, "County Judges' Association of Arkansas opposes raising severance tax," February 20, 2012
  7. Business Week, "Ark. lawmakers ask leaders to reconsider tax hike," January 12, 2012
  8. Arkansas News, "On the road, severance tax hike foes pan proposal," February 1, 2012
  9. Todays THV, "Increased severance tax fight continues in Ark.," March 1, 2012
  10. 10.0 10.1 Arkansas News, "Top political leaders oppose severance tax hike," April 16, 2012
  11. KY3.com, "Arkansas petition workers claim intimidation," May 23, 2012
  12. The City Wire, "Report: Severance tax rise will not stop drilling," June 13, 2012
  13. The City Wire, "Results differ for Arkansas ballot issues," April 2, 2012
  14. WREG.com, "Arkansas attorney general rejects ballot measure proposed to raise severance tax on nat. gas," February 22, 2011
  15. The City Wire, "Attorney General approves severance tax ballot title," March 15, 2011
  16. Arkansas News, "Nelson files revised severance tax proposal," June 30, 2011
  17. Arkansas News, "AG certifies revised severance tax ballot proposal," July 8, 2011
  18. CBS News, "Ark. severance tax proposal needs more signatures," July 20, 2012
  19. The City Wire, "Organizer to ‘suspend’ severance tax campaign," July 24, 2012