Murkowski Offers AMT Relief to Oil, Gas Producers
S5265, S5293-S5299
- AuthorsMurkowski, Sen. Frank H.
- Institutional AuthorsU.S. Senate
- Cross-ReferenceFor text of S. 1050, see Doc 1999-18612 (18 original pages).
- Subject Area/Tax Topics
- Index Termslegislation, taxoil and gas taxationcreditsAMT
- Industry GroupsEnergyMining and extraction
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 1999-18555 (8 original pages)
- Tax Analysts Electronic Citation1999 TNT 103-55
Energy Security Tax Policy Act of 1999
=============== SUMMARY ===============
Finance Committee member Frank H. Murkowski, R-Alaska, introduced S. 1050, the Energy Security Tax Policy Act, which would provide incentives for oil and gas producers, including measures to provide them some relief from the alternative minimum tax, especially when prices are low. He told the Senate his bill would eliminate the AMT preferences for intangible drilling costs, percentage depletion, and the depreciation adjustment for oil and gas assets. The bill also eliminates "the impact of intangible drilling costs, depletion and depreciation on oil and gas assets from the adjusted current earnings adjustment," he said, and allows the enhanced recovery credit and the section 20 credit to be used to offset the AMT.
Other portions of the bill address the concerns of marginal well producers, enlarge the definition of enhanced oil recovery by including horizontal drilling in areas where that is the only feasible extraction method, and clarify the depreciation period of natural gas gathering lines. Text of the bill appears in the Record.
=============== FULL TEXT ===============
S. 1050. A bill to amend the Internal Revenue Code of 1986 to provide incentives for gas and oil producers, and for other purposes; to the Committee on Finance.
ENERGY SECURITY TAX POLICY ACT OF 1999
Mr. MURKOWSKI. Mr. President, the production of oil and gas in the United States is fast becoming a thing of the past. I am introducing two bills today to halt, and if possible, reverse that trend.
The economic consequences of the 1973 oil embargo were severe and long lasting. Whole sectors of our economy underwent significant changes and dislocations. Parts of the United States were plunged into recession which remained for a decade as they adjusted to the fluctuations and insecurity of energy supplies in the 1970's. At the time of the embargo, imports made up 36% of our oil consumption.
Our foreign policy was modified to reflect our growing dependence and protecting oil-producing regions of the world took on a new importance. By the time of the Gulf War of 1990-91, oil imports were roughly 50%.
Today, the United States depends upon foreign sources for some 56% of our supply. This is despite Corporate Average Fuel Efficiency (CAFE) standards for cars which have almost doubled gas mileage. This is despite the creation of the Department of Energy. This is despite the untold billions of dollars which have been invested by U.S. industry in energy-saving equipment and processes in order to remain competitive in a world economy.
If no changes are made in federal policy to protect our domestic oil and gas industry -- the "pilot light" of our nation's economy and security upon which all productive enterprise depends -- our future indeed may be bleak. The Department of Energy predicts 68% dependency on foreign oil by the year 2010. This is just shy of a doubling of our oil imports since the embargo of 1973.
In two recent hearings the Senate Energy & Natural Resources Committee examined the state of the domestic oil and gas industries and their future. What we learned has been the impetus for my introduction of these bills today.
During the past 18 months, 136,000 U.S. oil wells and 57,000 gas wells have been shut in. 50,000 men and women throughout the United States have lost their jobs in these industries -- 15% of all employees. With operating oil rigs at an all-time low and new investment in the U.S. drying up, the future for domestic production of oil and gas is grim.
While the consumption of natural gas is favored by the Administration as a means to reduce emissions, unless changes are made now in federal policy to make production and delivery of natural gas easier, the projected 50% increase in the need for natural gas by the year 2010 will not be met without severe price shocks for American citizens.
The price of oil today is high enough for investment in the U.S. by those who will or can still invest in our domestic oil and gas economy. However, the fact is that the fundamentals for investment in America are not good. Access to prospective areas is severely restricted, environmental costs are extremely high and production rates from U.S. wells are liable to be quite low, in comparison to other areas in the world.
The U.S. is a mature and high cost oil producing region of the world. In response to a changing world oil market, other producing countries are undertaking changes in their government policies to attract and retain economic investment in what they properly consider to be an important national industry.
For example, the United Kingdom has undertaken a significant regulatory reform effort to speed, simplify and provide certainty to investments in their energy industry. They are actively reviewing their tax and royalty systems to adjust them to the new realities of the world energy markets. Colombia, likewise, is undertaking major reductions in royalties to attract and retain investment. These nations and others have determined that they must compete with the rest of the world for investment capital, and are thus moving to make their nations more attractive to such investment. The U.S. lags far behind.
The first of the bills I am introducing is identical to a measure being introduced in the U.S. House of Representatives by Congresswoman Barbara Cubin, Chairman of the Subcommittee on Energy and Mineral Resources. It makes significant changes in the oil and gas leasing policies of the United States, by simplifying procedures and granting more certainty for those who choose to invest in our domestic energy business.
This legislation grants States the option of assuming federal regulation of oil and gas leases within their borders, after a federal decision to lease is made. States already perform identical functions on their lands, and this would standardize regulatory functions within a State's borders. The States are closer than the federal government to oil and gas leasing activities within their borders, and are best positioned to make timely and responsible regulatory decisions. In return for opting to assume the specified federal responsibilities for these activities, the States would receive payment of up to 50% of the costs currently assessed them by the federal government for these functions. Federal ownership of the lands would continue.
An important part of this legislation clarifies that the federal government can no longer charge States via the existing "net receipts sharing" program for the costs of programmatic planning activities on federal lands unrelated to mineral leasing activities. This would stop creative legal interpretations by the Department of Interior like that which charged Utah for the government's secret planning which resulted in the creation of an enormous National Monument in that State. This type of creative accounting undermines the respect of the citizenry in their governmental institutions, and with this bill, we will plug this leak in the public trust.
