Before Mr. Nelson completed gathering the necessary signatures, Governor Mike Beebe called a special session of the legislature to propose his own alternative plan. His plan, which was agreed upon by the gas industry, would not increase the tax as much as Mr. Nelson's plan. His plan introduced lower rates for high cost hydraulically fratured wells and a higher rate for conventional natural gas wells. Producers could also deduct the cost of dehydrating, treating, compressing, and delivering the gas to the buyer from the taxable amount of gas they produced. The proposal also gave a lower tax rate on wells for the first four years until producers made back their costs for the well. To address this issue, the AHTD developed a plan to place new weight restrictions on 133 miles of state highway in the Fayetteville Shale area. These new restrictions were set to go into effect in Febraury of 2010, but before this could happen AHTD announced that they would instead have a public comment meeting before making their decision. After lobbying by the natural gas industry and county judges who didn't want these trucks on their county roads, the list was shortened to 69 miles of highway. This left the AHTD unable to keep up with road damages. During the Legislative General Session in 2011, a bill was sponsored that would remove the lower tax rates for the "high-cost" hydraulically fractured wells but would preserve the lower tax rate for wells that did not produce above the 250,000 cubic feet per day. This bill failed to pass the legislature. During the same session, State Representative Jonathan Barnett (R) , who is now the Co-Chairman of the Oil and Natural Gas Caucus and formerly a State Highway Commissioner, filed a bill that would place an initiative on the ballot for voters in 2012 that would increase the state sales tax by a half cent. It passed the legislature to be able to appear on the 2012 ballot as Issue 1. After the effort to eliminate the exemption for high cost wells during the Session failed, the Severance Tax was challenged again by Sheffield Nelson. He submitted another ballot initiative to raise the tax to a flat 7% for all natural gas wells and for the life of the well. An increase to 7% would have produced about $256 million in 2011 compared to the $59 million that was actually collected. Mr. Nelson's initiative was certified by the Secretary of State's office and he began collecting the 62,507 necessary signatures to get the proposal on the ballot for all Arkansans to vote on in 2012. Mr. Nelson formed the Committee for a Fair Severance Tax. He raised about $163,000 over the course of his campaign to put this proposal on the ballot. His signature campaign was met with strong opposition from the industry. A group called Arkansans for Jobs and Affordable Energy (AJAE) was formed and the President/CEO of the Arkansas State Chamber of Commerce, Randy Zook, was named Chairman of the organization. This group was funded largely by the gas industry and launched a strong campaign against Mr. Nelson's effort to collect the signatures he needed. Over the course of their campaign, AJAE raised almost $2,328,000 with Southwestern Energy contributing $850,000, XTO (Exxon-Mobil) contributing $600,000 and Stephens Production Company contributing $850,000. Most of the remaining $28,000 of support for AJAE was from other natural gas industry companies. The Conway Area Chamber of Commerce (CACC) also helped oppose Mr. Nelson's attempt to gather signatures. In early 2012, the President of the (CACC) Brad Lacy, the Vice President of CACC Jamie Gates, and Faulkner County Judge Preston Scroggin went on a 250 mile, six city tour around the state to urge other local and county leaders to oppose Mr. Nelson's initiative. They traveled on this tour in the brand new Compressed Natural Gas GMC Yukon that was given to the CACC by Southwestern Energy. Many questioned the ethics of the harsh campaign against Mr. Nelson's efforts by so many public officials when Mr. Nelson was simply trying to gather the signatures necessary to allow all the citizens of Arkansas to vote on whether they wanted to raise the tax on this industry. Another group named Stop the Gas Tax AR was even accused of poll intimidation. This group had a place on their website where people could plot on a map where they saw anyone canvassing for signatures for Mr. Nelson's ballot initiative. Mr. Nelson did manage to turn in more than the required amount of signatures, but a large portion were disqualified. After a 30 day extension was granted to gather more signatures, Mr. Nelson announced that he would suspend his efforts to get the initiative on the ballot. Many of the signatures that were thrown out came from a firm that was hired by Mr. Nelson to canvass for signatures. Many who opposed the initiative called for an investigation into the large number of disqualified signatures, which Mr. Nelson supported fully as he knew voter fraud had occurred and he felt that there had been wrongdoings by the canvassing firm he had hired. In October, a month before the election, the AHTD was questioned by legislators about radio ads that were paid for by the Department concerning Issue 1. On November 6th, 2012 during the General Election, voters in Arkansas approved Issue 1 that was filed by Jonathan Barnett and referred to voters by the legislature. This increased the states sales tax by a half percent. Voters approved this tax increase by a margin of 58%-42% with the proceeds of this tax going to highways in the state.
Governor Beebe signing his severance tax plan
State Rep. and Oil & Natural Gas Caucus Co-Chair Jonathan Barnett
Road damage from natural gas activity in Faulkner County
A truck like this full of fluid would be over the weight limit for this road.