FAIR Energy Policy Act

Summary: Fossil Aid is Inefficient and Regressive Energy Policy Act or the FAIR Energy Policy Act  This bill amends the Internal Revenue Code to phase out certain tax provisions that apply to fossil fuels. The bill establishes a schedule for decreasing the benefits of the provisions for major integrated oil companies by specified percentages that reach 100% after December 31, 2019. The affected provisions include:    the deduction for intangible drilling costs,  the deduction for the percentage of depletion of oil and natural gas wells,   the deduction for oil related qualified production activities income,   the deduction for the amortization of geological and geophysical expenditures,   the deduction for the percentage of depletion of oil shale,   the deduction for exploration and development costs for oil shale,   the capital gains treatment for royalties of coal,   the deduction for tertiary injectants,   the exception to the passive loss limitation for working interests in oil and natural gas properties, and   the marginal wells tax credit.  

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fossil Aid is Inefficient and 
Regressive Energy Policy Act'' or the ``FAIR Energy Policy Act''.

SEC. 2. PHASE OUT OF TAX PREFERENCES FOR FOSSIL FUELS.

    (a) Findings.--Congress finds the following:
            (1) United States tax policy has provided tax preferences, 
        such as special deductions, special tax rates, tax credits, and 
        grants in lieu of tax credits, for oil and gas production for 
        100 years.
            (2) United States tax policy has provided tax preferences 
        for coal production for over 80 years.
            (3) In order to ensure that all sources of energy compete 
        on an equal footing, as tax credits for renewable energy are 
        phased out over the next 4 years, fossil fuel tax preferences 
        should be phased out on the same schedule.
    (b) Expensing of Intangible Drilling Costs.--Section 263 of the 
Internal Revenue Code of 1986 is amended--
            (1) in subsection (c), by striking ``subsection (i)'' and 
        inserting ``subsections (i) and (j)'', and
            (2) by adding at the end the following new subsection:
    ``(j) Phase Out of Deduction for Intangible Drilling Costs.--In the 
case of a dual capacity taxpayer which is a major integrated oil 
company (within the meaning of section 167(h)(5)), for any intangible 
drilling and development costs paid or incurred with respect to an oil 
or gas well, the amount of such costs allowed as a deduction under 
subsection (c) shall be reduced by--
            ``(1) in the case of any costs paid or incurred after 
        December 31, 2016, and before January 1, 2018, 20 percent,
            ``(2) in the case of any costs paid or incurred after 
        December 31, 2017, and before January 1, 2019, 40 percent,
            ``(3) in the case of any costs paid or incurred after 
        December 31, 2018, and before January 1, 2020, 60 percent, and
            ``(4) in the case of any costs paid or incurred after 
        December 31, 2019, 100 percent.''.
    (c) Percentage Depletion for Oil and Natural Gas Wells.--Section 
613A(d) of such Code is amended by adding at the end the following new 
paragraph:
            ``(6) Phase out of percentage depletion for oil and natural 
        gas wells.--In the case of a dual capacity taxpayer which is a 
        major integrated oil company (within the meaning of section 
        167(h)(5)), the amount allowed as a deduction for the taxable 
        year which is attributable to the application of subsection (c) 
        (determined after the application of paragraphs (1) through (5) 
        of this subsection and without regard to this paragraph) shall 
        be reduced by--
                    ``(A) in the case of any crude oil or natural gas 
                produced after December 31, 2016, and before January 1, 
                2018, 20 percent,
                    ``(B) in the case of any crude oil or natural gas 
                produced after December 31, 2017, and before January 1, 
                2019, 40 percent,
                    ``(C) in the case of any crude oil or natural gas 
                produced after December 31, 2018, and before January 1, 
                2020, 60 percent, and
                    ``(D) in the case of any crude oil or natural gas 
                produced after December 31, 2019, 100 percent.''.