The legislation also assists States by dropping the requirement that their share of mineral leasing on federal lands within their borders be reduced by the government's costs of administering mineral leasing if a State opts to assume the federal government's responsibility for regulation of oil and gas activities.
In order to speed development of secure sources of domestic oil and gas by making federal practices more competitive with the rest of the world, I have included in the bill certain provisions which are intended to correct federal practices which are hastening the flight of oil and gas development capital to foreign shores.
One recurring criticism from those who would like to invest in America's domestic energy development is the uncertainty they encounter when they do business with their own federal government. In order to make investment decisions, they must have some certainty about when they might reasonably be expected to be able to actually take possession of, and invest capital in, a federal lease. Moreover, the government is increasingly charging potential lessees for governmental activities before they have any reasonable expectation of being granted a lease. This is akin to charging customers just to stand in line to buy a lottery ticket for a drawing which may never be held. This is absurd, and is a clear signal to potential investors that the U.S. cares little about whether the investment is made here or abroad. This legislation will reverse that signal and provide the certainty that investors need.
Additionally, my legislation would establish reasonable and responsible time frames for the government to respond to requests for permits. If legally-required analyses could not be undertaken by the government within a reasonable time, the applicant could be offered the opportunity to contract for such analyses by an independent party for the government's use. My bill would allow the applicant to receive a credit against royalties due from eventual production in the area for such costs, in recognition of the fact that the more rapidly lands are leased and put into oil or gas production, the more revenues the government will receive and the quicker it will receive it.
My legislation also sets fair but rigid performance deadlines for the completion of federal lease decision-making. One of the most frequent concerns I hear from small companies throughout the country in the oil and gas producing business is the snail-like pace of federal decision-making. Customers of government services deserve a "yes" or "no", instead of the endless series of "maybes" to which they have become accustomed. They deserve no less, and I seek to correct that deficiency before all oil and gas investment flees our shores.
Coordination among federal land management agencies over leasing policies is also long overdue. The bill requires the Secretaries of the Interior and Agriculture to report to Congress with recommendations explaining the most efficient means of eliminating duplication of effort and inconsistent policy between the Bureau of Land Management and the Forest Service with respect to the treatment of oil and gas leases.
The U.S. government and the public deserve to have the best knowledge possible about our domestic supplies of energy. The legislation I am introducing today initiates a modern, science-based energy inventory process to be undertaken by the Secretary of Interior and the Director of the U.S. Geological Survey. Technology for determining oil and gas availability has revolutionized the private sector; it is time for this quantum leap information to be used by the government.
I am particularly happy to include as Title 4 of the bill a provision that Senator Don Nickles recently introduced as S. 924, concerning federal royalty certainty. This would put an end to the seemingly intractable problem that has sprung up between lessees and the Department of Interior over the issue of where oil is to be valued for royalty purposes. While other nations around the world are taking steps to become more competitive for energy investments by changing laws to encourage investment and provide certainty to possible investors, this recent back-door royalty increase by the Administration has sent a strong signal to domestic producers that they are no longer welcome here. Title 4 merely clarifies what congress has been saying all along -- that oil should be valued for royalty purposes at or near the lease. This clarification is absolutely essential if consumers are to receive the 30 trillion cubic feet of gas the Administration says they will demand in a decade at a cost they can afford.
The final title of the legislation will serve as a strong signal to our domestic industry that we value the jobs they provide for our neighbors and the investment they make right here at home. It recognizes that when world oil prices make investments in American energy production uncompetitive with foreign investments, the U.S. will adjust our take from the current direct royalty to a system which promotes jobs and investment in down times and increases royalty and U.S. production later. Specifically, it calls for a 20% credit against royalties due the federal government against capital expenditures during times of lowered oil and gas prices. If a landlord discovered that his rental units were vacant because they were overpriced compared to the competition, he would drop the price to attract renters. The federal government should do the same.
The legislation would also adjust the definition of what constitutes a "marginal" oil well, and allow for suspensions of leases at the lessee's option when oil prices dip precipitously.
This bill is a comprehensive attempt to bring some of our mineral leasing laws and regulations up-to-date with the realities of today's world energy markets. Our domestic industry is dying on the vine because of a combination of governmental actions and inactions, complex regulation and outdated governmental approaches to this important part of our national economy. We need to take steps to make sure that the "pilot light" of our economy does not go out, and it is my belief that this legislation will go a long way to ensuring its continuing contributions to our nation's strength.
Mr. President, the second measure that I am introducing today will redress some of the unfair tax penalties that hinder the continued development and modernization of a domestic oil and gas industry. In particular the legislation focuses on aspects of the alternative minimum tax (AMT) that have a perverse effect on the industry, especially when energy prices are low.
Mr. President, in adopting the AMT in 1986, Congress stated that its purpose was to "serve one overriding objective: to ensure that no taxpayer with substantial economic income can avoid significant tax liability by using exclusions, deductions and credits." Yet the unintended consequence of the AMT is that companies with high fixed costs, such as the oil and gas industry, can face higher effective AMT tax rates when the price of oil is low than when the price is high. In other words, when oil and gas companies are struggling to cope with low world prices, the AMT serves to impose a tax penalty simply because prices are low.
Let me give you an example of the perverse effect of the AMT. If the price of oil is $10 a barrel and an oil and gas company sells 100,000 barrels of oil, the company's revenues would be $1 million. If its production costs were $500,000, its gross profits would be $500,000. If the company took advantage of percentage depletion and other oil and gas incentives, it could reduce it's taxable income to $100,000 and owe $35,000 in taxes. However, because the AMT takes back many of these oil and gas incentives, the same company would be subject to a $90,000 AMT. That is a 90 percent tax rate.
