Gov. Bebee on Arkansas Severance Tax Agreement

Governor Mike Beebe announced today that he is contacting legislators to determine support for an agreed increase of the severance tax on natural gas in Arkansas. The agreement will create an ongoing roads program for Arkansas without increasing natural-gas rates for residential Arkansas customers. Discussions ended yesterday when representatives of the natural-gas industry agreed to Governor Beebe's proposal.

Terms of the agreement include:

• A base rate of 5% of gas-sale proceeds received by the producer.
• A reduced rate of 1.5% for the first 36 months of production on high-cost wells. Well owners who have not recovered their costs after 36 months may apply to the Department of Finance and Administration for a possible extension of up to 12 months.
• A reduced rate of 1.5% for the first 24 months of production on other wells.
• A reduced rate of 1.25% for marginal gas wells that do not meet minimum production thresholds.
• The agreement would take effect on January 1, 2009.

Ninety-five percent of the severance-tax revenue would be dedicated to Arkansas roads, utilizing the current formula of 70% to state highways, 15% to counties and 15% to cities. The other 5% would go to general revenue. By conservative estimates, the new severance-tax rate would generate about $57 million for the State in the first year, increasing each year and reaching the $100 million mark by the year 2013. Governor Beebe is now discussing the proposal with legislators and gauging their support before deciding whether to call a special session. Beebe has said that he will not call a special session unless enough votes exist to pass the proposal.

Videos of Press Event:


Prior Stories: Keeping Arkansas’ Economy Strong: Why Should We Care?
Landowners Benefit From Royalties But Arkansas Gov't Wants More Taxes From Gas Wells

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