LITTLE ROCK—The chief executive of Chesapeake Energy Corp. said Tuesday the Fayetteville Shale natural gas formation will transform Arkansas’ economy, but said any additional tax burdens or regulations could drive business away from the state.

“You all are in a unique situation to see an event that will potentially transform this state into an economic powerhouse of the mid-South,” Chesapeake Chief Executive Officer Aubrey McClendon said at a luncheon for the Arkansas Economic Development Foundation in downtown Little Rock.

McClendon said his company won’t lobby for any changes in the increase on Arkansas’ severance tax on natural gas recently enacted in a special session this month. Chesapeake, the largest leaseholder in the Fayetteville Shale, agreed to support the tax hike along with other natural gas firms after negotiations with Gov. Mike Beebe’s office.

The tax increase, which takes effect Jan. 1, will eventually raise $100 million annually for state highways. It replaces a rate that brings in about $660,000 a year.

The tax hike includes temporarily lowered rates for some wells, but McClendon warned against the Legislature considering any other increases or regulations. He said the company’s recent natural gas discovery in the Haynesville Shale in Louisiana is an example of why the state should avoid any further tax hikes.

“It certainly can draw away. That’s why Arkansas has to be careful with the regulatory environment and tax environment,” McClendon told reporters before his speech. “There are other competing plays in nearby states that are every bit as good as the Fayetteville, if not better, so you have to stay competitive.”

Chesapeake announced last month that it would more than double its number of rigs from 12 to 25 and will drill about 300 wells a year in the state. McClendon predicted the company would spend more than $1 billion in the state annually in the coming years.