By contrast, assuming the same fixed costs and incentives, if the price of oil was $20 a barrel and the company had $1.1 million in taxable income, its regular tax rate would only be 35 percent and it's AMT liability would be only 26.4 percent. Mr. President, that is not the way the AMT was designed to work.
My bill tackles this problem head-on. It eliminates the AMT preferences for intangible drilling costs, percentage depletion, and the depreciation adjustment for oil and gas assets. In addition, it eliminates the impact of intangible drilling costs, depletion and depreciation on oil and gas assets from the adjusted current earnings adjustment. Finally, the proposal allows the enhanced oil recovery credit and the Section 29 credit to be used to offset the AMT.
In addition to trying to resolve the AMT problems that face the industry, I have adopted a portion of a bill introduced by Senator Kay Bailey Hutchison that attempts to maintain viable independent producers and ensure that marginal wells stay in operation. Marginal wells are those that produce less than 15 barrels a day. In reality they produce on average about 2.2 barrels of oil a day. While individually these wells may not seem like important components of our domestic energy supply, together they produce as much oil as the United States imports from Saudia Arabia. To maintain these marginal wells, the legislation includes a marginal well tax credit of $3.00 per barrel in order to prolong marginal domestic oil and gas well production.
Mr. President, in an effort to stimulate enhanced recovery of oil and thereby increase U.S. production, my legislation enlarges the definition of enhanced oil recovery by including horizontal drilling in areas of Alaska where the only feasible method of recovering some oil is to use such methods. In Alaska, it is just not economically feasible to search for oil by moving drilling platforms from area to area. Instead, the oil companies attempt to locate oil by using a single drilling platform and employing horizontal drilling techniques to search for oil. My legislation recognizes these economic realities and encourages further development of horizontal drilling techniques so that we can recover oil more feasibly.
Finally, Mr. President, this second measure addresses a problem that has recently arisen with natural gas gathering lines. These lines are used to transport natural gas from the well-head to a central processing facility for processing before it can be transported via trunk lines to an end user such as a distribution facility. The Federal Energy Regulatory Commission (FERC) exempts gas processor gather lines from FERC jurisdiction because they are classified as gas gathering equipment that is part of the production facility, not pipeline transportation under FERC rules.
IRS has taken the position that these lines should be depreciated over a 15 year period if they are owned and operated by an entity that does not produce oil or gas transported in the line. However, if gas transported in the line is owned by the producer, the line can be depreciated over 7 years.
Mr. President, this rule does not make sense. The depreciable life of an asset should depend on the use of the asset and not who owns the asset. For that reason, my legislation clarifies that these gathering lines are depreciable over 7 years no matter who the owner of the pipeline is.
Mr. President, there are many other tax changes that have been proposed to assist the oil and gas industry. It is my view that the proposals I have offered will, over the long term, improve the health of the industry in the most cost-effective manner.
I ask unanimous consent that the text of the two bills be printed in the Record.
There being no objection, the bills were ordered to be printed in the Record, as follows:
S. 1049
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title. -- This Act may be cited as the "Federal Oil and Gas Lease Management Improvement Act of 1999".
(b) Table of Contents. -- The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. No property right.
TITLE I -- STATE OPTION TO REGULATE OIL
AND GAS LEASE OPERATIONS ON FEDERAL LAND
Sec. 101. Transfer of authority.
Sec. 102. Activity following transfer of authority.
TITLE II -- USE OF COST SAVINGS FROM STATE REGULATION
Sec. 201. Compensation for costs.
Sec. 202. Exclusion of costs of preparing planning documents and
analyses.
Sec. 203. Receipt sharing.
TITLE III -- STREAMLINING AND COST REDUCTION
Sec. 301. Applications.
Sec. 302. Timely issuance of decisions.
Sec. 303. Elimination of unwarranted denials and stays.
Sec. 304. Reports.
Sec. 305. Scientific inventory of oil and gas reserves.
TITLE IV -- FEDERAL ROYALTY CERTAINTY
Sec. 401. Definitions.
Sec. 402. Amendment of Outer Continental Shelf Lands Act.
Sec. 403. Amendment of Mineral Leasing Act.
Sec. 404. Indian land.
TITLE V -- ROYALTY REINVESTMENT IN AMERICA
Sec. 501. Royalty incentive program.
Sec. 502. Marginal well production incentives.
Sec. 503. Suspension of production on oil and gas operations.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings. -- Congress finds that --
(1) State governments have a long and successful history of regulation of operations to explore for and produce oil and gas; the special role of the States was recognized by Congress in 1935 through its ratification under the Constitution of the Interstate Compact to Conserve Oil and Gas;
(2) under the guidance of the Interstate Oil and Gas Compact Commission, States have established effective regulation of the oil and natural gas industry and subject their programs to periodic peer review through the Commission;
(3) it is significantly less expensive for State governments than for the Federal Government to regulate oil and gas lease operations on Federal land;
(4) significant cost savings could be achieved, with no reduction in environmental protection or in the conservation of oil and gas resources, by having the Federal Government defer to State regulation of oil and gas lease operations on Federal land;
(5) State governments carry out regulatory oversight on Federal, State, and private land; oil and gas companies operating on Federal land are burdened with the additional cost and time of duplicative oversight by both Federal and State conservation authorities; additional cost savings could be achieved within the private sector by having the Secretary defer to State regulation;
(6) the Federal Government is presently cast in opposing roles as a mineral owner and regulator; State regulation of oil and gas operations on Federal land would eliminate this conflict of interest;
(7) it remains the responsibility of the Secretary of the Interior to carry out the Federal policy set forth in the Mining and Minerals Policy Act of 1970 (30 U.S.C. 21a) to foster and encourage private sector enterprise in the development of economically sound and stable domestic mineral industries, and the orderly and economic development of domestic mineral resources and reserves, including oil and gas resources; and
(8) resource management analyses and surveys conducted under the conservation laws of the United States benefit the public at large and are an expense properly borne by the Federal Government.
