[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2265 Introduced in Senate (IS)]
106th CONGRESS
2d Session
S. 2265
To amend the Internal Revenue Code of 1986 to preserve marginal
domestic oil and natural gas well production, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 21, 2000
Mrs. Hutchison (for herself, Mr. Breaux, Mr. Lott, Mr. Brownback, Mr.
Bingaman, Mr. Gramm, Mr. Thomas, and Mr. Inhofe) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to preserve marginal
domestic oil and natural gas well production, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This Act may be cited as the ``Marginal Well
Preservation Act of 2000''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL
PRODUCTION.
(a) Purpose.--The purpose of this section is to prevent the
abandonment of marginal oil and gas wells responsible for half of the
domestic production of oil and gas in the United States.
(b) Credit for Producing Oil and Gas From Marginal Wells.--Subpart
D of part IV of subchapter A of chapter 1 (relating to business
credits) is amended by adding at the end the following new section:
``SEC. 45D. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.
``(a) General Rule.--For purposes of section 38, the marginal well
production credit for any taxable year is an amount equal to the
product of--
``(1) the credit amount, and
``(2) the qualified crude oil production and the qualified
natural gas production which is attributable to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is--
``(A) $3 per barrel of qualified crude oil
production, and
``(B) 50 cents per 1,000 cubic feet of qualified
natural gas production.
``(2) Reduction as oil and gas prices increase.--
``(A) In general.--The $3 and 50 cents amounts
under paragraph (1) shall each be reduced (but not
below zero) by an amount which bears the same ratio to
such amount (determined without regard to this
paragraph) as--
``(i) the excess (if any) of the applicable
reference price over $14 ($1.56 for qualified
natural gas production), bears to
``(ii) $3 ($0.33 for qualified natural gas
production).
The applicable reference price for a taxable year is
the reference price for the calendar year preceding the
calendar year in which the taxable year begins.
``(B) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2000,
each of the dollar amounts contained in subparagraph
(A) shall be increased to an amount equal to such
dollar amount multiplied by the inflation adjustment
factor for such calendar year (determined under section
43(b)(3)(B) by substituting `1999' for `1990').
``(C) Reference price.--For purposes of this
paragraph, the term `reference price' means, with
respect to any calendar year--
``(i) in the case of qualified crude oil
production, the reference price determined
under section 29(d)(2)(C), and
``(ii) in the case of qualified natural gas
production, the Secretary's estimate of the
annual average wellhead price per 1,000 cubic
feet for all domestic natural gas.
``(c) Qualified Crude Oil and Natural Gas Production.--For purposes
of this section--
``(1) In general.--The terms `qualified crude oil
production' and `qualified natural gas production' mean
domestic crude oil or natural gas which is produced from a
marginal well.
``(2) Limitation on amount of production which may
qualify.--
``(A) In general.--Crude oil or natural gas
produced during any taxable year from any well shall
not be treated as qualified crude oil production or
qualified natural gas production to the extent
production from the well during the taxable year
exceeds 1,095 barrels or barrel equivalents.
``(B) Proportionate reductions.--
``(i) Short taxable years.--In the case of
a short taxable year, the limitations under
this paragraph shall be proportionately reduced
to reflect the ratio which the number of days
in such taxable year bears to 365.
``(ii) Wells not in production entire
year.--In the case of a well which is not
capable of production during each day of a
taxable year, the limitations under this
paragraph applicable to the well shall be
proportionately reduced to reflect the ratio
which the number of days of production bears to
the total number of days in the taxable year.
``(3) Definitions.--
``(A) Marginal well.--The term `marginal well'
means a domestic well--
``(i) the production from which during the
taxable year is treated as marginal production
under section 613A(c)(6), or
``(ii) which, during the taxable year--
``(I) has average daily production
of not more than 25 barrel equivalents,
and
``(II) produces water at a rate not
less than 95 percent of total well
effluent.
``(B) Crude oil, etc.--The terms `crude oil',
`natural gas', `domestic', and `barrel' have the
meanings given such terms by section 613A(e).
``(C) Barrel equivalent.--The term `barrel
equivalent' means, with respect to natural gas, a
conversion ratio of 6,000 cubic feet of natural gas to
1 barrel of crude oil.
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a marginal well in which there is more than one owner of
operating interests in the well and the crude oil or natural
gas production exceeds the limitation under subsection (c)(2),
qualifying crude oil production or qualifying natural gas
production attributable to the taxpayer shall be determined on
the basis of the ratio which taxpayer's revenue interest in the
production bears to the aggregate of the revenue interests of
all operating interest owners in the production.
``(2) Operating interest required.--Any credit under this
section may be claimed only on production which is attributable
to the holder of an operating interest.
``(3) Production from nonconventional sources excluded.--In
the case of production from a marginal well which is eligible
for the credit allowed under section 29 for the taxable year,
no credit shall be allowable under this section unless the
taxpayer elects not to claim the credit under section 29 with
respect to the well.''
``(e) Credit Treated as Business Credit.--Section 38(b) is amended
by striking ``plus'' at the end of paragraph (11), by striking the
period at the end of paragraph (12) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(13) the marginal oil and gas well production credit
determined under section 45D(a).''
