Prominent Arkansas Republican, two-time gubernatorial candidate, and former gas company executive Sheffield Nelson would like to increase his state's natural gas drilling tax.
Arkansas currently levies a 5% natural gas extraction tax, but it offers a discounted rate of 1.5% for the first three years (when about 40% of a well’s production takes place). On top of that, the state also allows a number of deductions in determining the taxable amount. Both of these “allowances” cut into collections pretty severely.
Citing these loopholes, Nelson is proposing a 7% flat rate, with no exemptions. He says the current tax does not fairly compensate Arkansas for the gas being extracted.
According to Pennsylvania's natural gas industry, Arkansas' tax structure was just this side of Eden and should be copied by the Keystone State. Now we know why:
"Nelson argued that during the last 12 months, the severance tax in
Arkansas had brought in about $54 million to state coffers, but had a 7%
rate been in effect with no loopholes, the state would have netted
Lesson of the day: if you are going to enact a natural gas drilling tax (which polls very well with Pennsylvanians), don't fill it with loopholes.