(b) Purposes. -- The purposes of this Act are --
(1) to transfer from the Secretary to each State in which Federal land is present authority to regulate oil and gas operations on leased tracts and related operations as fully as if the operations were occurring on privately owned land;
(2) to share the costs saved through more efficient State enforcement among State governments and the Federal treasury;
(3) to prevent the imposition of unwarranted delays and recoupments of Federal administrative costs on Federal oil and gas lessees;
(4) to effect no change in the administration of Indian land; and
(5) to ensure that funds deducted from the States' net receipt share are directly tied to administrative costs related to mineral leasing on Federal land.
SEC. 3. DEFINITIONS.
In this Act:
(1) Application for a permit to drill. -- The term "application for a permit to drill" means a drilling plan including design, mechanical, and engineering aspects for drilling a well.
(2) Federal land. --
(A) In general. -- The term "Federal land" means all land and interests in land owned by the United States that are subject to the mineral leasing laws, including mineral resources or mineral estates reserved to the United States in the conveyance of a surface or nonmineral estate.
(B) Exclusion. -- The term "Federal land" does not include --
(i) Indian land (as defined in section 3 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1702)); or
(ii) submerged land on the outer Continental Shelf (as defined in section 2 of the Outer Continental Shelf Lands Act (43 U.S.C. 1331)).
(3) Oil and gas conservation authority. -- The term "oil and gas conservation authority" means the agency or agencies in each State responsible for regulating for conservation purposes operations to explore for and produce oil and natural gas.
(4) Project. -- The term "project" means an activity by a lessee, an operator, or an operating rights owner to explore for, develop, produce, or transport oil or gas resources.
(5) Secretary. -- The term "Secretary" means --
(A) the Secretary of the Interior, with respect to land under the administrative jurisdiction of the Department of the Interior; and
(B) the Secretary of Agriculture, with respect to land under the administrative jurisdiction of the Department of Agriculture.
(6) Surface use plan of operations. -- The term "surface use plan of operations" means a plan for surface use, disturbance, and reclamation.
SEC. 4. NO PROPERTY RIGHT.
Nothing in this Act gives a State a property right or interest in any Federal lease or land.
TITLE I -- STATE OPTION TO REGULATE OIL AND GAS LEASE OPERATIONS ON FEDERAL LAND
SEC. 101. TRANSFER OF AUTHORITY.
(a) Notification. -- Not before the date that is 180 days after the date of enactment of this Act, a State may notify the Secretary of its intent to accept authority for regulation of operations, as described in subparagraphs (A) through (K) of subsection (b)(2), under oil and gas leases on Federal land within the State.
(b) Transfer of Authority. --
(1) In general. -- Effective 180 days after the Secretary receives the State's notice, authority for the regulation of oil and gas leasing operations is transferred from the Secretary to the State.
(2) Authority included. -- The authority transferred under paragraph (1) includes --
(A) processing and approving applications for permits to drill, subject to surface use agreements and other terms and conditions determined by the Secretary;
(B) production operations;
(C) well testing;
(D) well completion;
(E) well spacing;
(F) communization;
(G) conversion of a producing well to a water well;
(H) well abandonment procedures;
(I) inspections;
(J) enforcement activities; and
(K) site security.
(c) Retained Authority. -- The Secretary shall --
(1) retain authority over the issuance of leases and the approval of surface use plans of operations and project-level environmental analyses; and
(2) spend appropriated funds to ensure that timely decisions are made respecting oil and gas leasing, taking into consideration multiple uses of Federal land, socioeconomic and environmental impacts, and the results of consultations with State and local government officials.
SEC. 102. ACTIVITY FOLLOWING TRANSFER OF AUTHORITY.
(a) Federal Agencies. -- Following the transfer of authority, no Federal agency shall exercise the authority formerly held by the Secretary as to oil and gas lease operations and related operations on Federal land.
(b) State Authority. --
(1) In general. -- Following the transfer of authority, each State shall enforce its own oil and gas conservation laws and requirements pertaining to transferred oil and gas lease operations and related operations with due regard to the national interest in the expedited, environmentally sound development of oil and gas resources in a manner consistent with oil and gas conservation principles.
(2) Appeals. -- Following a transfer of authority under section 101, an appeal of any decision made by a State oil and gas conservation authority shall be made in accordance with State administrative procedures.
(c) Pending Enforcement Actions. -- The Secretary may continue to enforce any pending actions respecting acts committed before the date on which authority is transferred to a State under section 101 until those proceedings are concluded.
(d) Pending Applications. --
(1) Transfer to state. -- All applications respecting oil and gas lease operations and related operations on Federal land pending before the Secretary on the date on which authority is transferred under section 101 shall be immediately transferred to the oil and gas conservation authority of the State in which the lease is located.
(2) Action by the state. -- The oil and gas conservation authority shall act on the application in accordance with State laws (including regulations) and requirements.
TITLE II -- USE OF COST SAVINGS FROM STATE REGULATION
SEC. 201. COMPENSATION FOR COSTS.
(a) In General. -- Subject to the availability of appropriations, the Secretary shall compensate any State for costs incurred to carry out the authorities transferred under section 101.
(b) Payment Schedule. -- Payments shall be made not less frequently than every quarter.
(c) Cost Breakdown Report. -- Each State seeking compensation shall report to the Secretary a cost breakdown for the authorities transferred.