(d) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by redesignating
paragraph (3) as paragraph (4) and by inserting after paragraph
(2) the following new paragraph:
``(3) Special rules for marginal oil and gas well
production credit.--
``(A) In general.--In the case of the marginal oil
and gas well production credit--
``(i) this section and section 39 shall be
applied separately with respect to the credit,
and
``(ii) in applying paragraph (1) to the
credit--
``(I) subparagraphs (A) and (B)
thereof shall not apply, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the marginal
oil and gas well production credit).
``(B) Marginal oil and gas well production
credit.--For purposes of this subsection, the term
`marginal oil and gas well production credit' means the
credit allowable under subsection (a) by reason of
section 45D(a).''
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by inserting ``or the marginal oil
and gas well production credit'' after ``employment credit''.
(e) Carryback.--Subsection (a) of section 39 (relating to carryback
and carryforward of unused credits generally) is amended by adding at
the end the following new paragraph:
``(3) 10-year carryback for marginal oil and gas well
production credit.--In the case of the marginal oil and gas
well production credit--
``(A) this section shall be applied separately from
the business credit (other than the marginal oil and
gas well production credit),
``(B) paragraph (1) shall be applied by
substituting `10 taxable years' for `1 taxable years'
in subparagraph (A) thereof, and
``(C) paragraph (2) shall be applied--
``(i) by substituting `31 taxable years'
for `21 taxable years' in subparagraph (A)
thereof, and
``(ii) by substituting `30 taxable years'
for `20 taxable years' in subparagraph (B)
thereof.''
(f) Coordination With Section 29.--Section 29(a) is amended by
striking ``There'' and inserting ``At the election of the taxpayer,
there''.
(g) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following item:
``Sec. 45D. Credit for producing oil and
gas from marginal wells.''
(h) Effective Date.--The amendments made by this section shall
apply to production in taxable years beginning after December 31, 1999.
SEC. 3. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES AND
DELAY RENTAL PAYMENTS.
(a) Purpose.--The purpose of this section is to recognize that
geological and geophysical expenditures and delay rentals are ordinary
and necessary business expenses that should be deducted in the year the
expense is incurred.
(b) Election To Expense Geological and Geophysical Expenditures.--
(1) In general.--Section 263 (relating to capital
expenditures) is amended by adding at the end the following new
subsection:
``(j) Geological and Geophysical Expenditures for Oil and Gas
Wells.--Notwithstanding subsection (a), a taxpayer may elect to treat
geological and geophysical expenses incurred in connection with the
exploration for, or development of, oil or gas as expenses which are
not chargeable to capital account. Any expenses so treated shall be
allowed as a deduction in the taxable year in which paid or incurred.''
(2) Conforming amendment.--Section 263A(c)(3) is amended by
inserting ``263(j),'' after ``263(i),''.
(3) Effective date.--
(A) In general.--The amendments made by this
subsection shall apply to expenses paid or incurred
after the date of the enactment of this Act.
(B) Transition rule.--In the case of any expenses
described in section 263(j) of the Internal Revenue
Code of 1986, as added by this subsection, which were
paid or incurred on or before the date of the enactment
of this Act, the taxpayer may elect, at such time and
in such manner as the Secretary of the Treasury may
prescribe, to amortize the suspended portion of such
expenses over the 36-month period beginning with the
month in which the date of the enactment of this Act
occurs. For purposes of this subparagraph, the
suspended portion of any expense is that portion of
such expense which, as of the first day of the 36-month
period, has not been included in the cost of a property
or otherwise deducted.
(c) Election To Expense Delay Rental Payments.--
(1) In general.--Section 263 (relating to capital
expenditures), as amended by subsection (b)(1), is amended by
adding at the end the following new subsection:
``(k) Delay Rental Payments for Domestic Oil and Gas Wells.--
``(1) In general.--Notwithstanding subsection (a), a
taxpayer may elect to treat delay rental payments incurred in
connection with the development of oil or gas within the United
States (as defined in section 638) as payments which are not
chargeable to capital account. Any payments so treated shall be
allowed as a deduction in the taxable year in which paid or
incurred.
``(2) Delay rental payments.--For purposes of paragraph
(1), the term `delay rental payment' means an amount paid for
the privilege of deferring the drilling of an oil or gas well
under an oil or gas lease.''
(2) Conforming amendment.--Section 263A(c)(3), as amended
by subsection (b)(2), is amended by inserting ``263(k),'' after
``263(j),''.
(3) Effective date.--
(A) In general.--The amendments made by this
subsection shall apply to payments made or incurred
after the date of the enactment of this Act.
(B) Transition rule.--In the case of any payments
described in section 263(k) of the Internal Revenue
Code of 1986, as added by this subsection, which were
made or incurred on or before the date of the enactment
of this Act, the taxpayer may elect, at such time and
in such manner as the Secretary of the Treasury may
prescribe, to amortize the suspended portion of such
payments over the 36-month period beginning with the
month in which the date of the enactment of this Act
occurs. For purposes of this subparagraph, the
suspended portion of any payment is that portion of
such payment which, as of the first day of the 36-month
period, has not been included in the cost of a property
or otherwise deducted.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S1522-1523)
Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S1523-1524)
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