A proposed increase in the Arkansas severance tax on natural gas will not reduce energy activity in the state, proponents said last week.

Sheffield Nelson, a former gas company executive who unsuccessfully sought the Republican nomination for governor in 1990 and 1994, is pushing a constitutional amendment that would raise the severance tax to 7% of produced value.

Charles Venus, a former economics professor at the University of Arkansas, said the current tax rate is too low.

Natural gas producers can easily afford higher tax bills, Venus said at a news conference in Little Rock.

“It’s a pittance to these companies,” he said.

The current severance tax rate ranges from 1.5% to 5%, based on how long a gas well has been producing and other factors. Exemptions for treatment and transportation costs lower the rate for many producers in northwest Arkansas.

Nelson, who is leading a petition drive to put a severance tax amendment on the November ballot, said the higher rate would bring in an additional $155 million a year.

“ExxonMobil makes that in profit in less than one-and-one-half days,” Nelson said at last week’s news conference.

The higher tax is opposed by the State Chamber of Commerce, which said it would result in companies opting to explore for gas outside of the state.

Nelson needs to obtain 62,000 valid signatures of registered voters to put the measure on the November ballot. The effort is endorsed by the Arkansas Municipal League.

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