Agriculture, Forestry & Economic Development- House

Yes madam madam chair. Resolution. We're ready when you're ready thank you madam chair make a really easy just want to highlight the effects of duck hunting and water file sports in our state just wanna chance on the floor to get this resolution out there to highlight the economic impact that it has on our state. Are there any questions. Seeing no questions is there anyone here to speak for the bill. Against the resolution. I have a motion on the floor. Any discussion on the motion. All in favor say aye. All those opposed say no. Congratulations your resolution has passed thank you manager. So. I was thinking that. So. So at this point I will take a perfect personal privilege and to avoid any appearance of improper impropriety or conflict I'm accusing from the chair and will take no action voting or otherwise regarding house bill seventeen twenty nine after that bill I will come back and take over the chair. Represented by you're recognized to present HB thirteen fifteen to concur and Senate Amendment this is what the Senate ascus today was to change it to after four years to review the program and after four years decide whether we'll move on or not so I would appreciate it good vote on this concurrence. Are there any questions for representative Vaught with regard to the cement. Anyone in the speak against this for this. What will the committee. I have a motion to concur Senate Amendment all the any discussion. All those in favor say aye. Opposed nay which concurred in the Senate amendment thank you. Now we're going to seventeen twenty nine that's right okay. Representative Bentley. You're recognized to present house bill seventeen twenty nine thank you chairman with your permission like to bring to folks up it with me doctor Jessica Richardson and Frederic Simon the chair of the milk civilization Board. Good morning and happy Saint Patrick's day to you colleagues I appreciate you giving us the time to bring this bill bill before you today I want to say back in nineteen ninety one we had over a thousand areas in Arkansas in Arkansas Code Dearman produce enough milk to provide that for every our cans and. Now we'll look at nine twenty twenty one and we're down to thirty one dairies we're here today to discuss why that's happened what we can do to fix this at the two experts with my doctor Ridge jock doctor Jessica Richardson and Frederic Simon from the milk stabilization board I'm going to just briefly go over this much you guys ask them specific questions but I know that some folks look at things that are going on and say just give up so we can't fix it there's nothing that we can do about it but I know this body when we looked at was going on with our small pharmacies with independent pharmacies we decided we could take on the PBMs and we can make a difference and thanks to the to the legislation that we passed and this body we've seen huge change nationwide I'm here in our state would help to savor independent pharmacists so today I am here today to ask you to help us to be brave to do both and the other others have not done and to help our small dairymen across the state and with that I'm going to give it to Dr Richardson to explain more and then with Frederick to hear his boots on the ground discussion. Please identify yourself for the record and who you're with. Good morning my name is Dr Jessica Richard and I'm director of commodity activities like an economics and a dairy specialist Arkansas farm bureau. Yes thank you. Mr vice chairman and committee thank you for the opportunity to speak today the Arkansas farm bureau Derry Division came together to adopt the following resolution to ensure an ample supply of fluid milk produced by local producers for Arkansas processors we support legislation requiring Arkansas dairy producers be paid on a monthly basis the class one price as established by the federal milk marketing administrator for order seven. This resolution aligns with the purpose of H. B. seventeen twenty nine and therefore Arkansas farm bureau supports H. B. seventeen twenty nine this bill is necessary because Arkansas dairymen are not being paid class one prices which refers to fluid milk for their class one milk instead they are paid a uniform price or blend price which is typically lower than the class one price the difference between these prices is sometimes as high as four dollars and twelve cents per hundred weight. And for context an example is where I. ninety had dairy has lost an estimate of twenty two thousand dollars per year due to this pricing discrepancy this figure could determine whether or not a dairy farmer stays in business can afford health insurance. More hired help or perhaps to send their kids to college. This explains in part why the state of Arkansas has lost over ninety five percent of our dairies since nineteen ninety in nineteen ninety as you can see by the hand on for any and this poster. There are a hundred fifty dairies in the state in nineteen ninety by two thousand five there was only two hundred and seven now in two thousand twenty one they're only thirty five remaining if we would if we want to continue to have milk produced in Arkansas we have to assist our remaining farmers we believe this legislation will help do that. The legislation does not increase the price of milk to the consumer we have three milk processors in Arkansas all three bottle fluid NO for beverage consumption they do not make other classes of milk products I eat cheese ice cream and butter therefore since Arkansas is a milk deficit state meaning that we do not produce enough to me are fluid milk demand. And all of the no process in Arkansas as bottled as fluid milk I E. a class one product Arkansas dairy farmers should be paid for fluid milk prices class one. This bill gives authority to the Arkansas milk stabilization board to ensure a fair price is paid to the detriment of Arkansas for their milk up until such a point that Arkansas is no longer a mill deficit state. It additionally gives the board the authority to make the rules regarding how to ensure fluid milk prices are paid to dairy farmers Arkansas farm bureau supports passage of H. B. seventeen twenty nine and I'm glad to answer any questions you might have. Good morning. Can you identify yourself for the record players and who you're with my name is Frederic Simon and I am a dairy farmer out of the Faulkner County and also currently the chairman of the Arkansas milk stabilization board. I am here today to testify before you on behalf of this house bill seventeen twenty nine which is promoting that dairy farmers receive the full class one price of for the their milk that is produced this is not a tax by any means is not an assessment is not any type of manipulation of terminology coming back to the consumer of the state of Arkansas it is merely a means of pass through money coming from the milk processing plant. Two back to the dairy farmer the money we're talking about is actually calculated through of federal pricing formula is money that we've heard of it does not need to be lost in the transition from the mill plant. To the coop back to the farmer what we're asking is that we just received the the full price of for our milk. for instance of my farm if my mail court to go five hours from here to Kosciusko Mississippi. versus thirty five miles to the highland plant in Little Rock both plans set in the same federal order system. The money should be the same but based on who you are a member of of cooperative wise. And how they handle the distribution of those funds. There can be as much as ten thousand dollars a month increasing income on my farm by going five hours out of state with my milk. That is a significant amount of money in my operation. And again all we're asking to do here is that would who ever you are a member of the cooperative marketing your milk that they all pay the same money to the Arkansas producers Arkansas produce milk. And as you may know I am only one of two Derry's in Faulkner County and only one of thirty farms remaining in the state of Arkansas. And it is very difficult in my profession to you know run my business efficiently with the dying infrastructure. So there again I just merely ask that you can consider supporting this and voting in favor of helping the Arkansas dairy farmers passing this bill thank you. With that we'll take questions from committee members. Members Cavenaugh you have questions for representative Bentley or her witnesses. Seeing none there we have a number of people signed up to speak. For the bill I believe it's up Mike Fisher. See in the room or in the holding area. All right do we have a Bill Haak. I think they're feeling their issues have been spoken for by Frederick so. Dan right. Same. Is the bill that they've been they've been well heard at one repeat the same thing for you guys so okay I've got another name on here I can't make it out so Is there anyone in the holding room that wishes to speak for the bill. I don't believe we have anybody on the on the list here to speak against the bill is there anybody in the holding area or in the an audience that wished wishes to speak against the bill. Scene nine. Okay representative Bentley would you like to close her bill I will chairman thank you colleges like we've seen with the PBMs the unfortunately the co ops that should be assisting our farmers have become monopoly and strangling for dairy farmers and the numbers speak for themselves I can look at my business this year injuring this pandemic my box prices of got nineteen percent my plastic prices have gone up ten percent we can adjust the value what these people are going to be gone so I would love to see Arkansas children to be able drink Arkansas milk and that's really what I'm after is to encourage Davis to come back in our state not only to say this but I would love for us to get back to eight hundred in Arkansas provide jobs provide fresh milk for Kansans and with that I would have to do pass for the bill. What's will of the committee. We have a motion do pass on the on the table is there any discussion on the motion. Seeing none all those in favor say aye. Opposed nay. Congradulations represent Bentley of bills passed thank you chairman committee I appreciate your time. Moving right down the list will move down the house bill sixteen seventy nine representative Hillman are you ready. You're recognized thank you madam chair David Hillman I would like to if I could ask west ward the secretary of agriculture to come up here with me. Please identify yourself for the record. Yes ma'am west for from the Arkansas department of agriculture. I'd like to say this this little built under anything and and the appreciate a good vote and and hammered down but there there are some changes the that have been made and some of our kind of confusing especially if you're like me you don't really understand all the organization I would agriculture department but what basically the reason for this bill is because the transformation that we voted in two years ago and and some of the some of the names have been changed Hendren sites in my mind because it's still like it used to be but I'm trying to get changed and of. There I've read this bill and gone over everything and from what I understand my understanding of the way that court's part worse now these were all necessary changes but I want to make sure they're warm this room is comfortable with what we've done so obvious ways to come up with me and I and we will try to answer all the questions that you don't have about this and we'll take as much time as you need. You're recognized. Thank you ma'am and appreciate representive Hillman running this bill it is mostly just a cleanup language for for the department under the plan industries Division and and to address the the questions that were associated with that you know what we were no no disagreement there that it you know some of that may be it may be read a little confusing but as represent him and said you're this for Donnelly comes from the transformation efficiencies Act of two thousand nineteen there what what this language does is distinguishes between the board eight your eighteen soon to be nineteen member makeup of the board who are not employees of the department the board that makes the regulatory decision enforcement actions purses the employees of the part of our culture that are carrying out the day to day operations or do understand it that it that the language in there could be a little bit confusing but you know it it does make the distinction between more members first employees of the Department. Are there any questions. Seeing no questions is there any. Anyone here to speak for the bill. Against the bill. What's the will of the committee. I move do pass. Is there any discussion on the motion. Seeing no discussion what is the will of the committee all in favor say aye. Those opposed no congratulations your bill is passed thank you madam chair thank you Committee Senate bill four nineteen. Senator Dismang. You're