II 

110TH CONGRESS 

2D SESSION S. 3395 

To provide for marginal well production preservation and enhancement. 

IN THE SENATE OF THE UNITED STATES 

JULY 31, 2008 

Mr. INHOFE introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To provide for marginal well production preservation and 

enhancement. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Marginal Well Produc5 tion Preservation and Enhancement Act’’. 

6 SEC. 2. TAX TREATMENT FOR PROLONGED MARGINAL PRO7 DUCTION. 

8 (a) INCREASE IN PERCENTAGE DEPLETION FOR OIL

9 AND NATURAL GAS PRODUCED FROM MARGINAL PROP10 ERTIES.— 


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1 (1) IN GENERAL.—Paragraph (6) of section 

2 613A(c) of the Internal Revenue Code of 1986 (re3 lating to oil and natural gas produced from marginal 

4 properties), as amended by this Act, is amended to 

5 read as follows: 

6 ‘‘(6) OIL AND NATURAL GAS PRODUCED FROM

7 MARGINAL PROPERTIES.— 

8 ‘‘(A) IN GENERAL.—Except as provided in 

9 subsection (d)— 

10 ‘‘(i) the allowance for depletion under 

11 section 611 shall be computed in accord12 ance with section 613 with respect to the 

13 taxpayer’s marginal production of domestic 

14 crude oil and domestic natural gas, and 

15 ‘‘(ii) 27.5 percent shall be deemed to 

16 be specified in subsection (b) of section 

17 613 for purposes of subsection (a) of that 

18 section. 

19 ‘‘(B) COORDINATION WITH OTHER PRO20 DUCTION OF DOMESTIC OIL AND NATURAL

21 GAS.—For purposes of this subsection— 

22 ‘‘(i) no allowance for depletion shall 

23 be allowed by reason of paragraph (1) with 

24 respect to the taxpayer’s marginal producVerDate Aug 31 2005 22:19 Aug 02, 2008 Jkt 069200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3395.IS S3395

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1 tion of domestic crude oil and domestic 

2 natural gas, and 

3 ‘‘(ii) such production shall not be 

4 taken into account— 

5 ‘‘(I) in determining under para6 graph (1) how much of the taxpayer’s 

7 depletable oil quantity or depletable 

8 natural gas quantity has been used, or 

9 ‘‘(II) for purposes of applying 

10 subparagraph (A), (B), or (C) of 

11 paragraph (7). 

12 ‘‘(C) MARGINAL PRODUCTION.—The term 

13 ‘marginal production’ means domestic crude oil 

14 or domestic natural gas which is produced dur15 ing any taxable year from a property which— 

16 ‘‘(i) is a stripper well property for the 

17 calendar year in which the taxable year be18 gins, or 

19 ‘‘(ii) is a property substantially all of 

20 the production of which during such cal21 endar year is heavy oil. 

22 ‘‘(D) STRIPPER WELL PROPERTY.—For 

23 purposes of this paragraph, the term ‘stripper 

24 well property’ means, with respect to any calVerDate Aug 31 2005 22:19 Aug 02, 2008 Jkt 069200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3395.IS S3395

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1 endar year, any property with respect to which 

2 the amount determined by dividing— 

3 ‘‘(i) the average daily production of 

4 domestic crude oil and domestic natural 

5 gas from producing wells on such property 

6 for such calendar year, by 

7 ‘‘(ii) the number of such wells, 

8 is 15 barrel equivalents or less. 

9 ‘‘(E) HEAVY OIL.—For purposes of this 

10 paragraph, the term ‘heavy oil’ means domestic 

11 crude oil produced from any property if such 

12 crude oil had a weighted average gravity of 20 

13 degrees API or less (corrected to 60 degrees 

14 Fahrenheit). 

15 ‘‘(F) NONAPPLICATION OF TAXABLE IN16 COME LIMIT WITH RESPECT TO MARGINAL PRO17 DUCTION.—The second sentence of subsection 

18 (a) of section 613 shall not apply to so much 

19 of the allowance for depletion as is determined 

20 under subparagraph (A).’’. 

21 (2) CONFORMING AMENDMENTS.— 

22 (A) Section 613A(c)(3) of the Internal 

23 Revenue Code of 1986 (defining depletable oil 

24 quantity) is amended to read as follows: 


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1 ‘‘(3) DEPLETABLE OIL QUANTITY.—For pur2 poses of paragraph (1), the taxpayer’s depletable oil 

3 quantity shall be 1,000 barrels.’’. 

4 (B) Subparagraphs (A) and (B) of section 

5 613A(c)(7) of such Code are each amended by 

6 striking ‘‘or (6), as the case may be’’. 

7 (3) EFFECTIVE DATE.—The amendment made 

8 by this subsection shall apply to taxable years begin9 ning after December 31, 2008. 

10 (b) 1-YEAR EXTENSION OF SUSPENSION OF TAX11 ABLE INCOME LIMIT.—Section 613A(c)(6)(H) of the In12 ternal Revenue Code of 1986 (relating to temporary sus13 pension of taxable income limit with respect to marginal 

14 production) is amended by striking ‘‘2008’’ and inserting 

15 ‘‘2009’’. 

