MonticelloLive

Day 1 of the First Special Session of 2008

Monday, March 31, 2008

Senator Jimmy Jeffress’ report from the state Capitol with news of Monday’s activities in the Arkansas state Senate.
            The legislature convened in special session Monday, to act on the governor’s plan to raise $57 million next year for highway construction.
            The revenue would come from an increase in the severance tax on natural gas. The governor negotiated an agreement with natural gas production companies on the new tax rate.
            Until now, the severance tax has been calculated on volume. Therefore it does not keep up with inflation. Last year it raised a little more than $619,000, even though the production of natural gas in Arkansas is valued in the tens of billions of dollars.
            Because of the agreement with production companies, the tax is not expected to generate controversy.
            Another reason to expect a smooth session is that the natural gas companies have said they would not pass along the tax increase to consumers, in the form of higher prices. That is because natural gas extracted in Arkansas is generally mixed with gas from other regions.
            It is sold in huge amounts on national markets, where prices are determined by supply and demand.
            The Arkansas severance tax would be five (5) percent on the production value of natural gas, which is less than the rates in neighboring states.
            The rate will be lower for natural gas from older wells, where production is in decline. Also there will be exemptions for riskier new wells, where it takes longer for natural gas companies to recuperate their drilling costs.
            Within five years, the revenue is projected to be $100 million a year. It will be distributed for highway and road programs according to the traditional division, under which the state gets 70 percent, while cities and counties get 15 percent each.
            There are two other items on the call for the special session. One corrects a typo in the law that creates confusion for county clerks, when teenagers apply for a marriage license.
            The other law would extend a deadline in a desegregation lawsuit involving two school districts in Pulaski County.
            From the state Capitol, this is Senator Jimmy Jeffress wishing you a good day.