recognized thank you madam chair members for nineteen it it moves about one point eight million lease that's estimate of general revenue in that's on the for and one have meals on gas assessments of the something that we've done now for several sessions and in fact I think you all just considered a bill that was needing some additional funding in it helps fund that program the means fiction program with that we have to take any questions are there any questions is there anyone here to speak for the bill against the bill. With the will of the committee. Motion do pass as any discussion on the motion all those in favor say aye. Oppose narrow congratulations you passed your bill. Senate bill three thirteen Senate are you I don't know it or not is Senator Irvin or somebody presenting this for Senator Irvin representative Lee Johnson you're recognized. Thank you thank you madam chair committee members this is a pretty straightforward bill it simply AS codifies what's already happening practically within the parks division in places The Great Rivers director under the division of parks and tourism doesn't change their functional role or how they support and what they do I just clarifies the the organizational chart I'm happy to try to answer any questions are there any questions. Saying that yes Sir you're recognized representative Coleman. Thank. Is there an amendment there's no amendment it's a different bill The Amendment for different bill. All right is there any. Anyone here to speak for the bill. Against the bill. Are you close for your bill yes Sam Adam Jr and two eight what is the will of the committee motion to pass there any discussion on the motion all those in favor say aye those opposed no congratulations your bill is passed thank you Committee madam chair this bill has an amendment. You. Senator Dismang you're recognized to present your amendment are it yeah this is just add a House sponsors. But is there any questions anybody here to speak for against that but the will of the committee. Motion to pass. To adopt the amendment. All those in favor say aye. Those opposed no congratulations your amendment has passed you may proceed thank you madam chair members senate bill four eighteen allows the Arkansas state parks utilized in it dynamic price pricing for events services and overnight accommodations right now the way it's set up those rates are essentially set out a year in advance of the system to change those are antiquated and I think it's a twenty five percent upper down that they can do right now but again it's not twenty twenty percent but that's not broadly utilized because the way the system is set up this would allow them to actually affects flexibility to change those rates by fifty percent up or down the reason for doing that is is to create some and and really I want to focus on you know decreasing because we want to have more attendance and help those cottage industries around our parks at the full you look utilized year round and allowing them to operate with rates didn't during non peak seasons will hopefully draw some additional families into utilize those parts in addition to when there are peak times allowing that to adjust you know due to market demands are the reasons you want to do that in my opinion is if there is a computing industry out there that does adjust their prices you know of a private entity you know we're competing directly with them by not being able to alter our prices again doing so can help level the playing field to make sure that we protect our a private in the prices. Are there any questions. Seeing no questions is there anyone here to speak for the bill. Against the bill. What's the will of the committee. Motion do pass is there any. As amended represented going as amended. Okay. Is there any discussion on the motion. All those in favor say aye. Those narrow congrats congratulations your bill is passed the measure thank you committee members house bill seventeen twenty five representative back. Thank you for. Representative back you're recognized. Thank you madam chair I I. I served on this committee for six years and now I can tell you those seats are much more comfortable than the seats down here to the table to this point but I appreciate you have I I I I I appreciate you guys hearing this of bill and I want to start out by giving just a little bit of background. So. I want to take you back in time just a little bit there was an act in eighteen eighty five CB nineteen eighty five in nineteen eighty five before that and even the people that are against this bill will testify that as far as paying royalties on gas it was it was pretty much the wild wild west is that how you got Payton who paid and all that so that something needs to be done so on nine nineteen eighty five an act was passed basically what that did was was there's a it's a long act that basically what it did was this it's it's established a timeline that was related to when the gas was produced and when the royalty owner or the property owner should receive gas it also set up. Sort of a common some people call it blending price said on the on the first a of the rule to the first Hey to the gas that came out there was sort of a common price so one person didn't get more or less at. In terms of a price for the gas based upon who they at least with so what kind of blended all of those together and gave a common price and then the last thing which is what we're gonna talk a lot about think you hear a lot of discussion about this today is that it established that. All the property owners mineral right owners should receive one to receiving net proceeds for the first eighth of the royalties so the first Hey of the gas that comes out that well the rule to use paid on that were net. All right now the intent of this was simply this that everyone got paid that it was never intended to be what you were supposed to pay totally or the total are the maximum pay it was the minimum that you should pay that is the intent of not the nineteen eighty five ACT which worked perfectly for thirty five years we went through the whole process everything was fine everyone within the federal shall play. Everything was going fine. Now. The next time I talk about a little bit is of a court case is called the whiz and hot court case it was done and Ben during council it was between it's it's my understanding was point excel come XTO company and a property owner of their. Now the reason that case is important even though it doesn't really it's a federal court it's not a state court it didn't really address this issue some of the terms that were used in that case we're actually used by and I'm gonna use flowers will but some of the other companies that enter the space used some of the comments that were made in that case to determine that the one eighth minimal that was established in nineteen eighty five ACT is not the minimum at all it's what gets paid now why is that significant. That's significant. Because. If you have a lease and you get paid gross at the well head. The difference between gross at the well head and the net price is about any berries it could be anywhere from thirty to fifty percent grouses much higher you're not paying for deductions that that was that so by interpreting the law the way it's been interpreted now changing after thirty five years changing the law after thirty five years hi the wait interpreted now these people can only receive net on the first eighth royalties because of this interpretation this is not a court ruling to decide that this was the way it should be paid this was this was a company coming in and saying this is what the this other court decided so we're going to apply it here we're we're gonna change the rules. That is the first change in this bill if you look at page one of my bill it simply says. It simply adds the language that the role two was meant to be a minimum. A minimal not the actual so by putting that in this bill what that will establishes is that the royalty owners are skews me yeah royalty owners will be paid based upon their lease if they have a gross lease at the well head they will receive gross lease at the well at now the gonna re Seve the net first as established here but then the operating interest that has to lease their lease holds their lease will then pay the difference to get him up to the grout so they will be there delays will be justified now. And that's really pretty straightforward and pretty simple that's the first thing we would do the second thing in the in the bill is this. There was some confusion around. I heard from a lot of constituents on this that. After certain players got into the market that the percentage of on their net leases some operators have net leases that they get paid to but the percentage of costs went up to another what what was being charged against well wind up as a percentage as compared to what it was before no I don't claim to say that that's true or false I'm just saying that that's what was said so the second changes in the bill which is pretty State Street for pretty clear actually what is says. Is that. It deletes the language it's on page three it late the language it says that lawful deductions another word lawful deductions that can be deducted from the gross price to come up with the net these lawful deductions. Said including but not limited to. All federal state taxes levied upon the production and the proceeds I have just struck that language out and I replaced it with some language that says that the lawful deductions as established by the commission which would be the Arkansas will and gassed Commission or a court with competent jurisdiction. So that will help clear this thing up if if there are no unlawful charges being charged against wells this will do little or nothing. The just the same as it was the same as it was for thirty five years the same with the day after now. There is another change on the last page and I'm just corrected very very quickly basically what it says is if you if you're ready to that language it basically says that that it would have to receive your one eight and that that the working interest or stand responsible for making your lease all right if you're if you're lease was gross the working interest would go ahead and pay the difference to make your lease hall as stated guys. We have contracts agreed upon lease contracts that are recorded in our county courthouses that say and you'll hear from some people later today they say that they have twenty they're paid twenty percent gross that's what they agree to that's what the company bought the thing to greet you I'm gonna pay you twenty percent gross at the well head. And they're not getting it because we changed the rules. We didn't change the rules as a matter of fact I don't know of any legislation came for what was going on for thirty five years suddenly got changed all this does is takes it back to where the original intent of the nineteen eighty five. Real Salt Act excuse me at all with that I will keep it short we have several people who want to talk today so I'm going to keep that shorten take any questions that you guys might have. Are there any questions. Representative Coleman. Yes if they have a contract in this recorded. Okay they just take that the court collect the difference Senate there. Why why can't they just do that well it would it would involve taking someone to court over the contract is not as as you know that the the case is that I mean I guess I could you could force every. Person that has a signed contract to go inside this is not but then the company would say well the wise in heart decision hi the in that decision Wallace stated is this so you get into a big ballot and everyone will get into a big battle over what is actually all when in fact for thirty five years this was paid accordingly when I contacted I recently found out interesting enough I recently found out of I am contacted their Reginald one person that originally worked on this drive hi. And when I told them what was happening he says they can't do that thank you so that they they can't cut this is that would be fraud as it is happening. I saw. Are there any other questions. Representative Mickey you're recognized. Thank you senator representative back do you have any idea or Of all the people out there are there a lot of different contracts I mean. The most people have a one eight to the net or whatever and or there's a lot of people that have a gross contract on the well heads. That there I do not have the exact number I have asked the the the are the only gas commission some this means it's less than five percent that have these girls these now that's just what I'm told I haven't validated that number the majority of laces are in fact net leases thanks bye thank you thank you manager are there any other questions representative going you're recognized. So I just wanted to To be clear then so what you're saying and my my understanding this right that the was in the case basically created ambiguity. And so because of that ambiguity