‘‘(I) one or more tertiary recov-
ery methods (as defined in section
193(b)(3)) which can reasonably be
expected to result in more than an in-
significant increase in the amount of
crude oil which will ultimately be re-
covered, or
‘‘(II) one or more qualified non-
tertiary recovery methods which are
required to recover oil with tradition-
ally immobile characteristics or from
formations which have proven to be
uneconomical or noncommercial under
conventional recovery methods,’’
(c) QUALIFIED NONTERTIARY RECOVERY METH-
ODS.—Section 43(c)(2) is amended by adding at the end
the following new subparagraphs:
‘‘(C) QUALIFIED NONTERTIARY RECOVERY
METHOD.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied nontertiary recovery method’ means
any recovery method described in clause
(ii), (iii), or (iv), or any combination there-
of.
‘‘(ii) ENHANCED GRAVITY DRAINAGE
(EGD) METHODS.—The methods described
in this clause are as follows:
‘‘(I) HORIZONTAL
DRILLING.—
The drilling of horizontal, rather than
vertical, wells to penetrate any hydro-
carbon-bearing formation which has
an average in situ calculated perme-
ability to fluid flow of less than or
equal to 12 or less millidarcies and
which has been demonstrated by use
of a vertical wellbore to be uneco-
nomical unless drilled with lateral hor-
izontal lengths in excess of 1,000 feet.
‘‘(II) GRAVITY
DRAINAGE.—The
production of oil by gravity flow from
drainholes that are drilled from a
shaft or tunnel dug within or below
the oil-bearing zone.
‘‘(iii) MARGINALLY
ECONOMIC
RES-
ERVOIR REPRESSURIZATION (MERR) METH-
ODS.—The methods described in this
clause are as follows, except that this
clause shall only apply to the first
1,000,000 barrels produced in any project:
‘‘(I) CYCLIC
GAS
INJECTION.—
The increase or maintenance of pres-
sure by injection of hydrocarbon gas
into the reservoir from which it was
originally produced.
‘‘(II) FLOODING.—The injection
of water into an oil reservoir to dis-
place oil from the reservoir rock and
into the bore of a producing well.
‘‘(iv) OTHER METHODS.—Any method
used to recover oil having an average lab-
oratory measured air permeability less
than or equal to 100 millidarcies when
averaged over the productive interval being
completed, or an in situ calculated perme-
ability to fluid flow less than or equal to
12 millidarcies or oil defined by the De-
partment of Energy as being immobile.
‘‘(D) AUTHORITY TO ADD OTHER NONTER-
TIARY
RECOVERY
METHODS.—The Secretary
shall provide procedures under which—
‘‘(i) the Secretary may treat methods
not described in clause (ii), (iii), or (iv) of
subparagraph (C) as qualified nontertiary
recovery methods, and
‘‘(ii) a taxpayer may request the Sec-
retary to treat any method not so de-
scribed as a qualified nontertiary recovery
method.
The Secretary may only specify methods as
qualified nontertiary recovery methods under
this subparagraph if the Secretary determines
that such specification is consistent with the
purposes of subparagraph (C) and will result in
greater production of oil and natural gas.’’
(d) CONFORMING AMENDMENT.—Clause (iii) of sec-
tion 43(c)(2)(A) is amended to read as follows:
‘‘(iii) with respect to which—
‘‘(I) in the case of a tertiary re-
covery method, the first injection of
liquids, gases, or other matter com-
mences after December 31, 1990, and
‘‘(II) in the case of a qualified
nontertiary recovery method, the im-
plementation of the method begins
after December 31, 1998.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1998.
TITLE II—DOMESTIC OIL AND
GAS INDUSTRY CRISIS TAX
RELIEF
SEC. 200. PURPOSE.
The purpose of this title is to transform earned tax
credits and other accumulated tax benefits into working
capital for the cash-strapped domestic oil and gas pro-
ducers and service companies.