(d) Limitation on Amount. --
(1) In general. -- Compensation to a State may not exceed 50 percent of the Secretary's allocated cost for oil and gas leasing activities under section 35(b) of the Act of February 25, 1920 (commonly known as the "Mineral Leasing Act") (30 U.S.C. 191(b)) for the State for fiscal year 1997.
(2) Adjustment. -- The Secretary shall adjust the maximum level of cost compensation at least once every 2 years to reflect any increases in the Consumer Price Index (all items, United States city average) as prepared by the Department of Labor, using 1997 as the baseline year.
SEC. 202. EXCLUSION OF COSTS OF PREPARING PLANNING DOCUMENTS AND ANALYSES.
Section 35 of the Act of February 25, 1920 (30 U.S.C. 191(b)) is amended by adding at the end the following:
"(6) The Secretary shall not include, for the purpose of calculating the deduction under paragraph (1), costs of preparing resource management planning documents and analyses for areas in which mineral leasing is excluded or areas in which the primary activity under review is not mineral leasing and development.".
SEC. 203. RECEIPT SHARING.
Section 35(b) of the Act of February 25, 1920 (30 U.S.C. 191(b)) is amended by striking "paid to States" and inserting "paid to States (other than States that accept a transfer of authority under section 101 of the Federal Oil and Gas Lease Management Act of 1999)".
TITLE III -- STREAMLINING AND COST REDUCTION
SEC. 301. APPLICATIONS.
(a) Limitation on Cost Recovery. -- Notwithstanding sections 304 and 504 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1734, 1764) and section 9701 of title 31, United States Code, the Secretary shall not recover the Secretary's costs with respect to applications and other documents relating to oil and gas leases.
(b) Completion of Planning Documents and Analyses. --
(1) In general. -- The Secretary shall complete any resource management planning documents and analyses not later than 90 days after receiving any offer, application, or request for which a planning document or analysis is required to be prepared.
(2) Preparation by applicant or lessee. -- If the Secretary is unable to complete the document or analysis within the time prescribed by paragraph (1), the Secretary shall notify the applicant or lessee of the opportunity to prepare the required document or analysis for the agency's review and use in decisionmaking.
(c) Reimbursement for Costs of NEPA Analyses, Documentation, and Studies. -- If --
(1) adequate funding to enable the Secretary to timely prepare a project-level analysis required under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) with respect to an oil or gas lease is not appropriated; and
(2) the lessee, operator, or operating rights owner voluntarily pays for the cost of the required analysis, documentation, or related study; the Secretary shall reimburse the lessee, operator, or operating rights owner for its costs through royalty credits attributable to the lease, unit agreement, or project area.
SEC. 302. TIMELY ISSUANCE OF DECISIONS.
(a) In General. -- The Secretary shall ensure the timely issuance of Federal agency decisions respecting oil and gas leasing and operations on Federal land.
(b) Offer To Lease. --
(1) Deadline. -- The Secretary shall accept or reject an offer to lease not later than 90 days after the filing of the offer.
(2) Failure to meet deadline. -- If an offer is not acted upon within that time, the offer shall be deemed to have been accepted.
(c) Application for Permit To Drill. --
(1) Deadline. -- The Secretary and a State that has accepted a transfer of authority under section 101 shall approve or disapprove an application for permit to drill not later than 30 days after receiving a complete application.
(2) Failure to meet deadline. -- If the application is not acted on within the time prescribed by paragraph (1), the application shall be deemed to have been approved.
(d) Surface use Plan of Operations. -- The Secretary shall approve or disapprove a surface use plan of operations not later than 30 days after receipt of a complete plan.
(e) Administrative Appeals. --
(1) Deadline. -- From the time that a Federal oil and gas lessee or operator files a notice of administrative appeal of a decision or order of an officer or employee of the Department of the Interior or the Forest Service respecting a Federal oil and gas Federal lease, the Secretary shall have 2 years in which to issue a final decision in the appeal.
(2) Failure to meet deadline. -- If no final decision has been issued within the time prescribed by paragraph (1), the appeal shall be deemed to have been granted.
SEC. 303. ELIMINATION OF UNWARRANTED DENIALS AND STAYS.
(a) In General. -- The Secretary shall ensure that unwarranted denials and stays of lease issuance and unwarranted restrictions on lease operations are eliminated from the administration of oil and gas leasing on Federal land.
(b) Land Designated for Multiple Use. --
(1) In general. -- Land designated as available for multiple use under Bureau of Land Management resource management plans and Forest Service leasing analyses shall be available for oil and gas leasing without lease stipulations more stringent than restrictions on surface use and operations imposed under the laws (including regulations) of the State oil and gas conservation authority unless the Secretary includes in the decision approving the management plan or leasing analysis a written explanation why more stringent stipulations are warranted.
(2) Appeal. -- Any decision to require a more stringent stipulation shall be administratively appealable and, following a final agency decision, shall be subject to judicial review.
(c) Rejection of Offer To Lease. --
(1) In general. -- If the Secretary rejects an offer to lease on the ground that the land is unavailable for leasing, the Secretary shall provide a written, detailed explanation of the reasons the land is unavailable for leasing.
(2) Previous resource management decision. -- If the determination of unavailability is based on a previous resource management decision, the explanation shall include a careful assessment of whether the reasons underlying the previous decision are still persuasive.
(3) Segregation of available land from unavailable land. -- The Secretary may not reject an offer to lease land available for leasing on the ground that the offer includes land unavailable for leasing, and the Secretary shall segregate available land from unavailable land, on the offeror's request following notice by the Secretary, before acting on the offer to lease.
(d) Disapproval or Required Modification of Surface Use Plans of Operations and Application for Permit To Drill. -- The Secretary shall provide a written, detailed explanation of the reasons for disapproving or requiring modifications of any surface use plan of operations or application for permit to drill.
