If efforts to raise Arkansas’ severance tax on natural gas production prove successful, Gov. Mike Beebe believes the state should divide the money between cities, counties and state government for road improvements.
Arkansas officials estimate that $16 billion will be required over the next decade to cover growing highway needs. The state currently collects 21.5 cents on every gallon of gasoline pumped—a tax source officials suggest will decrease as cars become more efficient and more drivers opt to drive hybrid vehicles.
"We don't need to raise the gas tax because people are having enough trouble with gasoline prices right now," Beebe said in an interview Nov. 3 with the Pine Bluff Commercial. "But the severance tax on natural gas is something that provides us an opportunity to have an ongoing and increasing source of revenue for highways, and hopefully we can talk the Legislature into doing that. If we can't, we may have to go to the people with an initiated act."
Beebe has said he will support a voter-led initiative to raise the tax if voters are unhappy with a proposal by natural gas companies. Sheffield Nelson, former chairman of gas company Arkla Inc., has said he will lead a push to put an initiated act before voters next year to raise the tax to a level equal to Oklahoma. However, instead of road improvements, Nelson wants money raised by the initiative to go toward higher education.
Discussions about the severance tax come as companies explore the Fayetteville Shale, a natural gas deposit stretching across a number of counties in north Arkansas. Arkansas currently charges 0.3 of a cent per thousand cu ft of gas, one of the lowest rates in the nation.
Oklahoma's severance tax is 7% of the gross price. A state report determined Arkansas would have taken in $92 million for the gas extracted from its wells last fiscal year if using that rate.
Beebe said inspection of the Fayetteville Shale is a good opportunity for the state to higher what he called its "pitifully low" severance tax rate.
"It's a huge opportunity and Arkansans are already paying for the Texas and Oklahoma and Louisiana gas," Beebe said. "This mostly would be paid for by people in Illinois and elsewhere where the pipelines ultimately deliver the gas."