Subtitle A—Credits to Cash
Provisions
SEC. 201. 10-YEAR CARRYBACK FOR UNUSED MINIMUM TAX
CREDIT.
(a) IN GENERAL.—Section 53(c) of the Internal Rev-
enue Code of 1986 (relating to limitation) is amended by
adding at the end the following new paragraph:
‘‘(2) SPECIAL RULE FOR TAXPAYERS WITH UN-
USED ENERGY MINIMUM TAX CREDITS.—
‘‘(A) IN GENERAL.—If, during the 10-tax-
able year period ending with the current taxable
year, a taxpayer has an unused energy min-
imum tax credit for any taxable year in such
period (determined without regard to the appli-
cation of this paragraph to the current taxable
year)—
‘‘(i) paragraph (1) shall not apply to
each of the taxable years in such period for
which the taxpayer has an unused energy
minimum tax credit (as so determined),
and
‘‘(ii) the credit allowable under sub-
section (a) for each of such taxable years
shall be equal to the excess (if any) of—
‘‘(I) the sum of the regular tax
liability and the net minimum tax for
such taxable year, over
‘‘(II) the sum of the credits al-
lowable under subparts A, B, D, E,
and F of this part.
‘‘(B) ENERGY MINIMUM TAX CREDIT.—For
purposes of this paragraph, the term ‘energy
minimum tax credit’ means the minimum tax
credit which would be computed with respect to
any taxable year if the adjusted net minimum
tax were computed by only taking into account
items attributable to—
‘‘(i) the taxpayer’s mineral interests
in oil and gas property, and
‘‘(ii) the taxpayer’s active conduct of
a trade or business of providing tools,
products, personnel, and technical solu-
tions on a contractual basis to persons en-
gaged in oil and gas exploration and pro-
duction.’’
(b) CONFORMING AMENDMENTS.—Section 53(c) of
such Code (as in effect before the amendment made by
subsection (a)) is amended—
(1) by striking ‘‘The’’ and inserting:
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the’’, and
(2) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998, and to any taxable year beginning
on or before such date to the extent necessary to apply
section 53(c)(2) of the Internal Revenue Code of 1986 (as
added by subsection (a)).
SEC. 202. 10-YEAR CARRYBACK FOR PERCENTAGE DEPLE-
TION FOR OIL AND GAS PROPERTY.
(a) IN GENERAL.—Subsection (d)(1) of section 613A
(relating to limitations on percentage depletion in case of
oil and gas wells) is amended to read as follows:
‘‘(1) LIMITATION
BASED
ON
TAXABLE
IN-
COME.—
‘‘(A) IN GENERAL.—The deduction for the
taxable year attributable to the application of
subsection (c) shall not exceed the taxpayer’s
taxable income for the year computed without
regard to—
‘‘(i) any depletion on production from
an oil or gas property which is subject to
the provisions of subsection (c),
‘‘(ii) any net operating loss carryback
to the taxable year under section 172,
‘‘(iii) any capital loss carryback to the
taxable year under section 1212, and
‘‘(iv) in the case of a trust, any dis-
tributions to its beneficiary, except in the
case of any trust where any beneficiary of
such trust is a member of the family (as
defined in section 267(c)(4)) of a settlor
who created inter vivos and testamentary
trusts for members of the family and such
settlor died within the last six days of the
fifth month in 1970, and the law in the ju-
risdiction in which such trust was created
requires all or a portion of the gross or net
proceeds of any royalty or other interest in
oil, gas, or other mineral representing any
percentage depletion allowance to be allo-
cated to the principal of the trust.
‘‘(B) 
CARRYBACKS
AND
CARRYFORWARDS.—
‘‘(i) IN GENERAL.—If any amount is
disallowed as a deduction for the taxable
year (in this subparagraph referred to as
the ‘unused depletion year’) by reason of
application of subparagraph (A), the dis-
allowed amount shall be treated as an
amount allowable as a deduction under
subsection (c) for—
‘‘(I) each of the 10 taxable years
preceding the unused depletion year,
and
‘‘(II) the taxable year following
the unused depletion year,
subject to the application of subparagraph
(A) to such taxable year.
