I

103D CONGRESS

1ST SESSION H. R. 1816

To amend the Internal Revenue Code of 1986 to increase the percentage

depletion deduction for oil and natural gas produced from stripper well

properties, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 22, 1993

Mr. BREWSTER (for himself and Mr. MCCRERY) introduced the following bill;

which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to increase

the percentage depletion deduction for oil and natural

gas produced from stripper well properties, and for other

purposes.

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 ‘‘Stripper Well Opera5 tors Preservation Act of 1993’’.
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1 SEC. 2. INCREASED PERCENTAGE DEPLETION FOR OIL AND

2 NATURAL GAS PRODUCED FROM STRIPPER

3 WELL PROPERTIES.

4 (a) IN GENERAL.—Subparagraph (C) of section

5 613A(c)(6) of the Internal Revenue Code of 1986 (relating

6 to oil and natural gas from marginal properties) is amend7 ed—

8 (1) by striking ‘‘25 percent’’ and inserting

9 ‘‘28.5 percent’’,

10 (2) by striking ‘‘15 percent’’ and inserting ‘‘20

11 percent’’, and

12 (3) by striking ‘‘$20’’ and inserting ‘‘$28’’.

13 (b) EFFECTIVE DATE.—The amendment made by

14 this section shall apply to taxable years beginning after

15 the date of the enactment of this Act.

16 SEC. 3. NET INCOME LIMITATION ON PERCENTAGE DEPLE17 TION REPEALED FOR STRIPPER WELL PROP18 ERTIES.

19 (a) IN GENERAL.—Section 613(a) of the Internal

20 Revenue Code of 1986 (relating to percentage depletion)

21 is amended by striking the second sentence and inserting:

22 ‘‘Except in the case of stripper well properties as defined

23 in section 613A(c)(6)(E) for which depletion is computed

24 in accordance with section 613A(c)(6), such allowance

25 shall not exceed 50 percent (100 percent in the case of

26 oil and gas properties other than stripper well properties
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1 as defined in section 613a(c)(6)(E) for which depletion is

2 computed in accordance with section 613A(c)(6)) of the

3 taxpayer’s taxable income from the property (computed

4 without allowance for depletion).’’

5 (b) CONFORMING AMENDMENT.—Section 613A(c)(7)

6 of such Code (relating to special rules) is amended by

7 striking subparagraph (C) and redesignating subpara8 graph (D) as subparagraph (C).

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 the date of enactment of this Act.

12 SEC. 4. EXPANSION OF ENHANCED OIL RECOVERY CREDIT.

13 (a) IN GENERAL.—Section 43(a) of the Internal Rev14 enue Code of 1986 (relating to enhanced oil recovery cred15 it) is amended to read as follows:

16 ‘‘(a) GENERAL RULE.—For purposes of section 38,

17 the enhanced oil recovery credit for any taxable year is

18 an amount equal to—

19 ‘‘(1) 15 percent of the taxpayer’s qualified en20 hanced oil recovery costs for such taxable year, plus

21 ‘‘(2) in the case of a taxpayer (other than an

22 integrated oil company as defined in section

23 291(b)(4)), 15 percent of the taxpayer’s stripper

24 well production costs for such taxable year.’’.
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1 (b) STRIPPER WELL PRODUCTION COSTS, ETC.—

2 Section 43(c) of such Code (defining qualified enhanced

3 oil recovery costs) is amended by redesignating para4 graphs (3) and (4) as paragraphs (4) and (5), respectively,

5 and by inserting after paragraph (2) the following new

6 paragraph:

7 ‘‘(3) STRIPPER WELL PRODUCTION COSTS.—

8 ‘‘(A) IN GENERAL.—The term ‘Stripper

9 Well Production costs’ means any of the follow10 ing:

11 ‘‘(i) Any amount paid or incurred dur12 ing the taxable year for tangible prop13 erty—

14 ‘‘(I) which is an integral part of

15 a qualified stripper well recovery

16 project, and

17 ‘‘(II) with respect to which de18 preciation (or amortization in lieu of

19 depreciation) is allowable under this

20 chapter.

21 ‘‘(ii) Any intangible drilling and devel22 opment costs—

23 ‘‘(I) which are paid or incurred

24 in connection with a qualified stripper

25 well recovery project, and
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1 ‘‘(II) with respect to which the

2 taxpayer may make an election under

3 section 263(c) of the taxable year.

4 ‘‘(B) QUALIFIED STRIPPER WELL RECOV5 ERY PROJECT.—The term ‘qualified stripper

6 well recovery project’ means any project

7 which—

8 ‘‘(i) involves a stripper well property

9 as defined in section 613A(c)(6)(E),

10 ‘‘(ii) involves the application (in ac11 cordance with sound engineering prin12 ciples) of recovery methods approved by

13 the Secretary for purposes of this section

14 which can reasonably be expected to result

15 in prolongation of the productive life of

16 such stripper well property and in more

17 than an insignificant increase in the

18 amount of crude oil which will ultimately

19 be recovered, and

20 ‘‘(iii) is located within the United

21 States (within the meaning of section

22 638(1)).

23 ‘‘(C) CERTIFICATION.—A project shall not

24 be treated as a qualified stripper well recovery

25 project unless the operator submits to the Sec-
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1 retary (at such times and in such manner as

2 the Secretary provides) a certification that the

3 project meets (and continues to meet) the re4 quirement of subparagraph (B).’’.

5 (c) NO DOUBLE CERTIFICATION.—Section 43(c) of

6 such Code, as amended by subsection (b), is amended by

7 adding at the end thereof the following new paragraph:

8 ‘‘(6) ONLY 1 CERTIFICATION ALLOWED.—For

9 purposes of this section, the term ‘qualified en10 hanced oil recovery project’ shall not include any

11 project which is certified as a qualified advanced sec12 ondary recovery project under paragraph (3) and the

13 term ‘qualified stripper well recovery project’ shall

14 not include any project which is certified as an en15 hanced oil recovery project under paragraph (2).’’.

16 (d) CONFORMING AMENDMENTS.—

17 (1) Paragraph (4) of section 43(c) of such

18 Code, as redesignated, is amended by inserting ‘‘and

19 qualified stripper well recovery costs’’ after ‘‘quali20 fied enhanced oil recovery costs’’.

21 (2) The heading for subsection (c) of section 43

22 of such Code is amended by inserting ‘‘AND QUALI23 FIED STRIPPER WELL RECOVERY COSTS’’ after

24 ‘‘COSTS’’.
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1 (e) EFFECTIVE DATE.—The amendments made by

2 this section shall apply in the case of amounts paid or

3 incurred in taxable years beginning after the date of en4 actment of this Act.

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