that's why you feel that legislation is needed to create some clarity right it in the the clarity in this is that the one I isn't the a minimal it was never intended to be the maximum. and quite honestly they it was operated that way I love my many years the fly will come in I don't mean to but there's the one of the bigger players and all this they bought leases from swim. Those releases that were paid according to the lease flowers will came in using the wizened hot confusion and said none and no more we're you're gonna get your one I know that and like I said I guess you could take on the court as a matter of fact there's I understand I'm not involved with this it doesn't affect this doesn't affect me there is a class action lawsuit right now against fly will are against it might not be follows one of the operators in there for this very reason so I gave good quick follow yes there is a because of the the the wide range of agreements that people have is that what prevented something like a class action suit to be able to solve this. I I'm not a lawyer and I do need to stay at a Holiday Inn express last night. The question I I don't know that the the answer to that question there's gonna be some legal people up here but but I do believe that the other people that have I think the class action lawsuit and I just I've just been told this thing are really the people who have the gross leases saying that that we were denied that but the other thing is the other confusion that we addressing this issue in this in this change in this bill is this what are lawful deductions are not something that the committee should not all is this. The only gas commission. Does work with. Realty owners that have been integrated into a unit are well these are people who are kind of I once I don't want to use the work force but now the only gas impediment and they so they they're very much aware of what these deductions is that deduction should and shouldn't be in there and they really service sort of overseer of sorts for those royalty owners so that this putting them in line with the lease holders with. That would be I think a perfect match for. Rescues me. Representative Brad you're recognized. Thank you madam chair there are no explain as but explain to me again what the wizened hunt decision dead. The thank you the The reason I decision and I'm not it was of in federal court was not a state court decision and. I don't want to give too much information that because I really don't know that I I I was told I was told that it was not a direct decision says you okay you can only pay this body in it is I understand it as I was told there was the judge in that case did make the statement that the one I net. Who was the royalties being paid and that's what's being used now to say that. All the people should be received this one night that. Follows yes Sir so the people that we're getting the one eight to begin with they're still getting the one I so this just yes acts of people that were at the higher. The contract. The first part of the bill that's the second part of the bill you're right that the first part of the bill does just affect those who have girls leases N. or leases that are above the the the one I this is the second part of the bill does address the issue is are the charges the lawful charges deductions that are being used Irvin subtracted from the gross to determine that the net are those that do it just puts a little bit oversight on that and I've heard some people say well you're putting a state agency in charge of of leases you know County injecting them into that that's not the case at all first of all they have a lot of knowledge concerning this issue so that they would be a good source but what the bill actually does is there's there's a second path here. A court of competent jurisdiction if there were if there were some. Charge that were in question you can simply go to court I could simply taken to court and say yeah yes the court would determine this is a legitimate deduction arts not. One more for yes so so the deductions apply to everybody regardless of what level of the session so. That leases the net leases yes okay not not the gross okay okay thank you are there any other questions. Senator Smith. Representative back I appreciate you bringing this bill to the Committee my question focuses on new well drilling in the state of Arkansas I know out in West Texas when a new well is drilled the royalty owners receive a substantial amount of money. From the drilling companies to allow that drilling to take place but how does do you I don't put you on the spot but does your bill have any impact on new well drilling and the way that the people that receive royalties will be paid. I'm not sort of I think there's two questions there it the first one has relate to you. You talked about the pads that the the wells are on so that's really independent of all this those those are typically. Leases where the person laces out a third of the land thirty three acres for certain period time for for that so that's really independent this is far as how this would affect a new well I would so much so much and do well but it would affect new leases right so in a new well would probably have new leases and as the it would establish that if they were net leases it was stabbed is that what the lawful deductions are to be made for that if it were. Gross leases honor then obviously it would directly affected saying that they should receive the one acting that. As a minimum. Are there any other questions. We have several people signed up to speak for and against so first we have a Mr Rodney Baker against the bill. Please identify yourself for the record. And you're welcome to per se. Thank you madam chairman Ronnie Baker with the I. pro Arkansas been provisions royalty owners I'd also like to bring if I may to the table with me Allen Perkins. Sorry my voice is suffering from the allergies allergies of all policies that's fine he can come to the table just recognized himself for the record thank you. Thank you madam chair in my name is Alan Perkins I'm an attorney with the little rock law firm of PP GMR law and I'm I'm here on behalf of the Arkansas independent producers and royalty royalty owners association. To provide testimony in opposition to the bill. Hello welcome to proceed thank you madam chairman First of all would create the opportunity to be here today and and just five on this issue The like to say this is a little bit awkward position for us in the sense that Mr back has been a strong supporter of all gas industry he's worked with us closely we appreciate him and appreciate the support he's gone and the days give us a past and we've never looked for reasons in opposition of Mister Beck but we find ourselves in that position today unfortunately Since. First of the year we have spent considerable time on this issue and the first bill was different than what is involved as you might expect we have met with Mister Becker officers at least three times we've had several board meetings and one of those was solely to meet with Mr back about his bill his concerns and our board is fairly good sized Board of about twelve people it represents all the producing areas all and gas in the state in the state and represent all that borders for your information so the companies are Stephens per production McGill one R. three. XTO flowers will energy merit energy handle and gas J. David Reynolds wider Brown operating mission creek resources token all in gas in three G. energy so. Covers a broad spectrum of Of the companies in different production areas and a different size of companies and. This is a very complicated issue you are a part of that already you gets more complicated when you start plugging in and out circumstances that have happened and our board is look at this state considered it and. Very tough on them to make the vote but they have made vote unanimously to oppose this bill because we think there's none intended consequences and consequences in their there's not a lot insurers. To get were in our opinion to get where Mr back trying to go we understand we're trying to go out at least on on the the main issue of how much is paid on the on the eighth of. We have looked at that in fact Mr Perkins is drafted language that in that we shared given Mr Becht that would move us down the road on this one path we thank the guest of where he wants to go on paying off the leases directly and so but it didn't address some of the other concerns that we would have or he has about you identifying the production because those things are those culture pretty much identified leases so for us their contract situation we do believe in our contracts of we are concerned about unintended consequences and with that. Brief and general information on my part unless Mr Perkins to get into details because he's much. More a proficient that. If it please the chair up little background on myself of an attorney here in Little Rock I've I've practice oil and gas law probably seventy five percent of my practice at the oil and gas commission of virtually every months with multiple applications representative number a number of the industry participants several of whom Mr Baker mentioned earlier. also taught well I guess laws an adjunct professor at the law school this this process of paying a bill ended what we call the statutory one eighth royalty is extremely complicated and if I spent half a day at the law school I couldn't really teach my students how this all works but I'm gonna try to boil it down into about five minutes for you all and you have to understand it's just extremely complicated but I also want to give a little bit of background as to why why do we have this crazy scheme anyway it doesn't seem to make much sense from a just a common sense standpoint so before nineteen eighty five. I think representative back made a humor's comment that it was sort of the wild west on the gas companies did whatever they wanted to I wouldn't quite go that far but it was of it extremely different type of environment or you had a few very large natural gas companies such as T. XO not XTO to different company was was a dominant player in the Arkoma basin at the time they were notorious for this but other owners as well and so they would they would enter into leases with their various landowners. mineral owners and then when those leases were combined included into a single unit which is our regulatory system in Arkansas so a unit normally is a a governmental section six hundred and forty acres within that section or that unit you typically have numerous people who own minerals and they have signed leases with various different companies they don't all sign up with the company who's gonna drill well. Through the integration process all of those people are sort of forced to cooperate with each other if you will because it doesn't make sense for them all to be going out dealing will separately on properties right next to each other so we have this orderly system to do that the oil and gas commission selects one of those the lease owners are working interest owners to be the operator of the unit and that single owner is then the one authorized to drill wells to produce the natural gas. But each one of those companies that owns leases are entitled their their partners if you will in the well and they're entitled to sell their share of gas that comes out of the well even though they didn't really and they're not operating so that it that that could produce really strange results back at that time when things were much different than they are today so in any given month company a they they might decide well prices are very high so we're not going to sell any gas this month and so they're royalty owners didn't get a check that month because they didn't sell any gas but company be then sold their gas and the and the gas that would have been companies a company As gas and they're royalty owners get twice as much as usual and so the neighbors talk to each other and the guiding get it checked is scratching his head going what the heck I didn't get any money and the other guys one man I'm buying a new car I got lots of money this month and so that that sort of inequity and there are lots of things that played into that which I won't go into because the legislature based on the outcry from royalty owners to contradict him up with a uniform system that ensured that every single royalty owner any unit every single month would get a payment from the operator for at least one eight at that time most leases were one eight so for most people that was that was their entire lease but if you if you had a lease for twenty percent then you're the the person you sign a lease with would pay the additional we call that excess royalty so you have the statutory royalty one eight and the excess royalty which is the difference between what you're lease rate is and and one eighth. that's the way it operated but it it takes a lot of work so then the the non operating party who sells their gas