16 SEC. 3. OIL AND GAS WELLS AND PIPELINE FACILITIES 

17 TECHNICAL AMENDMENT. 

18 Section 112(n)(4)(A) of the Clean Air Act (42 U.S.C. 

19 7412(n)(4)(A)) is amended by striking ‘‘this section’’ and 

20 inserting ‘‘this Act’’. 

21 SEC. 4. NATIONAL RESPONSE SYSTEM. 

22 Section 311(j) of the Federal Water Pollution Control 

23 Act (33 U.S.C. 1321(j)) is amended by striking paragraph 

24 (1) and inserting the following: 

25 ‘‘(1) SYSTEM.— 


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1 ‘‘(A) DEFINITION OF WASTEWATER

2 TREATMENT FACILITY.—In this paragraph, the 

3 term ‘wastewater treatment facility’ includes 

4 produced water from an oil production facility. 

5 ‘‘(B) REGULATIONS.—Consistent with the 

6 National Contingency Plan required under sub7 section (d), as soon as practicable after the ef8 fective date of this section, and from time to 

9 time thereafter, the President shall promulgate 

10 regulations consistent with maritime safety and 

11 marine and navigation laws— 

12 ‘‘(i) establishing methods and proce13 dures for removal of discharged oil and 

14 hazardous substances; 

15 ‘‘(ii) establishing criteria for the de16 velopment and implementation of local and 

17 regional oil and hazardous substance re18 moval contingency plans; 

19 ‘‘(iii) establishing procedures, meth20 ods, and requirements and other require21 ments for equipment to prevent discharges 

22 of oil and hazardous substances from ves23 sels and from onshore facilities and off24 shore facilities (other than wastewater 


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1 treatment facilities), and to contain those 

2 discharges; and 

3 ‘‘(iv) governing the inspection of ves4 sels carrying cargoes of oil and hazardous 

5 substances and the inspection of those car6 goes in order to reduce the likelihood of 

7 discharges of oil from vessels in violation 

8 of this section. 

9 ‘‘(C) SMALL FACILITIES.—In carrying out 

10 clause (iii) of subparagraph (B), not later than 

11 1 year after the date of enactment of that 

12 clause, the Administrator shall establish proce13 dures, methods, and equipment requirements 

14 and other requirements for, and consider the 

15 cost-effectiveness of those requirements on, 

16 small facilities (including agricultural and oil 

17 production facilities) to prevent discharges from 

18 facilities and offshore facilities, and to contain 

19 those discharges, by developing regulations 

20 based on storage volume and capacity that, with 

21 respect to those small facilities— 

22 ‘‘(i) apply to any facility the total oil 

23 storage capacity of which is at least 1,320 

24 gallons but less than 50,000 gallons, and 


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1 at which no single tank exceeds a nominal 

2 capacity of 21,000 gallons; and 

3 ‘‘(ii) establish minimal requirements 

4 and plans by eliminating engineer certifi5 cation, flow lines, loading and unloading 

6 areas, integrity testing, and other require7 ments, as determined by the Adminis8 trator, that do not take into consideration 

9 and meet cost-effectiveness standards.’’. 

10 SEC. 5. RECOVERY PERIOD FOR DEPRECIATION OF PROP11 ERTY USED TO INJECT QUALIFIED TERTIARY 

12 INJECTANTS. 

13 (a) IN GENERAL.—Section 168(e)((3)(A) of the In14 ternal Revenue Code of 1986 (defining 3-year property) 

15 is amended by striking ‘‘and’’ at the end of clause (ii), 

16 by striking the period at the end of clause (iii) and insert17 ing ‘‘, and’’, and by adding at the end the following new 

18 clause: 

19 ‘‘(iv) any qualified tertiary injectant 

20 property.’’. 

21 (b) QUALIFIED TERTIARY INJECTANT PROPERTY.— 

22 Section 168(e) of the Internal Revenue Code of 1986 (re23 lating to classification of property) is amended by adding 

24 at the end the following new paragraph: 


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1 ‘‘(8) QUALIFIED TERTIARY INJECTANT PROP2 ERTY.—The term ‘qualified tertiary injectant prop3 erty’ means— 

4 ‘‘(A) any property— 

5 ‘‘(i) the principal use of which is to 

6 inject any tertiary injectant as a part of a 

7 tertiary recovery method (as defined in sec8 tion 193(b)(3)), or 

9 ‘‘(ii) which is a pipeline used to carry 

10 any tertiary injectant in connection with 

11 such tertiary recovery method, and 

12 ‘‘(B) which has a class life of more than 4 

13 years.’’. 

14 (c) ALTERNATIVE SYSTEM.—The table contained in 

15 section 168(g)(3)(B) of the Internal Revenue Code of 

16 1986 is amended by inserting after the item relating to 

17 subparagraph (A)(iii) the following new item: 

‘‘(A)(iv) .............................................................................................. 7’’. 

18 (d) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to property placed in service after 

20 the date of the enactment of this Act, in taxable years 

21 ending after such date. 

Æ 


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