Arkansas’ higher severance tax on natural gas that will be levied beginning Jan. 1 is expected to generate $20 million in the final six months of fiscal 2009.

Kim Arnall, assistant director of fiscal services for the Bureau of Legislative Research, told legislative transportation committees last week that the tax should bring in $73.6 million in fiscal 2010, the first full year of collections. Arnall said severance tax revenues should increase to $101.5 million in fiscal 2015 before declining to $96.9 million in fiscal 2017.

The Legislature increased the state’s severance tax on natural gas in March from $0.003 per 1,000 cubic feet of gas, where it had been since 1957, to 5% of the price that production companies receive when the gas is sold. The volume-based tax currently generates about $600,000 per year.

Natural gas severance tax revenues are dedicated to state, county, and city transportation needs.

The Arkansas Highway Department will get $12.9 million from 2009 collections, with cities sharing approximately $2.8 million and counties another $2.8 million. The remaining $1.6 million will be allocated to general state government operations.

The Highway Department will receive $47.4 million in fiscal 2010, with cities and counties sharing separate $10.1 million pools. The department’s share will be $65.5 million in 2015, with $14 million for cities and $14 million for counties.

Little Rock can expect to receive $290,139 as its share of the new tax in fiscal 2009, $1 million in fiscal 2010, and $1.5 million in fiscal 2015.

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