every month they would take one eighth of of whatever they received from the sale of their gas and send it to the operator all of those other selling companies would do that the operator basically puts at all in a big bucket and then allocate set out to every royalty owner in the unit equally and the stat the statute which was defined designed to make it uniform had to make a decision do we make that net of expenses or gross of expenses the it and and it was important because any single gas seller isn't going to have leases with everyone in the unit they won't even know whether their leases or gross or net so there had to be a uniform system to do it and the way that the legislature in nineteen eighty five decided to do it was to make it and that. All of that only applies to the first one eight. Whatever deals each individual mineral owner made with their company when they signed the lease that companies responsible under the current law of for anything above or in addition to the one eight that their lease may call for now I want to it the so in Mr Baker mention that the cure for when when we first met with Mr back a couple months ago will what he said over and over was we just we just want everybody to have to to be paid exactly like their leases require. And while the the the industry. Is never happy to change some big administrative system that's been in place for decades we agreed that if that's your goal we need to simply repeal this whole blending system because it's designed to do the exact opposite it's designed to force all of the company's not to pay the way their leases were created but for everyone to blend that for states and have the operator paid out on behalf of all of them. and we we drafted that provided to Mister Beck but he was he was not satisfied with that that their their issues their specific issues with the way this bill has been drafted the the first the worries inserted the minimum it really is is. With all due respect from a legal standpoint sort of nonsensical the sentences talking about gas not royalty so it says one eight the all the gas sold on or after the first day of the next calendar month it's Senator from any such unit shall be considered and used to say royalty gas in other words it's just designating that that one eighth of all of the gas sold we're going to call that royalty gas and then the statute is built around that what of this the house bill seventeen twenty five does is say one eighth of all the gas sold will be the minimum royalty gas to be paid to the royalty owners so actually the way it's written it would make it seem that we would be paying gas to the royalty owners not money so that's just of that that that's a mechanical issue with the the wording of it the second the second change that he made that he talked about well you know there's just a lot of people that think they're they're deductions have gone up or they're not fair that's not right and so we want to we want to make sure that that's the that there's somebody out there who can make those decisions will first of all he said well if you have a lease you can go to court now after this well that's that's what you do now happens all the time I make a living partly in defending those kinds of cases where someone says the the deductions from my lease or not reasonable or they're not fair you're charging me too much whatever it may be that's exactly the way the law operates today but what he's done here is is in this language it says that the the deductions from royalty monies from gas sales is talking about the first one eight computed at the mouth of the well less all lawful directions deductions and then he's he's striking the existing language that says including but not limited. To all federal and state taxes levied upon the production or proceeds now in from a legal standpoint when languages stricken out of an existing law it suggests that that's no longer applicables if it's someone would argue could argue it would argue that by striking this legislature intend has made a decision that federal and state taxes levied on production are not lawful deductions I don't think that's what Mr back intends at all but by striking this language that's that's what certainly some people would argue and then he's in inserted there what I think he intends that the party she intends to be the arbiters of what are lawful deductions and he's name to the commission the Arkansas aghast Commission and courts of competent jurisdiction today courts of competent jurisdiction or already the final arbiters of what people's leases mean that doesn't do anything at all but by inserting the name of a governmental agency there it suggests and and well the commission might say and I see that they have a a very learned representative here he may speak later well that that's not gonna change anything we do the language in the statute which suggests that someone could go before the oil and gas commission and say I want you to tell my a working interest owner what lawful deductions are for my only gas lease that would they wouldn't have jurisdiction to do that if the commission were. Two injured decide regardless of the language in a lease that certain deductions were or were not allowable if it did if it that wasn't contrary to lease it would be constitutional so that they that that whole insertion there it doesn't make sense and it and it wouldn't be workable the the end the end provisions that he's added here that that you told you basically just means that Hey there the the oil and gas companies beyond the one eight if they something beyond the one eight they're gonna have to pay that that's that's the way it works now what it really means is with and it's not stated here is that he he wants to be able to use this so that. Someone could claim that they're working interest owner had to then reimburse them for the lawful deductions that were taken out of the first one eight but that would require a if if if that is the intent and and as it's written I'm not sure it does that but the the administrative burden of working this kind of action it already requires all of those companies to sell gas to send their first one eight to the operator that's a whole accounting system mechanism that they have to do every single month and then that same outside working interest owner if they have excess leases have to cut a second check to their own royalty owners for the difference now we're adding another layer so they would have to send the first one a to the operator the operator believes that with everyone else this operator over here or working interest owner they don't even know what that total final amount is because it's blended from a bunch of different other working interest owners and paid out as an average so then the operator after they pay that then they have to do another whole statement send it back out here to the working interest owner they would have to compare that against what they're already intending to pay and make up any difference and sometimes that would be a negative difference because. If this working interest owners selling their gas for two dollars and this one over here selling their gas for three dollars the blended amount that that royalty under god's going to be two fifty is seeming that they were equal so it could be that the royalty are actually got more than they were entitled to so when it goes back out here to the working interest owner they might deduct from their payment because that's what they would have to do to actually technically comply with their lease it's an extremely complicated costly administrative system I can tell I don't have the exact numbers but let me give you an example for fly wheel these are approximate they have of their own people that they actually have leases with approximately twenty three thousand mineral owners and several a number of them have multiple oil and gas leases and then when you apply those to all the wells in the field there are about between four hundred fifty five hundred thousand interests that are paid on each and every month just to their royalty owners so when you're talking about combining everyone together and making an additional step in this accounting process it's extremely burdensome on the industry if this bill needs to be fixed so that everyone gets paid exactly like their lease says then we should just repeal this whole blending business and go back to the way that most people think it happens which is I sign a lease and that's the the company that I'm going to get a check from. Real briefly and I know I've taken a long time and I've beg your pardon for that I want to just one thing that that that represented Beck said about. You know sort of casting aspersions at it and I'm used to hearing things like this all all I can tell you is that now the percentage of my expenses are so much more than they used to be that's a really easy thing to say and and let me give you some facts about the primary reason for that for when people have that kind of reaction and this is not any this is something you can check on your own so in twenty and twenty eighteen the assessment coordination department at a study commissioned by an independent consultant that had to do with that valorem taxes which believe me I I'm not gonna talk about. right now and it was by a company called resource technologies corporation call recommendations for improvement of Arkansas's willing gassed assessed valuations the reason that I'm I'm citing that is so that you know I'm not making these numbers up so on page twenty eight of that report that that consultant produced they were using southwestern energy with the time was the primary producer in the fate bill shale and they were addressing what expenses were four in MCF of gas a thousand cubic feet we call it a and M. C. F. is generally how gas is priced or that we would discuss it so they looked at a three year period twenty fourteen twenty fifteen and twenty sixteen. In twenty fourteen the average price paid for gas was three dollars and eighty six cents per MCF. The average cost per MCF was ninety two cents. If you do the math that's twenty four percent so twenty four percent of what they got paid was expenses. In twenty fifteen the average price dropped from three eighty six to two dollars and twelve cents and MCF but the cost of producing and was virtually unchanged to change from ninety two cents to ninety one cents because as you might expect those expenses are are much more stable than the price of gas in that second year then those expenses were forty three percent of the amount they receive for the gas and in twenty sixteen it got even worse in that year the the price of gas was a dollar eighty for the year that was the average price the the the production costs actually went down slightly to eighty seven cents and MC of but it's still equal to forty eight percent of that amount so from twenty fourteen and we're expenses were twenty four percent to twenty sixteen where they were forty eight percent even though expenses didn't change virtually at all it all has to do with the lower price for gas and that is the primary reason when people say oh Gee whiz my expenses are such a higher percentage of my check now that that's for reasons that are that are out of the gas companies control it's based on the very volatile prices for natural gas. So You know the the bottom line here as far as the industry goes is if if if this is a problem that needs to be fixed the the way to fix it is to repeal the blending language we don't have all those problems like they had in nineteen eighty five virtually every company sells all of their gas virtually every month they're all sophisticated that marketing for the most part and the prices are not that much different in a over time between one operator and another and the reasons that that caused us to create because the legislature the industry frankly was not especially happy about it in nineteen eighty five when they pass this but they they all went along with that so the the the ills that Mr back claim cities trying to cure here would would be best cured by repealing the the blending of portion of the statute as it exists now not by trying to make these changes that will increase expenses on the industry and really multiply the massive administrative costs of this shifting back and forth these giant databases and making multiple payments to royalty owners representative Coleman you're recognized for a question. Thank you manage your phone Page three line thirty two and you discussed this a little or quite a bit on the lawful deduction of those deductions that are in the contract in law now in that would this allow the commission to change contracts involved that's correct so they would be unlawful deduction would be turned Be determined today by the language of the lease contract and courts would decide that if there was a dispute that's for people that have an oil and gas lease for people who are integrated and do not have an oil and gas lease the the oil and gas commission is the primary