‘‘(ii) 
APPLICABLE
RULES.—Rules
similar to the rules of section 39 shall
apply for purposes of this subparagraph.
‘‘(C) 
ALLOCATION
OF
DISALLOWED
AMOUNTS.—For purposes of basis adjustments
and determining whether cost depletion exceeds
percentage depletion with respect to the produc-
tion from a property, any amount disallowed as
a deduction on the application of this para-
graph shall be allocated to the respective prop-
erties from which the oil or gas was produced
in proportion to the percentage depletion other-
wise allowable to such properties under sub-
section (c).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1998, and to any taxable year beginning
on or before such date to the extent necessary to apply
section 613A(d)(1)(B) of the Internal Revenue Code of
1986 (as added by subsection (a)).
SEC. 203. 10-YEAR NET OPERATING LOSS CARRYBACK FOR
LOSSES ATTRIBUTABLE TO OIL SERVICING
COMPANIES AND MINERAL INTERESTS OF
OIL AND GAS PRODUCERS.
(a) IN GENERAL.—Paragraph (1) of section 172(b)
(relating to years to which loss may be carried) is amended
by adding at the end the following new subparagraph:
‘‘(H) LOSSES ON MINERAL INTERESTS OF
OIL AND GAS PRODUCERS AND OILFIELD SERV-
ICING COMPANIES.—In the case of a taxpayer
which has an eligible oil and gas loss (as de-
fined in subsection (j)) for a taxable year, such
eligible oil and gas loss shall be a net operating
loss carryback to each of the 10 taxable years
preceding the taxable year of such loss.’’
(b) ELIGIBLE OIL AND GAS LOSS.—Section 172 is
amended by redesignating subsection (j) as subsection (k)
and by inserting after subsection (i) the following new sub-
section:
‘‘(j) ELIGIBLE OIL AND GAS LOSS.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘eligible oil and
gas loss’ means the lesser of—
‘‘(A) the amount which would be the net
operating loss for the taxable year if only in-
come and deductions attributable to—
‘‘(i) mineral interests in oil and gas
wells, and
‘‘(ii) the active conduct of a trade or
business of providing tools, products, per-
sonnel, and technical solutions on a con-
tractual basis to persons engaged in oil
and gas exploration and production,
are taken into account, and
‘‘(B) the amount of the net operating loss
for such taxable year.
‘‘(2) 
COORDINATION
WITH
SUBSECTION
(b)(2).—For purposes of applying subsection (b)(2),
an eligible oil and gas loss for any taxable year shall
be treated in a manner similar to the manner in
which a specified liability loss is treated.
‘‘(3) ELECTION.—Any taxpayer entitled to a
10-year carryback under subsection (b)(1)(H) from
any loss year may elect to have the carryback period
with respect to such loss year determined without re-
gard to subsection (b)(1)(H). Such election shall be
made in such manner as may be prescribed by the
Secretary and shall be made by the due date (includ-
ing extensions of time) for filing the taxpayer’s re-
turn for the taxable year of the net operating loss.
Such election, once made for any taxable year, shall
be irrevocable for such taxable year.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to net operating losses for taxable
years beginning after December 31, 1998, and to any tax-
able year beginning on or before such date to the extent
necessary to apply section 172(b)(1)(H) of the Internal
Revenue Code of 1986 (as added by subsection (a)).
SEC. 204. WAIVER OF LIMITATIONS.
If refund or credit of any overpayment of tax result-
ing from the application of the amendments made by this
subtitle is prevented at any time before the close of the
1-year period beginning on the date of the enactment of
this Act by the operation of any law or rule of law (includ-
ing res judicata), such refund or credit may nevertheless
be made or allowed if claim therefor is filed before the
close of such period.