(e) Effectiveness of Decision. -- A decision of the Secretary respecting an oil and gas lease shall be effective pending administrative appeal to the appropriate office within the Department of the Interior or the Department of Agriculture unless that office grants a stay in response to a petition satisfying the criteria for a stay established by section 4.21(b) of title 43, Code of Federal Regulations (or any successor regulation).
SEC. 304. REPORTS.
(a) In General. -- Not later than March 31, 2000, the Secretaries shall jointly submit to the President of the Senate and the Speaker of the House of Representatives a report explaining the most efficient means of eliminating overlapping jurisdiction, duplication of effort, and inconsistent policymaking and policy implementation as between the Bureau of Land Management and the Forest Service.
(b) Recommendations. -- The report shall include recommendations on statutory changes needed to implement the report's conclusions.
SEC. 305. SCIENTIFIC INVENTORY OF OIL AND GAS RESERVES.
(a) In General. -- Not later than March 31, 2000, the Secretary of the Interior, in consultation with the Director of the United States Geological Survey, shall publish, through notice in the Federal Register, a science-based national inventory of the oil and gas reserves and potential resources underlying Federal land and the outer Continental Shelf.
(b) Contents. -- The inventory shall --
(1) indicate what percentage of the oil and gas reserves and resources is currently available for leasing and development; and
(2) specify the percentages of the reserves and resources that are on --
(A) land that is open for leasing as of the date of enactment of this Act that has never been leased;
(B) land that is open for leasing or development subject to no surface occupancy stipulations; and
(C) land that is open for leasing or development subject to other lease stipulations that have significantly impeded or prevented, or are likely to significantly impede or prevent, development; and
(3) indicate the percentage of oil and gas resources that are not available for leasing or are withdrawn from leasing.
(c) Public Comment. --
(1) In general. -- The Secretary of the Interior shall invite public comment on the inventory to be filed not later than September 30, 2000.
(2) Resource management decisions. -- Specifically, the Secretary of the Interior shall invite public comment on the effect of Federal resource management decisions on past and future oil and gas development.
(d) Report. --
(1) In general. -- Not later than March 31, 2001, the Secretary of the Interior shall submit to the President of the Senate and the Speaker of the House of Representatives a report comprised of the revised inventory and responses to the public comments.
(2) Contents. -- The report shall specifically indicate what steps the Secretaries believe are necessary to increase the percentage of land open for development of oil and gas resources.
TITLE IV -- FEDERAL ROYALTY CERTAINTY
SEC. 401. DEFINITIONS.
In this title:
(1) Marketable condition. -- The term "marketable condition" means lease production that is sufficiently free from impurities and otherwise in a condition that the production will be accepted by a purchaser under a sales contract typical for the field or area.
(2) Reasonable commercial rate. --
(A) In general. -- The term "reasonable commercial rate" means --
(i) in the case of an arm's-length contract, the actual cost incurred by the lessee; or
(ii) in the case of a non-arm's-length contract --
(I) the rate charged in a contract for similar services in the same area between parties with opposing economic interests; or
(II) if there are no arm's-length contracts for similar services in the same area, the just and reasonable rate for the transportation service rendered by the lessee or lessee's affiliate.
(B) Disputes. -- Disputes between the Secretary and a lessee over what constitutes a just and reasonable rate for such service shall be resolved by the Federal Energy Regulatory Commission.
SEC. 402. AMENDMENT OF OUTER CONTINENTAL SHELF LANDS ACT.
Section 8(b)(3) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(b)(3)) is amended by striking the semicolon at the end and adding the following:
"Provided: That if the payment is in value or amount, the royalty due in value shall be based on the value of oil or gas production at the lease in marketable condition, and the royalty due in amount shall be based on the royalty share of production at the lease; if the payment in value or amount is calculated from a point away from the lease, the payment shall be adjusted for quality and location differentials, and the lessee shall be allowed reimbursements at a reasonable commercial rate for transportation (including transportation to the point where the production is put in marketable condition), marketing, processing, and other services beyond the lease through the point of sale, other disposition, or delivery;".
SEC. 403. AMENDMENT OF MINERAL LEASING ACT.
Section 17(c) of the Act of February 25, 1920 (30 U.S.C. 226(c)) (commonly known as the "Mineral Leasing Act"), is amended by adding at the end the following:
"(3) Royalty due in value. --
"(A) In general. -- Royalty due in value shall be based on the value of oil or gas production at the lease in marketable condition, and the royalty due in amount shall be based on the royalty share of production at the lease.
"(B) Calculation of value or amount from a point away from a lease. -- If the payment in value or amount is calculated from a point away from the lease --
"(i) the payment shall be adjusted for quality and location differentials; and
"(ii) the lessee shall be allowed reimbursements at a reasonable commercial rate for transportation (including transportation to the point where the production is put in marketable condition), marketing, processing, and other services beyond the lease through the point of sale, other disposition, or delivery;".
SEC. 404. INDIAN LAND.
This title shall not apply with respect to Indian land.
TITLE V -- ROYALTY REINVESTMENT IN AMERICA
SEC. 501. ROYALTY INCENTIVE PROGRAM.
(a) In General. -- To encourage exploration and development expenditures on Federal land and the outer Continental Shelf for the development of oil and gas resources when the cash price of West Texas Intermediate crude oil, as posted on the Dow Jones Commodities Index chart is less than $18 per barrel for 90 consecutive pricing days or when natural gas prices as delivered at Henry Hub, Louisiana, are less than $2.30 per million British thermal units for 90 consecutive days, the Secretary shall allow a credit against the payment of royalties on Federal oil production and gas production, respectively, in an amount equal to 20 percent of the capital expenditures made on exploration and development activities on Federal oil and gas leases.