arbiter of how that works but who also would be subject to this first one eight portion of the statute at least that's that's the industry's position and the oil and gas commission doesn't necessarily agree with that today nevertheless they have the the commission has jurisdiction over its part the jurors and I think that they would also readily say they do not have jurisdiction over private contracts. You're recognized we've still got a lot of people to speak for against the we need to kind of. Move along. Okay so with this would allow the commission to change. Those contracts. The way this is written. It doesn't explicitly state that but but it certainly the way that it's worded it suggests that the commission could determine what lawful deductions are from private contracts witcher which can only be determined by the contract itself and or in the interpretation of a court yes. A satisfied represent common right. Thank you for your testimony now we have Gerry and Debbie flowers for the bill. If you're in the holding room we need you to come to the end of the table please. Please state your names for the record Gary W. flowers. And it be four hours before you are recognized to present eight. Well the. I would like to say that in the beginning when all the oil companies came here it was a competition to see who could get the the mineral from the people. So some companies would pay more. Minerals in others. So me and my wife we waited. As long as we could because we wanted we didn't know anything about this deal and want to see how it would go. So. We waited almost a year before we leased. And so we lease with David a chair and. Dolly's risiko because we got a better deal on our lease. She. The oil and gas commission. Sadly to say doesn't work for the people of Arkansas. In our opinion. Because we dealt with them. And they their interests seem to live with the gas companies and not with citizens Arkansas. Because I was received a letter from them. In the twelve month that we waited that stated if I that I lease my minerals to somebody that they would leave some for me and I will be given whatever they the going rate was whatever they want me to have. So I was forced to lease my minerals by the oil and gas commission. So we had to do so we lease with a with a change in we got the best deal that we could. Those leases were negotiated in good faith. They were signed and they're recorded a Conway County courthouse. And the. I had a lot of things I want to say I'm trying to remember okay hold. The lease is for the lease the lease goes a. You know they use the lease is their advantage. What gives them the right to come out on your land and take five or six or seven eight acres for nearly ever and becomes there's. What gives them the right to do that if you ask them they'll say well you leased your minerals we have a right to go out on your land and do what we want to out there. But when it comes to pay and by the lease all that ain't no good you can't we can we don't have to do that that leasing or the paper showed up. So the lease they use those just for whatever advantage they can get. To help them. And we we've that we've been dealing with these people for years and years and years. We filed a complaint against the all it with the oil and gas commission against them the only gas commission sends a letter back saying sorry there's nothing we can do. You'll have to take him to court well we're just little people we don't have no money. We can't compete in court with these people. There they have lived the last guy that was just appears to they have we don't have we don't have that kind of ability financially or any other way. So you know we depend on you. We depend on the oil and gas commission we've been on the government down here to see that we're not run over steamrolled which is exactly what we're getting. You know when you just look at what they do. I I called up my lease holders merit energy when I went in two thousand eighteen swine's last checked me was six hundred and some dollars. Fite wheels for checked me in may was less than half that. What I call my lease holder which is merit energy and I said what happened. They hang up on me they hung up on me. The they're arrogant people they won't they won't talk to you if they don't feel like they don't have to they hang up. Click goes the phone you're done so where do we go you can't go to them you can go to the oil and gas commission. Yet we have no recourse we did it we did steam rolled. That's been going on for five years or longer. So I'm here today to tell you how it is out there ground zero where we live we live at ground zero. Eleven hundred wells in Conway County. And that's where we live and that's how it is in the real world they want to come out on your land they say we're coming out there we're going to take five or six acres of it we're going to make that a drill rig will pay you a one time surface damage that's all you get one time server damage and is the lady says as long as a part working vehicle on that pad you can't take it back. They can drive a pick up truck out there is there's. That's the lease that in they go by that but when it comes time to pay by the least leasing worth the paper trail. So this is what we deal with so we appreciate Mr back. And what he's doing for the first time we have built. Thank you our lease is a twenty percent of the well had gross and we've been paid that ever since I started pain are realty's the soonest I will took over it dropped half and it's not because of anything else that I suppose be taken out trucking but they do they take out trucking they take out all the extra stuff they have to do but our lease is twenty percent at the well head and no one else took it out into a fly wheel started pay is what should a term called clean lease is what we negotiated for for a long time. A lot of people did a lot of people just jumped on or signed up for whatever they can get but we worked and we waited and we got the best deal we could get which I think is what any of you people would be here. For something that you own is going to be taken from you. It's called the clean lease. Everybody is recognized it up until. May of twenty eighteen now it's no longer worth the paper trail. Thank you appreciate you listening to thank you. Thank you for your testimony thank. Mr brainteaser is against the next please state your name for the record you may proceed. Thank you madam chairman thank you members of the committee appreciate this opportunity to. Expressing opinion or view on this bill I find myself in the same position my friend Rodney bankers in namely. rarely. disagreeing with representative back. On anything we typically are or. And in sync and it's unfortunate our regret that we're here but the interests of many of our members Arkansas state chamber of commerce and associated industries of Arkansas. Are there their interests or or. Threatened by this bill under four points above a very brief I just wanna make four points this bill attempts to allow an administrative agency to adjudicate or over the provisions in private contracts. We don't think that's a good idea it disturbs a long standing statutory system that has been the basis of enormous financial investments in the Arkansas natural gas industry I don't think anybody in this room would want to discourage the future investments by the industry. And it creates an adverse business environment for future natural gas investment in the state and that's not something I don't think any of us would bill and it contains really serious ambiguities that will likely result in a large or an enormous volume of litigation against the industry. And as I was listening to the. Earlier testimony on the bill I was struck by the parallel between a business interest I'm personally involved in where we rent farmland to producers in Southeast Arkansas on a shared basis. We share in twenty five percent of the production expenses we get twenty five percent of the revenue. The production expenses often go against the price of the commodities we sale namely soybeans cotton and rice. Sometimes I kick myself in the fall when I take the the market price in October November for soybeans as I did this past fall. And was thrilled to get ten dollars and forty five cents to ten dollars and ninety cents a bushel for our share of the of the crop now I find myself picking up the paper looking at fifteen dollars and forty cents or fifteen dollars and sixty cents for beans wishin wine a world or thinking one the world did not wait to sell are part of the crop. But I don't get to go back and referred to the production prices or costs and and the deal is done the deal is made you know I I regret that it's unfortunate that people find themselves having to take care of. Abnormally low extraordinarily low prices for natural gas I remember when they have we have the severance tax Fite several years back. At the time everybody in Arkansas including everybody in the General Assembly was just convinced that natural gas prices will stay up at ten eleven twelve gosh before talking about fourteen and fifteen dollar prices for gas now it's two fifty to two eighty two thirty. And those production prices is the. Former the the last With Mr spoke to those those production prices don't go down with the price they don't go up with the price thank goodness but they don't go down with the price of all that adds up to just a position that that we feel compelled to take to oppose this bill and urges some further study of this this challenge this problem sympathetic to the to the royalty owners I'm my wife is a. Isn't brought the owner West Texas are referred to her affectionately is my all heiress wife no before you jump to any conclusion it's a very small interest in some of those those wells but that that mailbox money is still pretty good deal but it goes up it goes down depending on the prices of commodities and production costs of. I'll close on that happy note that but we we feel compelled to speak against the bill merger vote against it thank you very much appreciate your time thank you. I think it's Mister Jaime sched heart maybe Jimmy Hart for the bill. Recognized that sell your name for the record A. J. R. take on the county judge Conway County if you noticed I put county judge and self because I am a rolled over to. But the. You know I want to go back I'm kind of like a representative vacant course up missed Barker might appoint Neil question not asked as a you know a pro I would quote I would a lack thanks a question with a pro they've got producers enrolled in honors Miller was rolled owner on the twelve member board. For starters. Second place we need to remember one funding there's a legal binding contract or filed ever courthouse. Not a record else a lot of courthouse state Arkansas. Nobody held a gun to these people said nobody it but buys these people Bisi nation aided the movement The taken initiate these leases. These leases started out in two thousand and thirty four it was a company that they had a hard call Sean walls. And it's kind of funny how this sign has happened because when I started out the lease ground for twenty five dollars an acre to one eight in at least. At the height of this lying they give as much as twenty percent and twenty five hundred dollars maker. It's real simple. When you sign that lease somewhere between twelve percent and if you're review sign Rosalie's overlooking afternoon those folks most time to relook enough to render for ages of that gas play the heart of that game's play vocals lease is released to date twelve twelve percent twelve percent gross you know what the bill with the with bonus money. You know the point I would love to make though is when you when you look at this thing it's a you know I I look at role the owners now pretty standard those deductions like to take those deduction not gonna say they don't but they asked current day today there are rolled the owners out there is on is what I call net lease program that sixty eight percent of their check is being taken for deductions. Sixty eight percent and I want to remind you of this. Twelve one eighth may at least one eight net lease in point percent. Right now one eight net leases more lack of I'm gonna say four to five percent. You know we're dealing with the group and I'm not knocking may man we've had our ups and downs with a fight that fight ready you're still here on the center stack deal member ray while. but I can't stress this enough you know let's set a standard let's treat it that way and I don't mind to a part of this you know the people of the flock here heard the couple before many. There'd be no need. I mean because based upon what's going on this whole find even in federal court the Arkansas legislature got it set down sentenced on what idiots. and obviously back in eighty five that the regulation that deregulation it happened because we had bad players out there device that we're waiting six months or six. Two or three years I will say six years the basic payroll the honors what what