Subtitle B—Hard Times Tax Relief
SEC. 211. PHASE-OUT OF CERTAIN MINIMUM TAX PREF-
ERENCES RELATING TO ENERGY PRODUC-
TION.
(a) ENERGY PREFERENCES FOR INTEGRATED OIL
COMPANIES.—Section 56 (relating to alternative min-
imum taxable income) is amended by adding at the end
the following new subsection:
‘‘(h) ADJUSTMENT
BASED
ON
ENERGY
PREF-
ERENCE.—
‘‘(1) IN
GENERAL.—In computing the alter-
native minimum taxable income of any taxpayer
which is an integrated oil company (as defined in
section 291(b)(4)) for any taxable year beginning
after 1998, there shall be allowed as a deduction an
amount equal to the alternative tax energy pref-
erence deduction.
‘‘(2) PHASE-OUT OF DEDUCTION AS OIL PRICES
INCREASE.—The amount of the deduction under
paragraph (1) (determined without regard to this
paragraph) shall be reduced (but not below zero) by
the amount which bears the same ratio to such
amount as—
‘‘(A) the amount by which the reference
price for the calendar year preceding the cal-
endar year in which the taxable year begins ex-
ceeds $14, bears to
‘‘(B) $3.
For purposes of this paragraph, the reference price
for any calendar year shall be determined under sec-
tion 29(d)(2)(C) and the $14 amount under sub-
paragraph (A) shall be adjusted at the same time
and in the same manner as under section 43(b)(3).
‘‘(3) ALTERNATIVE TAX ENERGY PREFERENCE
DEDUCTION.—For purposes of paragraph (1), the
term ‘alternative tax energy preference deduction’
means an amount equal to the sum of—
‘‘(A) the intangible drilling cost preference,
and
‘‘(B) the depletion preference.
‘‘(4) 
INTANGIBLE
DRILLING
COST
PREF-
ERENCE.—For purposes of this subsection, the term
‘intangible drilling cost preference’ means the
amount by which alternative minimum taxable in-
come would be reduced if it were computed without
regard to section 57(a)(2).
‘‘(5) DEPLETION PREFERENCE.—For purposes
of this subsection, the term ‘depletion preference’
means the amount by which alternative minimum
taxable income would be reduced if it were computed
without regard to section 57(a)(1).
‘‘(6) ALTERNATIVE
MINIMUM
TAXABLE
IN-
COME.—For purposes of paragraphs (1), (4), and
(5), alternative minimum taxable income shall be de-
termined without regard to the deduction allowable
under this subsection and the alternative tax net op-
erating loss deduction under subsection (a)(4).
‘‘(7) REGULATIONS.—The Secretary may by
regulation provide for appropriate adjustments in
computing alternative minimum taxable income or
adjusted current earnings for any taxable year fol-
lowing a taxable year for which a deduction was al-
lowed under this subsection to ensure that no double
benefit is allowed by reason of such deduction.’’
(b) REPEAL OF LIMIT ON REDUCTION FOR INDE-
PENDENT PRODUCERS.—Subparagraph (E) of section
57(a)(2) (relating to exception for independent producers)
is amended to read as follows:
‘‘(E) EXCEPTION FOR INDEPENDENT PRO-
DUCERS.—In the case of any oil or gas well,
this paragraph shall not apply to any taxpayer
which is not an integrated oil company (as de-
fined in section 291(b)(4)).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after,
and amounts paid or incurred in taxable years after, De-
cember 31, 1998.
SEC. 212. DEPRECIATION ADJUSTMENT NOT TO APPLY TO
OIL AND GAS ASSETS.
(a) IN GENERAL.—Subparagraph (B) of section
56(a)(1) (relating to depreciation adjustments) is amend-
ed 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 con-
duct of the trade or business of exploring
for, extracting, developing, or gathering
crude oil or natural gas.’’
