MonticelloLive

A new study has dramatically increased the projected economic benefits from natural gas exploration in an area of the state known as the Fayetteville Shale.

Previously, the economic benefits of the natural gas play were estimated to be $5.5 billion from the years 2005 through 2008. It was conducted by the Center for Business and Economic Research of the Sam M. Walton College of Business at the University of Arkansas at Fayetteville

The new study also was done by the business center. It revises the estimated financial impact upward to almost $18 billion over the next five years. That includes the creation of about 11,000 jobs.

According to the new report, in 2007 the market value of gas produced in the shale play was about $651 million. Production last year totaled 88.8 billion cubic feet in the Fayetteville Shale, which is actually not near the city of Fayetteville.

The most successful wells in the play have been drilled in Cleburne, Conway, Faulkner, Franklin, Pope, Van Buren and White Counties. After pipelines are completed and are ready to transport new gas out of state, the area of new drilling activity is expected to broaden.

The shale play should remain productive for 25 to 35 years. Technology has improved the efficiency of new wells, making them profitable at today’s gas prices. However, if the price of gas goes down too much then drilling and exploration are likely to be suspended until the price goes up again.

The Senate Committee on Revenue and Taxation heard details of the economic study during a meeting at the Capitol, in which senators also discussed the potential impact of a proposed increase in the severance tax.

Last year the severance tax on natural gas generated $619,000 in state revenue. It is based on the volume of gas produced, rather than on its value. The governor is proposing an increase in the severance tax that would generate $57 million in 2009 and $100 million in 2013, if the price of natural gas stays at current levels.

If the governor can line up commitments from a super majority of 75 percent of the membership of the Senate and the House of Representatives, he will call a special session of the legislature to consider his severance tax proposal.

Attorney General Warns Payday Lenders
The attorney general has sent letters to 156 payday lending operations in Arkansas in which he warns them to close down or face lawsuits. According to the attorney general, the lenders are violating the state’s constitutional limits on usury.

The letters also instruct the payday lenders to cancel any debt collection activities and to void current and past due debt obligations of their customers.

The attorney general’s office is relying on two recent rulings by the state Supreme Court, in which payday lending practices were referred to as constitutionally suspect because their interest rates are so high.

Consumer groups argue that the payday lending industry will sometimes charge interest rates as high as 300 percent annually. The highest interest rate allowed under the state Constitution is now 17 percent.