we're doing we're dealing with here today is I'm one of the ugliest site he's somebody made that comment five hundred thousand royalty owners is that right good number. Because of the little folks out here in Arkansas it's dependent on you the taking protect their interests. And what's going on today clear to the committee you know what I keep trying to say when's enough enough you know I know fines are tough but they're not that up they were tough back in twenty twelve to the natural gas state pretty much under two dollars a thousand for a good while. And what that this is there something significantly changed what that is you know we're going to take the deductions we're going to take the duction were taken I believe when you look at somebody and I've got several I get a lot of calls scanty judge what the world's going on. I mean I get hit with that quite often what the world's going on what the world's going on is presumed it because I have people are bankers the retired CPA asus as well generally speaking with southwest any was there they took about fifty one percent of my check for the ducks well I can verify we say that date number today's not fifty one percent it's sixty eight so I'm mostly the net net we keep talking about numbers but the truth that net mostly realty owners you know was really happy with the gross owner he's out left field he just you know you're just you're just out because by they're gonna take of the desk Senator net net right now is about four percent. I'm going to shut up and entertain questions. Are there any questions. Thank you for your testimony thank you next we have my Norman's. For the bill. Please state your name for the record. And you may begin who you're with and then you may begin yes Sir. I Mark Norman have a mental Rajin Conway County. And when this first started my family reason for motion Arkansas but we. It up in Conway and have property up and around saga Hajji. And we we the oil and gas industry Sturch come around looking for mineral rights. Well. I've got a third grade education graduated from Arkansas state university so I tried to do a little research. Been in the business world for a long time I talked with all Oklahoma oil and gas commission of talking Arkansas Ole and gaze Commission I went to a big seminar advice for Mr Morgan with that done under a mortgage law firm out of Texarkana he was supposed to be the boss called. Of all the gas industry. And without a doubt every organization said get you a or everyone not place I went to talk to you can talk to a gas No attorney in Texas everyone said get you a gross will rose zero experience at the wealthy. And that's what we did for my family because it would involve my mother my father my brother in the grantee. So we follow that advice like any good businessman would do he day did their research and and said that and that's what the attorneys were calling for because what they said was everything with the trouble like Oklahoma oil and gas commission said everything in the world can get thrown under expenses. We can't keep up with the new expenses that are coming in under the old guy to the whole gas commission we get more complaints than we can deal with you know so make sure you get something free of expenses not just like seven so we're going to I grew up on a farm in in in Monroe County. If you lease land you got choice I can lease that for a cash rent or I can take some of the risk. I didn't take any the rest and my family didn't take any risks we get that gross at the well had zero experience and that's what we got and that's what we had now I'm not gonna tell you what a bumpy road all the way down through it because every time a gas company put in a way all they would start holding out expenses and they wouldn't pay your twenty percent and they say will send me a copy of your lease you got a copy of my lease but I sent copy after copy after copy Austin under British petroleum I sit on the Chesapeake I sent him to the XTO in they would finally come around empires are twenty percent gross at the well head zero expenses but you had to hold their feet to the fire every time. Deal with British petroleum one time. They said all know you can't be rocked it's in the computer and the computers got to be right I said ma'am I you may know I grew up in Eastern Arkansas went to East Arkansas school but I can still site for I know my does it does I know too because institute for to tax you know and so I said let me just speak with your supervisor and we did and she says you're right and they only twenty five thousand dollars now it took me six months to get it but they put me in every gas company up until five wheel has operated at what it was cumbersome in your forehead might be bloody from dealing with them but when you ask flowers will they just sent you a copy of the wizened hunt said and said well this is we can do this so now and I don't have much with flowers will and if you say I'm not going hungry okay. But they're holding at about fifty two percent I've got a gross at the well head they've never held in nobody's ever held at any expenses of mine so now instead of getting you know to get a two hundred dollar check you get a. Ninety six dollar check. You know so that's that's kind of the way that is. I don't I don't have a lot with flowers will but I have been appalled from the very beginning and if talk with been friends with Jimmy Hart for a long time and and and would pass on the information Jamie when you go to the Qantas club or when you're talking does this group of people be sure and tell them to look at their statements at the S. and the S. and the S. because I've got pretty good at it for awhile but it's gotten to be more more confusing over the years now I'm not near as good as I used to be to try to make people aware that the if you didn't check your statement you are going will get what your lease colorful anywhere a lot of people that did that. I find it. It we're going we're going to go to church here now mostly everything in love I find. I find it hard to understand how the polling the royalty owners association Doug House it never was just appalled when they're all they're all producers or involved in the production ended in the one the royalty owners on their well that's like having a fox got guarded. That didn't even make the list well and also I change jobs before when I was young man I changed job before retiring for the telephone company. It could put it out so I don't I don't begrudge you know the Mr Parkin from going from working from the oil and gas commission if it is history in the and now working for the other side because it there's you know you gotta make a living but. He was there for all those years what in the fix if you solve problems with all this they had wanted they fix some of this stuff the. You know so I I just have a I just have a problem with the all of the stuff I I pay severance taxes on the gross gas it comes out but I'm not getting paid on the gross anymore. But I still have to pay my severance tax to the county. You know I by this what also bothers me as a as a citizen of the state of Arkansas no one that that. Parks and rec rec the the state parks in Arkansas game and fish commission and all these different places only property that have mineral rights that they have released how many millions of dollars it is leaving the state of Arkansas and when that money didn't come to me I can't turn it in the State of Arkansas I live here I do business in. So what's the churn it we're losing for all that time. And and and it just. I'm kind of like the gentleman that was here earlier it's it's awful hard for a person like me to go up and fight all companies specially no more money than I get from from from five will it just it just doesn't work that way but anyway that's. I've made my point my point I think I've not understood why they that the attorney general's office had been involved in the fact is I've written too about that said mark why are what are you representing the people of Arkansas Connecture you that there's more money this is more important to the state of Arkansas from a tax revenue standpoint infer from turning the state of Arkansas then then then the price of the toilet paper that might account going up during the pandemic you know it's just this this debate this needs to be addressed it needs to be fixed and needs to be fixed I think on the Legislative level. There wasn't a problem before I mean it was I always a head banging experience but we got it resolved but it was always resolve but if you let fly we'll go down this road then instead of all the other gas companies going to follow suit. It's just you've just opened the door and so if if if the the the properties the mineral rights it that the the state of Arkansas has. You know you start cut it all in half or or by sixty percent it will happen if you let if you don't resolve the issues so. All of that stuff thank you thank you. Next we have a. L. Fite boiled maybe broil boil. Please state your name. And who you're with for the record and then you make per se Martin Boyle. For myself royalty owners. Mr was correct a little while ago that I like to statement he wished it held out on. The. Being sale from ten dollars to fifteen dollars well that's what Mr flowers did that talked a little while ago he held out for gross contract. Four twenty percent gross contract. it is Mr Parkin said the Attorney awhile ago. That the. He spoke against the bill. Said that it's not really that hard to understand but he lost me. In a that's the way I feel about it's not really that hard to understand I've got a twenty percent gross contract. With. Ceco. The company that flowers will bought out. Now my twenty percent gross contract. I'm getting paid. Fifty six percent. They're withholding forty six percent of the check I don't get much but it's just the Is a part of it. But I do have a gross contract the legal legally binding go road contract and I think Mr Beck's bill. We'll help. To Straighten it out with flowers will. they'll be able to understand it better. That's all I have. Thank you for your testimony. Mark. Cambiado. Sorry I'm I know I'm slaughtering names. Can be no maybe. Cambiando thank you. Please state your name. And who you're with and you may begin okay. My name is mark and be out on the rule the owner and the dental at least in the past and I probably own close to a thousand interested thousand wells and I can agree with Mr flowers that when ceco sold out to fly wheel my check drop in hand so as not to use an isolated well these are all that will they have doubled the in my case double the amount of calls that they're taking out result in me and have an LS of the check. And that's pretty much all I have to say thank you for your testimony Sir. Linda and Byron. For the bill. I think that's what it says so we'll go to John Brayford for the bill. Okay Daryl and Carol. All the way. all of your thank you. For the bill. They went around. Please state your name and who you're with for the record and then you may begin. Under all of your does my wife Carol. as usual there are talking today except a lot of money one state. Of arsenal just get your lawyer if you got one is twenty percent gross lesions. I don't know is a resident of a lawyers that I have or not but lawyers because so much money you can afford to get a lawyer to fight every little does miss this particular case law where we should definitely lowers it cost too much money. Please state your name ma'am you may begin I'm Carole ology and we're of property owners in Conway County. On the twenty second of April two thousand and ten we entered into a lease agreement with Safeco and this is about the same as what you've heard. And it we have twenty percent gross if will had no deductions. And I have figured. And in the three years and four months that we were with Safeco. And they had they paid what they were supposed to pay the twenty percent and no deductions and then when flour will take over. They. Started they didn't pays the twenty percent. And the deductions like they were talking about doubled. And as of from that time since flowers will have had the Act required to seco we've lost twelve thousand over twelve thousand dollars. They have shorted us compared to what we were paid when the lease was when they were paying according to the leaks. And this. That we've had it in they had a increase of twenty three. Point fourteen percent in deductions. Since flowers will got it. And I have the wizened hunt case pulled up in front of me and I I took it to flowers will I had emails with them and every time that you talk to them they referred to this case. They say they can do that because of this case in this case science this is the bill that the legislation passed about this one eight. And that's why they won't pay it because of these. And like I said I've got the bill in front of me and that put what it refers to the fifteen seventy seventy two three oh five. That's what they will pay it and like my husband said and I have worked in an attorney's office