High Court 4-3, Says Refund Sand Tax: $24 Million

EXEMPTION FOR SAND AS MACHINERY CORRECT; STATE OWES FOUR FRACKING FIRMS

Just when the state’s economic forecasts looks oh, so rosy, along comes a financial hurdle for Gov. Asa Hutchinson’s very tight state budget.

Hutchinson’s form of a balanced budget has been and continues to be a tightrope-walking act.

By his orchestrated tax breaks, by taking millions from such state funding as public libraries, senior citizen centers, UAMS ( the state’s Medical college) and other state agencies, then awarding tax breaks for millionaires and many middle-income Arkansans to fulfill campaign promises.

His plan has not been without sharp critics yelling that “payday someday,” looms down the road.

This fiscally conservative, yet surprisingly generous opening of the state’s pocketbooks, by this administration, did so to simply fulfill a campaign promise in the hopes of stimulating the economy and curtail government growth.

Now the Arkansas State Supreme Court, in a 4- 3 ruling last week, saying some $24 million was collected illegally in taxes and added interest on a judgment, of all things, in sand used in the oil fracking processes.

This $ 24 million- plus, must be refunded to the four major players in what was once a “big deal,” on gas fracking. The state will do so quickly, according to the administration’s budget division. No reconsideration from the high court will be asked for by the state.

As we all know, the drop in crude oil and natural gas prices have dried up most of these gas fracking ventures. Much of the central and north central portions of Arkansas can now only see faint glimpses of the activity seen two or three years ago by these fracking conglomerates.

Gone are the bevy of gas drilling rigs. So are all those jobs that came with the rigs. What remain are the longterm effects of gas fracking; miles and miles of rutted and pitted, pot-hole laced county and state roads.

What the Arkansas Supremes decided was that $24 million and change was due back to these four big firms as this sand was a part of the machinery. The justices agreed that industry deserved a tax break in the complex use of this sand in its processes.

The sands or proponents that are used in these deep injection wells are a part of the process to keep those gas wells producing in the central Arkansas formation known as the Fayetteville shale.

The ruling from the Supreme Court did uphold a Pulaski County Circuit Court Tim Fox’s initial ruling.

A $24 million dollar “hit” to the state budget.

Arkansas already gives the oil and gas interests generous tax breaks on all kinds of industry needs. This ruling on the proppants and sand exposes just how much the tax breaks can cost the state in real dollars.

Add this $24 million to the amount of tax breaks afforded other industry to do business in Arkansas. Weeks ago we offered Lockheed Martin $ 87.1 million over 20 years, about $6 million a year, as incentives. Is it worth it? We will all feel the pinch of paying back these sand funds. We didn’t necessarily feel the benefits from the fracking boom or this $24 million when paid in. Or did we? Sometimes one has to wonder when does a tax exemption really pay for itself?

It seems the Arkansas Legislature is throwing tax break after tax break to attract industry and better economic conditions to the state. Can we stand another $24 million misinterpretation to doing business in Arkansas?

This week the EPA issued a statement paper noting “that while some hydraulic fracturing has contaminated some drinking water sources but the damage is not widespread.”

And in Arkansas this week, we learned that sand is a part of the tax exempt machinery that makes it all possible.