(b) No Crediting Against Onshore Federal Royalty Obligations. -- In no case shall such capital expenditures made on Outer Continental Shelf leases be credited against onshore Federal royalty obligations.
SEC. 502. MARGINAL WELL PRODUCTION INCENTIVES.
To enhance the economics of marginal oil and gas production by increasing the ultimate recovery from marginal wells when the cash price of West Texas Intermediate crude oil, as posted on the Dow Jones Commodities Index chart is less than $18 per barrel for 90 consecutive pricing days or when natural gas prices are delivered at Henry Hub, Louisiana, are less than $2.30 per million British thermal units for 90 consecutive days, the Secretary shall reduce the royalty rate as production declines for --
(1) onshore oil wells producing less than 30 barrels per day;
(2) onshore gas wells producing less than 120 million British thermal units per day;
(3) offshore oil well producing less than 300 barrels of oil per day; and
(4) offshore gas wells producing less than 1,200 million British thermal units per day.
SEC. 503. SUSPENSION OF PRODUCTION ON OIL AND GAS OPERATIONS.
(a) In General. -- Any person operating an oil well under a lease issued under the Act of February 25, 1920 (commonly known as the "Mineral Leasing Act") (30 U.S.C. 181 et seq.) or the Mineral Leasing Act for Acquired Lands (30 U.S.C. 351 et seq.) may submit a notice to the Secretary of the Interior of suspension of operation and production at the well.
(b) Production Quantities Not a Factor. -- A notice under subsection (a) may be submitted without regard to per day production quantities at the well and without regard to the requirements of subsection (a) of section 3103.4-4 of title 43 of the Code of Federal Regulations (or any successor regulation) respecting the granting of such relief, except that the notice shall be submitted to an office in the Department of the Interior designated by the Secretary of the Interior.
(c) Period of Relief. -- On submission of a notice under subsection (a) for an oil well, the operator of the well may suspend operation and production at the well for a period beginning on the date of submission of the notice and ending on the later of --
(1) the date that is 2 years after the date on which the suspension of operation and production commences; or
(2) the date on which the cash price of West Texas Intermediate crude oil, as posted on the Dow Jones Commodities Index chart is greater than $15 per barrel for 90 consecutive pricing days.
* * *
S. 1050
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the "Energy Security Tax Policy Act of 1999".
SEC. 2. ELIMINATION OF CERTAIN AMT PREFERENCES FOR OIL AND GAS ASSETS.
(a) Depletion. -- Section 57(a)(1) of the Internal Revenue Code of 1986 (relating to depletion) is amended by striking the second sentence and inserting the following: "This paragraph shall not apply to any deduction for depletion computed in accordance with section 613A."
(b) Intangible Drilling Costs. -- Section 57(a)(2)(E) of the Internal Revenue Code of 1986 (relating to exception for independent producers) is amended to read as follows:
"(E) Termination of application to oil and gas properties. -- In the case of any taxable year beginning after December 31, 1998, this paragraph shall not apply in the case of any oil or gas property."
(c) Effective Date. -- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.
SEC. 3. DEPRECIATION ADJUSTMENT NOT TO APPLY TO OIL AND GAS ASSETS.
(a) In General. -- Subparagraph (B) of section 56(a)(1) of the Internal Revenue Code of 1986 (relating to depreciation adjustments) is amended to read as follows:
"(B) Exceptions. -- This paragraph shall not apply to --
"(i) property described in paragraph (1), (2), (3), or (4) of section 168(f), or
"(ii) property used in the active conduct of the trade or business of exploring for, extracting, developing, or gathering crude oil or natural gas."
(b) Depreciation adjustment for purposes of adjusted current earnings. -- Paragraph (4)(A) of section 56(g) of such Code (relating to adjustments based on adjusted current earnings) is amended by adding at the end the following new clause:
"(vi) Oil and gas property. -- In the case of property used in the active conduct of the trade or business of exploring for, extracting, developing, or gathering crude oil or natural gas, the amount allowable as depreciation or amortization with respect to such property shall be determined in the same manner as for purposes of computing the regular tax."
(c) Effective Date. -- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.
SEC. 4. REPEAL CERTAIN ADJUSTMENTS BASED ON ADJUSTED CURRENT EARNINGS RELATING TO OIL AND GAS ASSETS.
(a) Intangible Drilling Costs. -- Clause (i) of section 56(g)(4)(D) of the Internal Revenue Code of 1986 (relating to certain other earnings and profits adjustments) is amended by striking the second sentence and inserting the following: "In the case of any oil or gas well, this clause shall not apply to amounts paid or incurred in taxable years beginning after December 31, 1998."
(b) Depletion. -- Clause (ii) of section 56(g)(4)(F) of the Internal Revenue Code of 1986 (relating to depletion) is amended to read as follows:
"(ii) Exception for oil and gas wells. -- In the case of any taxable year beginning after December 31, 1998, clause (i) (and subparagraph (C)(i)) shall not apply to any deduction for depletion computed in accordance with section 613A."
(c) Effective Date. -- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.
SEC. 5. ENHANCED OIL RECOVERY CREDIT AND CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL SOURCE ALLOWED AGAINST MINIMUM TAX.
(a) Enhanced Oil Recovery Credit Allowed Against Regular and Minimum Tax. --
(1) Allowing credit against minimum tax. -- Subsection (c) of section 38 of the Internal Revenue Code of 1986 (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 enhanced oil recovery credit. --
"(A) In general. -- In the case of the enhanced oil recovery 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 enhanced oil recovery credit).
"(B) Enhanced oil recovery credit. -- For purposes of this subsection, the term 'enhanced oil recovery credit' means the credit allowable under subsection (a) by reason of section 43(a).".
(2) Conforming amendment. -- Subclause (II) of section 38(c)(2)(A)(ii) of such Code is amended by inserting "or the enhanced oil recovery credit" after "employment credit".