and we've negotiated several leases and not all of those one eight there's some of them that that they'll have one six different ones but if you negotiate a lease it's a binding contract. From what we understand and they're and they had their breaching their contract. And you can't fight this. Property owners can't find this. Because we don't have enough money and everybody even the oil and gas commission we've gone to them just like everybody else has and we can't get anything done and this is the only way and because of Mister Beck we're able to go through the legislature. And that's all. Thank you for your testimony. William king is up next. William king. Seeing now William Kane coming through the door. Richard. Maybe. I'm I have to have the county judge Cameri the names. Of this. Please tell your name and who you're with and then you may proceed record outside. Kindly Kelly and I come just for support school just. I come to support the bill because I to. Health mental right then. I would think all I do have these problems and I just hope that we can support this bill that's all I have to say thank you. Let me see if I can get the county judge to help me. Gerald T. Bryant junior. Please tell us your name and who you're with fire. Name is Herschel Bryant junior. I have the fly wheel thing. To me. What I have is a twenty percent. Roti with no deductions and since they took over it is what the nothing basically. That's all right so you just I'm not getting paid what I used to get the. Thank you for your testimony. The county judge went back there to see if the other ones were still back there to come speak for the bill. Please state your name and who you're with for the record. When you said I'm sorry. There I am for this bill because cents up. Flowers will has taken over for southwest energy. You know my yeah. My pay is not not the same night you know I've known for a long time. You know when prices was down. But You know they're H. it's Matt my Leashes twenty percent with no expenses. Is what mining is put their holding expenses out. Now the lawyer that was here before was talking about expenses. Forty eight percent. Now for years mine was thirty to thirty two. There to beginning of last year of twenty twenty they were up to seventy five. By the end of the year they were ninety two percent. You know I just want clarity Indians. And that's one for the bill thank you Sir. Is there anyone there's no one else signed at is there anyone else in the audience that would like to speak against the bill. For the bill representative back would you like to close for your bill. Thank you madam chair and then thing thank you Committee in. I wanted. Many do not only and when I start a bill the first thing I do is I look for the push back I look for the other side and I do that with the intentions of making a compromise I always feel that a compromise can deny. Hi as you heard. Ronnie and Allen say we didn't we started this a long time ago the very first people I gave a draft of this bill to wear them the very first people I did it intentionally. No you know what I mean several weeks ago right. I allow them I make myself available I allow them to have an yeah Senate time we had a meeting at our office don't know if you guys remember the first thing that I said was I quoted I got I have a lot of information for which is Will Rogers and he's real Walker said he never learned anything lives talk. And that's what I told him that day I said I never learned anything while talking you saying not be Aug they that they had a chance to look at I'm here to listen and I did listen. I didn't hear a lot of suggestions I heard a lot of things that this will work this will work this will work I didn't hear a lot of suggestions are. Since that time every time I've had a bill the the the the bills change or whatever I get redrafted I'm. Gave them a copy they always get the first copy. Now you hear that this last bill has problems. I don't see that is is is much but I want to tell you that they had a copy this bill two weeks ago. I gave it to an angel that I gave it to Andy and I have to make sure that he distributed just like I would be others to see what the feedback was. Because I said the clock's ticking. I need to get this bill filed I want to hear your feedback. Two days later after I gave the bill I ask you have you heard anything back from the people is there anything I need to change because the clock is ticking they haven't said anything. That same Thursday I signed into the lower level returned to down here and I ask. Any feedback is now it's got some problems. As well giving me the problems let's take a look at the clock is ticking. I did get my response but I didn't get it from them I got it from you guys. Our state several of you guys I got the copy of the email that they sent you guys as to what was wrong with the bill. The question you should ask yourself is this. Why was I not told if this is a problem why was I not told it was a problem. That morning I contacted him at least three times every time I've done that I've had Ronnie in a handy at my house on Saturday afternoon to discuss possibilities for this bill hours and hours and hours I discussed this bill. You want to say that they did make a recommendation and they're they're absolutely right the. Your bond fund here. This is. Now what's gonna highlight everything that they were gonna deduct. But I think it's just too much. If you look at this bill probably over analyzing seventy five percent. Of the Texas deleted. Maybe certified techs delay in that you know it it to their current they're saying okay we've got to do one with this old system this also from that word for for thirty five years all I'm asking for is to get paid for your lease which was happening for thirty five years. Under the old system they're the ones that you heard it you for. Of a jot down some of the phrases that we I have a twenty thank you for that I had a twenty percent road ways and they're charging office I was not supposed to be charged that's time and that's the new thing they've changed the game I'm not I'm not trying to point fingers anybody but the game is changing they changed the used to resume her decision to do that. So that's really what what what's happening here they've changed the guy. All we're trying to do is to get. This bill. Back to get this statute back to where it was before. Did you did you here on the night that they were not paying the complete thing before this they did not because the war. The companies were paying that it's very complicated but you know what it was very complicated when they were paying the whole thing. They want to say that you can't do this is complicated it's really complicated that's that's what I want to say hi but ask yourself this you heard the with the five hundred thousand or something however many things were had to be changed and all this so complicated changes what I am. One thing is clear retains all it's very complicated they said very complicated extremely I think complex and complicated. Last yourself this. Thank changed it. To make them get more role keys didn't. Was it easier to do it that way is it easier to get more money to you and. Or is it easier to make sure to pay the lease you've also heard several people here today say. I have a contract and agreement a lease. It's not worth anything. It was worth things until they changed it they changed it not me. Hi now. One. Why would they have the bill did they not say these certain things that were a problem in it you've heard that we're going to inject the commission into these private contracts that's not intend that's not what it says it just says that the commission. For a court of compensation Consett the net deductions. Are the live lawful deductions for the net laces that's what it says. Hi. Thank you will you take me to take this to court. You are the people here. You can't take this the come on they can't take thank you to my technical and they now. That's what they're doing. Wife as I said I made myself available to this thing and I I truly I I appreciate you guys I appreciate the work that we've done but I get the feeling that maybe we don't want to resolve this thing. Hello may maybe it's okay and guess what they tell me that the tone that somewhere okay we're we're to have one sure you're okay with where it's at. You have a gross ways that you're not supposed to be deducted anything from and and you've just determined because of another case that you weren't even involved with. You took some of that section said we don't have to pay you that first I will have to pay that debt let's PRI's would deal. In my opinion. So. Recently as I told you I contacted the. Original person that drafted. Nineteen eighty five the person that was there when all this was going on right and I mentioned earlier what I didn't mention to you as I asked him I told what they were doing when he was very shocked to be honest with you and when I asked what they're doing he said that that's almost fraud he's a lawyer. All right. Take a look at my bill and I said in my doing something wrong here his or so is there a problem here it in my duty what was the intent of the original bill ninety first got this back yesterday. I will read to you his tax that he sent me back. This is in reference to nineteen eighty five this gentleman was here. He knows what the intent of nineteen eighty five was what they were trying to solve at that point. The. Not too long and the screen went dead okay. This is the text of the sent me I have looked at H. B. seventeen twenty five it reinstates the intent of nineteen eighty five of the nineteen eighty five ACT one eighth was then and still is the lowest royalty I have always role to represent it back I hate to interrupt you but you're really not supposed to read what someone else is saying to at the end of the table I'm sorry said was that the law as realty. He also said that it was never never intended to be the Max all royalty the other thing that he said in in this bill was quite simply this he said that he really affirm kind of what I said earlier and and I think that Allen it's great with is that the intent was to make sure people are getting paid to timely and that it was a standard price. Now. I guess I could take questions at this point but. The bill is that simple. You heard. Allen say that this first line here is very complicated because a lot of problems our school cause problems I don't see it that way I have had I did several people look at super lawyers look at that but I I will make you this promise. If you will pass this out of committee. I will get with Allah will change that line if he's worried that that line refers to gas and not dollars will change at all amended you have my promise it will be amended on the Senate side. And with that. I appreciate your time I would appreciated do pass. And I'm sure there's some people in the other room that would also appreciate that thank you what's the will of the committee. Motion to pass is there any discussion on the motion. Representative McGee are recognized but after this. This is a complex to me is it is explain medical issue to the people that are doctors you need just it's really it's really confusing but. I'm not sure reading the bill I don't know how this bill fixes the problem with with the owners that have gross leases I mean it that didn't say anything. I just don't understand how that how this bill fixes it in if and I mean if they have valid contracts and the company's not paying another valid contracts they have legal recourse I understand many people don't have the finances of me this may be something that. We encourage the attorney general's office to look at from that standpoint you know they they quoted on on this within her case I'm not a lawyer and I don't know what was said in that case of so I'm right I'm reluctant to vote for the bill for those reasons sympathetic to all all my friends in Conway County I mean I grew up up there and I knew everybody said at the end of the table and I could have told you their names so. So you know while I would I understand the intent of the bill and I'm I'm sort of Ford I'm going to have to just obtain from voting on on the this time around thank you thank you madam chair representative Coleman you're recognized. Thank you native gegen representative Dr McGee's points. That's a real problem here of these companies not honor these contracts in their use in a court order to say that these contracts are invalid so I think that really need to go back to the court and have them correct and whether it should go to another court or for or whatever and then. I would think that you know they're not paying these contracts one thing we could do is instituted penalty for their late payments and everything because when you get a pocket book at tense because of people to to move along a little little faster but I don't see again or this is gonna. Mike in but if they don't pay it now based on a court order I don't see that they would pay it based on this legislation I