    (d) Domestic Manufacturing Deduction for Fossil Fuels.--Section 
199(d)(9) of such Code is amended by adding at the end the following 
new subparagraph:
                    ``(D) Phase out of deduction for oil related 
                qualified production activities income.--In the case of 
                a dual capacity taxpayer which is a major integrated 
                oil company (within the meaning of section 167(h)(5)), 
                the amount allowable as a deduction under subsection 
                (a) (determined after the application of subparagraph 
                (A) and without regard to this subparagraph) shall be 
                reduced by--
                            ``(i) in the case of any oil related 
                        qualified production activities income received 
                        or accrued after December 31, 2016, and before 
                        January 1, 2018, 20 percent,
                            ``(ii) in the case of any oil related 
                        qualified production activities income received 
                        or accrued after December 31, 2017, and before 
                        January 1, 2019, 40 percent,
                            ``(iii) in the case of any oil related 
                        qualified production activities income received 
                        or accrued after December 31, 2018, and before 
                        January 1, 2020, 60 percent, and
                            ``(iv) in the case of any oil related 
                        qualified production activities income received 
                        or accrued after December 31, 2019, 100 
                        percent.''.
    (e) Amortization of Geological and Geophysical Expenditures.--
Section 167(h) of such Code is amended by adding at the end the 
following new paragraph:
            ``(6) Phase out of amortization of geological and 
        geophysical expenditures.--In the case of a dual capacity 
        taxpayer which is a major integrated oil company (within the 
        meaning of section 167(h)(5)), the amount of geological and 
        geophysical expenses paid or incurred by a taxpayer which are 
        allowed as a deduction under this subsection (without regard to 
        this paragraph) shall be reduced by--
                    ``(A) in the case of any such expenses paid or 
                incurred after December 31, 2016, and before January 1, 
                2018, 20 percent,
                    ``(B) in the case of any such expenses paid or 
                incurred after December 31, 2017, and before January 1, 
                2019, 40 percent,
                    ``(C) in the case of any such expenses paid or 
                incurred after December 31, 2018, and before January 1, 
                2020, 60 percent, and
                    ``(D) in the case of any such expenses paid or 
                incurred after December 31, 2019, 100 percent.''.
    (f) Percentage Depletion for Oil Shale.--Section 613 of such Code 
is amended by adding at the end the following new subsection:
    ``(f) Phase Out of Percentage Depletion for Oil Shale.--In the case 
of a dual capacity taxpayer which is a major integrated oil company 
(within the meaning of section 167(h)(5)), the allowance for depletion 
for oil shale determined under this section (without regard to this 
subsection) shall be reduced by--
            ``(1) in the case of any income received or accrued from 
        the property after December 31, 2016, and before January 1, 
        2018, 20 percent,
            ``(2) in the case of any income received or accrued from 
        the property after December 31, 2017, and before January 1, 
        2019, 40 percent,
            ``(3) in the case of any income received or accrued from 
        the property after December 31, 2018, and before January 1, 
        2020, 60 percent, and
            ``(4) in the case of any income received or accrued from 
        the property after December 31, 2019, 100 percent.''.
    (g) Expensing of Exploration and Development Costs for Oil Shale.--
Section 617 of such Code is amended--
            (1) by redesignating subsection (i) as subsection (j), and
            (2) by inserting after subsection (h) the following new 
        subsection:
    ``(i) Phase Out of Expensing of Exploration and Development Costs 
for Oil Shale.--In the case of a dual capacity taxpayer which is a 
major integrated oil company (within the meaning of section 167(h)(5)), 
the amount of expenditures related to oil shale which are allowed as a 
deduction under subsection (a) shall be reduced by--
            ``(1) in the case of any such expenditures paid or incurred 
        after December 31, 2016, and before January 1, 2018, 20 
        percent,
            ``(2) in the case of any such expenditures paid or incurred 
        after December 31, 2017, and before January 1, 2019, 40 
        percent,
            ``(3) in the case of any such expenditures paid or incurred 
        after December 31, 2018, and before January 1, 2020, 60 
        percent, and
            ``(4) in the case of any such expenditures paid or incurred 
        after December 31, 2019, 100 percent.''.
