The backer of an initiative to raise the severance tax Arkansas charges natural gas producers has appealed to the U.S. Securities and Exchange Commission (SEC) to scrutinize two energy producers for their indirect funding of anti-tax hike groups and what those groups are telling voters.

Sheffield Nelson, a former gas utility industry executive, has tried for years to get the Arkansas severance tax raised. Recently he enlisted the aid of an economist in support of his latest signature-gathering effort to put the tax hike before voters in November. Economist Charles Venus disputed claims by producer-funded anti-tax hike groups that an increase would drive gas production from the state (see NGI, June 25).

Last week Nelson wrote to the SEC arguing that producers Southwestern Energy Co. and XTO Energy Inc., a unit of ExxonMobil Corp. are funding groups such as Arkansans for Jobs and Affordable Energy, and Stop the Gas Tax through contributions to the Arkansas State Chamber of Commerce. The groups apparently are spreading the message that a tax hike would drive energy companies from the state and kill jobs, a message Nelson said is misleading.

“They have been successful in convincing the people of Arkansas that jobs are at risk if they pass our proposed tax,” he wrote to SEC Chair Mary Schapiro. “They apparently feel that there is no ethical problem with their sitting silently by while the general public was being bombarded with this misleading information.”

Sheffield argues that both Southwestern and XTO have invested “significant amounts of money” in Arkansas drilling operations. Any plan on their part to leave the state is material and something of which all of the companies’ investors should be informed, not just the people of Arkansas, Sheffield said in his letter. “They should either have to notify all shareholders of their position, if they do plan to leave the state if this proposal passes, or they should have to spend a significant amount of money with the Arkansas news media to correct the misimpression they have intentionally created here.”

The current severance tax is capped at 5%, but it can be lower depending on the type of gas well in question. The existing tax was adopted in 2008 with the intent of generating $100 million annually. Nelson has said his measure would raise $250 million a year. The Republican, who was a chairman of Arkla Inc. and a former gubernatorial candidate, is now leader of the Committee for a Fair Severance Tax.

Polls taken earlier this year found opposition to the tax hike (see NGI, April 30). Some have said a tax hike would threaten the continued development of the Fayetteville Shale, which the University of Arkansas and Arkansas State Chamber of Commerce recently credited for saving the state from the recession (see NGI, June 18).

XTO spokesman Jeff Neu said Sheffield’s appeal to the SEC is not warranted. “If enacted, a significant severance tax increase would impact our costs to drill in Arkansas, and such costs will be taken into account when making future investment decisions,” he said.

Southwestern, which did not respond to a request for comment, accounted for almost 62% of the 1.073 Tcf of natural gas sold in Arkansas in 2011, according to Arkansas Oil & Gas Commission data. BHP Billiton Petroleum sold another 15.77% and XTO sold 15.30%.

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