don't see what changes that much thank you. Any other discussion we have a do pass on the table all those in favor say aye. Those opposed no. Roll call. The fact that about this I fly it's pretty close. Representative Shepherd representative Shepherd. Representive Eubanks. Yes. McGee. Represent McGee. Representative Jett representative Jett. Representative Womack. Yes. Representative Bragg yes representative Hillman. No. Representative vis. Representive eves. Representative McNair. No. Representive Smith. Yes representa Fortner. Yes representative Coleman. No. Representative Paula well. Yes representive wing. Yes representive berry. Representive Perry. Representive Cooper yes. Yes representative bro yes. Yes representive in it. No. Senate Lynch representive Lynch. I'm sorry your bill failed. Yes. A lot to make a motion to expanders vote expunge vote by which it failed so they can go back together get some work done on this record back and better for at the proper motion is there any discussion on the motion representative Brad. I agree if I think there's concerns here that haven't been answered and and I think it does take more time and I know times short but I think it's worth going back and getting parties together and resolving some of this. Any other discussion. I will add that I do hope that both parties will get together and make the adjustments that need to be made to help these people. Thank you representative Beck for your bill and I'm sorry that it has failed I don't know expunged all those in favor say aye and. All those opposed no the the expungement has passed so you all get together and get it fixed senator thank you Garner. You're recognized. We really need to do these last two bills as fast as we can we're running out of time. Accept a motion to pass so what happens. You're recognized thank you madam chair this bill came up because last year we had an unprecedented. Pandemic happened largely calls by a Chinese Communist Party government that released a virus that is devastating our economy kill thousands of our Kansans and his hers across the board start looking at the economic ramifications of that I start to find really quickly that America is overly dependent on China for our vital resources whether it be the raw material for medicine with B. B. P. B. P. equipment whether be other things and I start to think that we in Arkansas need take a real concrete step to change our business relationship with China if you don't know China's our biggest geopolitical threat within thirty or forty years so have the number one economy in the world they are actively seeking to steal intellectual property and take actions against us that are hostile they're building islands so they can set up military positions that could one day attack as Johnny is our number one geopolitical threat Brandon budget last year to me the fiscal session it went down and we were told that if I pass that appropriation change that we will lose billions of dollars that Tyson and Walmart would be able to the business that we need this office do that well it failed. And a month later. The governor shut down the office we had in China. I don't know if you know since last April now I don't think any of those grave concerns for shutting Office Dale actually happened. What did happen is there were some issues with China at the federal level with a trade deal that we had in some other realities of having a bottom ministration versus trump but as far as Arkansas position we didn't lose one dollar change one thing so what this does is actually to put in cold what we're already doing. And to make a small nine small a micro step. In the direction to hold China accountable in the change Arkansas relationship moving forward to this geopolitical threat because I'm scared one day I will look up when I'm old and gray and my kids around and we're going to have not just an economic problem China would have a military or otherwise problem in China and it's today we can take that first real step to address that with that manager will take any questions there any questions. Seeing no questions will move to the against Rene Dadi. Please state your name and who you're with. For the record. Hey good morning chairman Dr jim Hutchinson accounts for ADC Renee Dodi is on our team as well so she'll be assisting you there any questions from committee it just real quick I know you're pressed for time have secretary Preston's commissioners the Economic development council on share concerns with this B. two fifty two ADC has responsibility under its enabling statutes to arise you and the governor on matters that affect economic development Arkansas what helps and what hinders it at a minimum we can tell you that S. B. two fifty two doesn't help trade with China and certainly creates a real risk that will hurt trade in the trade that will be her won't be the import market people in west little rock people in Bentonville will still be able to obtain consumer goods from China. Who would be hurt our small businesses farmers agro processors who depend on the ability to export to the number two economy in the world a market that in the past three years in the midst of a trade war still account for almost a billion dollars in exports Arkansas. There are others here today who are more qualified to speak about the impact or farmers but one need only look at the price of soybeans over the past four months to see the difference to see the benefit to our farmers when they have access to the Chinese market is the difference between eight dollars bushel and fifteen dollars a bushel is raining is it mentioned earlier. Presently China is our number five trading partner overall if you had China with Hong Kong the combined export market would make it our number for trading partner ahead of Japan. We believe the decision to have a presence in a foreign country should be driven by the business climate and the opportunity for cans my current statute the termination as to what we have an office in a foreign country is made by the economic development council comprised of sixteen Ark Kansans from all four congressional districts we think the existing process serves us well and we request that remain in place we are not dismissing the concerns that many have been and I think Senator garner's concerns are good faith concerns about China and its human rights practices we just don't think the approach that it's kind of a go it alone approach is what is best to deal with those concerns we also don't see how the bill itself would do anything to address the concerns or change any behavior that folks are concerned about how we know that ten of the eleven kinda SEC states each of the states that we compete against these are competitors they have offices in China they have a presence in China. Our absence from that market creates opportunities for competitors to steal market share and ask you let's not give them an opportunity respectfully ask that you not vote for Senate bill two fifty two and prepare take any questions committee may have any questions. Senate questions thank you for your testimony making. State your name and who you're with. And he speak against the bill. Good morning my name is Matt king the director of public affairs and government relations at Arkansas farm bureau madam chair on the committee thank you for the opportunity to speak against this bill Arkansas as the as the previous Speaker mention John is an extremely important market for agriculture there the the number two market for agricultural products we had we about one in every four rows of soybeans you guys see growing at a across the state are destined for China closing this ability closing this are this office could cause some adverse effects to to to trade in trade here trade in China and hope that that you guys a vote against this bill won't take anymore of your time thank you. Thank you next is Randy's up against the bill. Please state your name and who you're with. Randy's work Arkansas state chamber of commerce and associated industries of Arkansas I'll try to be as brief for briefer than Matt of. Again I find myself. Disagreeing are posing legislation from one of our. Nor usual friends and set in senator garner and I don't feel comfortable doing this but I feel like I need to I want to talk about just the strategic aspect of the supply chains that have grown up between the US and China I am not going to object to the need for geopolitical changes in our posture relative to China own turn things like military issues and and All those complex political issues that they're appropriate it's as a senator pointed out. What I'm concerned about is the recipient with which we make changes in our supplier buyer or customer relationship with China we have found out in this pandemic for instance that a scary percentage of our pharmaceutical purchases come from China are are literally our medicines or or made in China and or India. and we're vulnerable to that we need to change that we need to bring back we need to re shore a great deal of our manufacturing capacity especially on strategic items like basic metals we're incredibly vulnerable to China's stranglehold on the the world's supply of rare minerals rare earths there called that are used in very sophisticated manufacturing processes and products. Our automobile industry is just absolutely dependent on our own some elements of their their product coming from China and or or other countries Mexico among them so much my point is not to say that we don't need to back away from China as a supplier we just need to do it and carefully. Crafted and and executed way that does not cut us off immediately with with inability to communicate with suppliers in China we can move away from them but we need to do it in a way that states rational and controlled and I think having the flexibility to have some kind of presence there is absolutely essential and for that reason I urge you to vote against two fifty two thank you very much for your time appreciate thank you there's no one else signed up for against is there anyone in the audience for. Against would you like to close for your bill yes ma'am very briefly if all that was true. One that happened in the last year whenever we shut the office down in China. We shut it down there is no office in China this is going to hurt trade is gonna hurt everyone else of actual agricultural issues it would have happened that's why I picked this bill seeks the pop up I respect my good friends on whose focus is very much so but I hate this game I would like to be much more aggressive on China the second I do that to say no no no you're hurting too much you're being too expensive so I do the very minimum to try to do something no no no that doesn't do anything only thing you're going to do is just make a mad. We still can actually interact with China they have a consulted they can still go there underneath this to do what they're doing today. Only thing I'm trying to do is take that first micro step I'd love to put a conference a plan together to move away from China yes what the if you think I really did that the opposition would be ten times for what I'm doing today. So it's very simple. Let's send that very small but clear message that in Arkansas we're gonna making a small but real change to our interaction with China and let's do it by doing something that we are already not doing thank you very much. What is the will of the committee. Seeing no violation. Summary senator garner your bill has. Failed without a lack motion moving on house bill sixteen forty president Hillman can you go fast. For this intimate is it me. And you have an amendment thank you madam chair I do have an amendment it adds a couple lines to the bill to clarify a couple things that the Department coach will not to I would move do pass on the amendment. Is there any discussion on the motion saying nine what's will of the committee all of those in favor say aye opposed no you may proceed. Okay. I will take as long or as short as the committee chair ask me to short yes ma'am. Four years ago we passed the bill authorizing the state of Arkansas growers to grow hemp on a research basis. Since that time the federal law has changed and if we don't change the state law will no longer be able to producing up in Arkansas. The that the changes that are made to have been approved by everybody that I cannot actually think of and I've had no people no one talk against the bill or how come may for it it will it's been it's been vetted by the agriculture department to plan for the state police they can't growers of you a P. B. everybody act that I can think of so with that I will. Close. And not let shall do what the committee wishes today are there any questions anyone here to speak for the bill against the bill what is the will of committee do pass as on the table so all those in favor say aye. Oppose narrow congratulations you're dealing with well as amended. I guess I need to adjourn but listen we do have a meeting Monday afternoon at two o'clock Monday afternoon at two o'clock