II 

111TH CONGRESS 

1ST SESSION S. 286 

To provide for marginal well production preservation and enhancement. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 21, 2009 

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) is amended to read as follows: 

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

6 MARGINAL PROPERTIES.— 

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

8 subsection (d)— 

9 ‘‘(i) the allowance for depletion under 

10 section 611 shall be computed in accord11 ance with section 613 with respect to the 

12 taxpayer’s marginal production of domestic 

13 crude oil and domestic natural gas, and 

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

15 be specified in subsection (b) of section 

16 613 for purposes of subsection (a) of that 

17 section. 

18 ‘‘(B) COORDINATION WITH OTHER PRO19 DUCTION OF DOMESTIC OIL AND NATURAL

20 GAS.—For purposes of this subsection— 

21 ‘‘(i) no allowance for depletion shall 

22 be allowed by reason of paragraph (1) with 

23 respect to the taxpayer’s marginal produc24 tion of domestic crude oil and domestic 

25 natural gas, and 


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1 ‘‘(ii) such production shall not be 

2 taken into account— 

3 ‘‘(I) in determining under para4 graph (1) how much of the taxpayer’s 

5 depletable oil quantity or depletable 

6 natural gas quantity has been used, or 

7 ‘‘(II) for purposes of applying 

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

9 paragraph (7). 

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

11 ‘marginal production’ means domestic crude oil 

12 or domestic natural gas which is produced dur13 ing any taxable year from a property which— 

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

15 calendar year in which the taxable year be16 gins, or 

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

18 the production of which during such cal19 endar year is heavy oil. 

20 ‘‘(D) STRIPPER WELL PROPERTY.—For 

21 purposes of this paragraph, the term ‘stripper 

22 well property’ means, with respect to any cal23 endar year, any property with respect to which 

24 the amount determined by dividing— 


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1 ‘‘(i) the average daily production of 

2 domestic crude oil and domestic natural 

3 gas from producing wells on such property 

4 for such calendar year, by 

5 ‘‘(ii) the number of such wells, 

6 is 15 barrel equivalents or less. 

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

8 paragraph, the term ‘heavy oil’ means domestic 

9 crude oil produced from any property if such 

10 crude oil had a weighted average gravity of 20 

11 degrees API or less (corrected to 60 degrees 

12 Fahrenheit). 

13 ‘‘(F) NONAPPLICATION OF TAXABLE IN14 COME LIMIT WITH RESPECT TO MARGINAL PRO15 DUCTION.—The second sentence of subsection 

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

17 of the allowance for depletion as is determined 

18 under subparagraph (A).’’. 

19 (2) CONFORMING AMENDMENTS.— 

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

21 Revenue Code of 1986 (defining depletable oil 

22 quantity) is amended to read as follows: 

23 ‘‘(3) DEPLETABLE OIL QUANTITY.—For pur24 poses of paragraph (1), the taxpayer’s depletable oil 

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


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

2 613A(c)(7) of such Code are each amended by 

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

4 (3) EFFECTIVE DATE.—The amendments made 

5 by this subsection shall apply to taxable years begin6 ning after December 31, 2008. 

7 (b) 1-YEAR EXTENSION OF SUSPENSION OF TAX8 ABLE INCOME LIMIT.—Section 613A(c)(6)(H)(ii) of the 

9 Internal Revenue Code of 1986 (relating to temporary sus10 pension of taxable income limit with respect to marginal 

11 production) is amended by striking ‘‘2010’’ and inserting 

12 ‘‘2011’’. 

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

14 TECHNICAL AMENDMENT. 

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

16 7412(n)(4)(A)) is amended by striking ‘‘this section’’ and 

17 inserting ‘‘this Act’’. 

18 SEC. 4. NATIONAL RESPONSE SYSTEM. 

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

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

21 (1) and inserting the following: 

22 ‘‘(1) SYSTEM.— 

23 ‘‘(A) DEFINITION OF WASTEWATER

24 TREATMENT FACILITY.—In this paragraph, the 


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1 term ‘wastewater treatment facility’ includes 

2 produced water from an oil production facility. 

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

4 National Contingency Plan required under sub5 section (d), as soon as practicable after the ef6 fective date of this section, and from time to 

7 time thereafter, the President shall promulgate 

8 regulations consistent with maritime safety and 

9 marine and navigation laws— 

10 ‘‘(i) establishing methods and proce11 dures for removal of discharged oil and 

12 hazardous substances; 

13 ‘‘(ii) establishing criteria for the de14 velopment and implementation of local and 

15 regional oil and hazardous substance re16 moval contingency plans; 

17 ‘‘(iii) establishing procedures, meth18 ods, and requirements and other require19 ments for equipment to prevent discharges 

20 of oil and hazardous substances from ves21 sels and from onshore facilities and off22 shore facilities (other than wastewater 

23 treatment facilities), and to contain those 

24 discharges; and 


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1 ‘‘(iv) governing the inspection of ves2 sels carrying cargoes of oil and hazardous 

3 substances and the inspection of those car4 goes in order to reduce the likelihood of 

5 discharges of oil from vessels in violation 

6 of this section. 

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

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

9 1 year after the date of enactment of that 

10 clause, the Administrator shall establish proce11 dures, methods, and equipment requirements 

12 and other requirements for, and consider the 

13 cost-effectiveness of those requirements on, 

14 small facilities (including agricultural and oil 

15 production facilities) to prevent discharges from 

16 facilities and offshore facilities, and to contain 

17 those discharges, by developing regulations 

18 based on storage volume and capacity that, with 

19 respect to those small facilities— 

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

21 storage capacity of which is at least 1,320 

22 gallons but less than 50,000 gallons, and 

23 at which no single tank exceeds a nominal 

24 capacity of 21,000 gallons; and 


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1 ‘‘(ii) establish minimal requirements 

2 and plans by eliminating engineer certifi3 cation, flow lines, loading and unloading 

4 areas, integrity testing, and other require5 ments, as determined by the Adminis6 trator, that do not take into consideration 

7 and meet cost-effectiveness standards.’’. 

8 SEC. 5. RECOVERY PERIOD FOR DEPRECIATION OF PROP9 ERTY USED TO INJECT QUALIFIED TERTIARY 

10 INJECTANTS. 

11 (a) IN GENERAL.—Section 168(e)((3)(A) of the In12 ternal Revenue Code of 1986 (defining 3-year property) 

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

14 by striking the period at the end of clause (iii) and insert15 ing ‘‘, and’’, and by adding at the end the following new 

16 clause: 

17 ‘‘(iv) any qualified tertiary injectant 

18 property.’’. 

19 (b) QUALIFIED TERTIARY INJECTANT PROPERTY.— 

20 Section 168(e) of the Internal Revenue Code of 1986 (re21 lating to classification of property) is amended by adding 

22 at the end the following new paragraph: 

23 ‘‘(9) QUALIFIED TERTIARY INJECTANT PROP24 ERTY.—The term ‘qualified tertiary injectant prop25 erty’ means— 


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1 ‘‘(A) any property— 

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

3 inject any tertiary injectant as a part of a 

4 tertiary recovery method (as defined in sec5 tion 193(b)(3)), or 

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

7 any tertiary injectant in connection with 

8 such tertiary recovery method, and 

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

10 years.’’. 

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

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

13 1986 is amended by inserting after the item relating to 

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

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

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

16 this section shall apply to property placed in service after 

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

18 ending after such date. 

Æ 


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