    (h) Capital Gains Treatment for Royalties of Coal.--Section 631 of 
such Code is amended by adding at the end the following new subsection:
    ``(d) Phase Out of Capital Gains Treatment for Royalties of Coal.--
In the case of coal (including lignite), the amount of gain or loss on 
the sale of such coal to which subsection (c) applies shall be reduced 
by--
            ``(1) in the case of any such gain or loss after December 
        31, 2016, and before January 1, 2018, 20 percent,
            ``(2) in the case of any such gain or loss after December 
        31, 2017, and before January 1, 2019, 40 percent,
            ``(3) in the case of any such gain or loss after December 
        31, 2018, and before January 1, 2020, 60 percent, and
            ``(4) in the case of any such gain or loss after December 
        31, 2019, 100 percent.''.
    (i) Deduction for Tertiary Injectants.--Section 193 of such Code is 
amended by adding at the end the following new subsection:
    ``(d) Phase Out of Deduction for Tertiary Injectants.--In the case 
of a dual capacity taxpayer which is a major integrated oil company 
(within the meaning of section 167(h)(5)), the amount of qualified 
tertiary injectant expenses allowable as a deduction under subsection 
(a) shall be reduced by--
            ``(1) in the case of any such expenditures paid or incurred 
        after December 31, 2016, and before January 1, 2018, 20 
        percent,
            ``(2) in the case of any such expenditures paid or incurred 
        after December 31, 2017, and before January 1, 2019, 40 
        percent,
            ``(3) in the case of any such expenditures paid or incurred 
        after December 31, 2018, and before January 1, 2020, 60 
        percent, and
            ``(4) in the case of any such expenditures paid or incurred 
        after December 31, 2019, 100 percent.''.
    (j) Exception to Passive Loss Limitation for Working Interests in 
Oil and Natural Gas Properties.--Section 469(c) of such Code is amended 
by adding at the end the following new paragraph:
            ``(8) Phase out of exception to passive loss limitation for 
        working interests in oil and natural gas properties.--In the 
        case of a dual capacity taxpayer which is a major integrated 
        oil company (within the meaning of section 167(h)(5)), for any 
        loss from a working interest in any oil or gas property, the 
        amount of such loss to which paragraph (3) applies shall be 
        reduced by--
                    ``(A) in the case of any such loss after December 
                31, 2016, and before January 1, 2018, 20 percent,
                    ``(B) in the case of any such loss after December 
                31, 2017, and before January 1, 2019, 40 percent,
                    ``(C) in the case of any such loss after December 
                31, 2018, and before January 1, 2020, 60 percent, and
                    ``(D) in the case of any such loss after December 
                31, 2019, 100 percent.''.
    (k) Marginal Wells Credit.--Section 45I(d) of such Code is amended 
by adding at the end the following new paragraph:
            ``(4) Phase out of marginal wells credit.--In the case of a 
        dual capacity taxpayer which is a major integrated oil company 
        (within the meaning of section 167(h)(5)), the amount of the 
        credit determined under subsection (a) shall be reduced by--
                    ``(A) in the case of any qualified crude oil 
                production or qualified natural gas production after 
                December 31, 2016, and before January 1, 2018, 20 
                percent,
                    ``(B) in the case of any qualified crude oil 
                production or qualified natural gas production after 
                December 31, 2017, and before January 1, 2019, 40 
                percent,
                    ``(C) in the case of any qualified crude oil 
                production or qualified natural gas production after 
                December 31, 2018, and before January 1, 2020, 60 
                percent, and
                    ``(D) in the case of any qualified crude oil 
                production or qualified natural gas production after 
                December 31, 2019, 100 percent.''.