(b) Credit for Producing Fuel From a Nonconventional Source. --
(1) Allowing credit against minimum tax. -- Section 29(b)(6) of the Internal Revenue Code of 1986 is amended to read as follows:
"(6) Application with other credits. -- The credit allowed by subsection (a) for any taxable year shall not exceed --
"(A) the regular tax for the taxable year and the tax imposed by section 55, reduced by
"(B) the sum of the credits allowable under subpart A and section 27."
(2) Conforming amendments. --
(A) Section 53(d)(1)(B)(iii) of such Code is amended by inserting "as in effect on the date of the enactment of the Energy Security Tax Policy Act of 1999," after "29(b)(6)(B),".
(B) Section 55(c)(2) of such Code is amended by striking "29(b)(6),".
(c) Effective Date. -- The amendments made by this section shall apply to taxable years beginning after December 31, 1998.
SEC. 6. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL PRODUCTION.
(a) Credit for Producing Oil and Gas From Marginal Wells. -- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (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."
(b) Credit Treated as Business Credit. -- Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit) 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).".
(c) Credit Allowed Against Regular and Minimum Tax. --
(1) In general. -- Subsection (c) of section 38 of the Internal Revenue Code of 1986 (relating to limitation based on amount of tax), as amended by section 5(a)(1), is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph:
"(4) 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 amendments. --
(A) Subclause (II) of section 38(c)(2)(A)(ii) of such Code, as amended by section 5(a)(2), is amended by striking "or the enhanced oil recovery credit" and inserting "the enhanced oil recovery credit, or the marginal oil and gas well production credit".
(B) Subclause (II) of section 38(c)(3)(A)(ii) of such Code, as added by section 5(a)(1), is amended by inserting "or the marginal oil and gas well production credit" after "recovery credit".
(d) Coordination With Section 29. -- Section 29(d) of the Internal Revenue Code of 1986 (relating to other definitions and special rules) is amended by adding at the end the following new paragraph:
"(9) Election not to take credit. -- No credit shall be allowed under subsection (a) with respect to production from any marginal well (as defined in section 45D(c)(3)(A)) if the taxpayer elects to not have this section apply to such well."
(e) Clerical Amendment. -- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
"45D. Credit for producing oil and gas from marginal wells."
(f) Effective Date. -- The amendments made by this section shall apply to production in taxable years ending after the date of the enactment of this Act.
SEC. 7. ALLOWANCE OF ADDITIONAL ENHANCED OIL RECOVERY METHOD.
(a) In General. -- Clause (i) of section 43(c)(2)(A) of the Internal Revenue Code of 1986 (defining qualified enhanced oil recovery project) is amended to read as follows:
"(i) which involves the application (in accordance with sound engineering principles) of --
"(I) one or more tertiary recovery methods (as defined in section 193(b)(3)) which can reasonably be expected to result in more than an insignificant increase in the amount of crude oil which will ultimately be recovered, or
"(II) a qualified horizontal drilling method which can reasonably be expected to result in more than an insignificant increase in the amount of crude oil which will ultimately be recovered or lead to the discovery or delineation of previously undeveloped accumulations of crude oil,"
(b) Qualified Horizontal Drilling Method. -- Section 43(c)(2) of the Internal Revenue Code of 1986 (relating to qualified enhanced oil recovery project) is amended by adding at the end the following new subparagraph:
"(C) Qualified horizontal drilling method. -- For purposes of this paragraph --
"(i) In general. -- The term 'qualified horizontal drilling method' means the drilling of a horizontal well in order to penetrate hydrocarbon bearing formations located north of latitude 54 degrees North.
"(ii) Horizontal well. -- The term 'horizontal well' means a well which is drilled --
"(I) at an inclination of at least 70 degrees off the vertical, and
"(II) for a distance in excess of 1,000 feet."
(c) Conforming Amendment. -- Clause (iii) of section 43(c)(2)(A) of the Internal Revenue Code of 1986 is amended to read as follows:
"(iii) with respect to which --
"(I) in the case of a tertiary recovery method, the first injection of liquids, gases, or other matter commences after December 31, 1990, and
"(II) in the case of a qualified horizontal drilling method, the implementation of the method begins after December 31, 1998."
(d) Effective Date. -- The amendments made by this section shall apply to taxable years ending after December 31, 1998.
SEC. 8. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR PROPERTY.
(a) In General. -- Subparagraph (C) of section 168(e)(3) of the Internal Revenue Code of 1986 (relating to classification of certain property) is amended by redesignating clause (ii) as clause (iii) and by inserting after clause (i) the following new clause:
"(ii) any natural gas gathering line, and".
(b) Natural Gas Gathering Line. -- Subsection (i) of section 168 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
"(15) Natural gas gathering line. -- The term 'natural gas gathering line' means the pipe, equipment, and appurtenances used to deliver natural gas from the wellhead to the point at which such gas first reaches --
"(A) a gas processing plant,
"(B) an interconnection with an interstate natural-gas company (as defined in section 2(6) of the Natural Gas Act (15 U.S.C. 717a(6))), or
"(C) an interconnection with an intrastate transmission pipeline."
(c) Effective Date. -- The amendments made by this section shall apply to property placed in service before, on, or after the date of the enactment of this Act.
- AuthorsMurkowski, Sen. Frank H.
- Institutional AuthorsU.S. Senate
- Cross-ReferenceFor text of S. 1050, see Doc 1999-18612 (18 original pages).
- Subject Area/Tax Topics
- Index Termslegislation, taxoil and gas taxationcreditsAMT
- Industry GroupsEnergyMining and extraction
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 1999-18555 (8 original pages)
- Tax Analysts Electronic Citation1999 TNT 103-55