(b) CONFORMING AMENDMENT.—Paragraph (4)(A)
of section 56(g) (relating to adjustments based on ad-
justed 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 con-
duct of the trade or business of exploring
for, extracting, developing, or gathering
crude oil or natural gas, the amount allow-
able as depreciation or amortization with
respect to such property shall be deter-
mined in the same manner as for purposes
of computing the regular tax.’’
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service in
taxable years beginning after December 31, 1998.
SEC. 213. REPEAL CERTAIN ADJUSTMENTS BASED ON AD-
JUSTED CURRENT EARNINGS RELATING TO
OIL AND GAS ASSETS.
(a) 
DEPRECIATION.—Clause 
(vi) 
of 
section
56(g)(4)(A), as added by section 212(b), is amended to
read as follows:
‘‘(vi) OIL AND GAS PROPERTY.—This
subparagraph shall not apply to property
used in the active conduct of the trade or
business of exploring for, extracting, devel-
oping, or gathering crude oil or natural
gas.’’
(b) INTANGIBLE DRILLING COSTS.—Clause (i) of
section 56(g)(4)(D) is amended by striking the second
sentence and inserting ‘‘In the case of any oil or gas well,
this clause shall not apply in the case of amounts paid
or incurred in taxable years beginning after December 31,
1998.’’.
(c) DEPLETION.—Clause (ii) of section 56(g)(4)(F)
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 com-
puted in accordance with section 613A.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 214. ENHANCED OIL RECOVERY CREDIT AND CREDIT
FOR PRODUCING FUEL FROM A NONCONVEN-
TIONAL SOURCE ALLOWED AGAINST MIN-
IMUM TAX.
(a) ENHANCED OIL RECOVERY CREDIT ALLOWED
AGAINST REGULAR AND MINIMUM TAX.—
(1) ALLOWING
CREDIT
AGAINST
MINIMUM
TAX.—Subsection (c) of section 38 (relating to limi-
tation based on amount of tax), as amended by sec-
tion 101(d), is amended by redesignating paragraph
(4) as paragraph (5) and by inserting after para-
graph (3) the following new paragraph:
‘‘(4) SPECIAL RULES FOR ENHANCED OIL RE-
COVERY CREDIT.—
‘‘(A) IN GENERAL.—In the case of the en-
hanced 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 para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the enhanced
oil recovery credit).
‘‘(B) ENHANCED
OIL
RECOVERY
CRED-
IT.—For purposes of this subsection, the term
‘enhanced oil recovery credit’ means the credit
allowable under subsection (a) by reason of sec-
tion 43(a).’’.
(2) CONFORMING AMENDMENTS.—
(A) 
Subclause 
(II) 
of 
section
38(c)(2)(A)(ii), as amended by section 101(d),
is amended by striking ‘‘or the marginal oil and
gas well production credit’’ and inserting ‘‘, the
marginal oil and gas well production credit, or
the enhanced oil recovery credit’’.
(B) 
Subclause 
(II) 
of 
section
38(c)(3)(A)(ii), as added by section 101(d), is
amended by inserting ‘‘or the enhanced oil re-
covery credit’’ after ‘‘recovery credit’’.
(b) CREDIT FOR PRODUCING FUEL FROM A NON-
CONVENTIONAL SOURCE.—
(1) ALLOWING
CREDIT
AGAINST
MINIMUM
TAX.—Section 29(b)(6) is amended to read as fol-
lows:
‘‘(6) APPLICATION
WITH
OTHER
CRED-
ITS.—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, re-
duced by
‘‘(B) the sum of the credits allowable
under subpart A and section 27.’’
(2) CONFORMING AMENDMENTS.—
(A) Section 53(d)(1)(B)(iii) is amended by
inserting ‘‘as in effect on the date of the enact-
ment of the Domestic Oil and Gas Crisis Tax
Reliance 
Reversal 
Act 
of 
1999,’’ 
after
‘‘29(b)(6)(B),’’.
(B) Section 55(c)(2) is amended by strik-
ing ‘‘29(b)(6),’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
Subtitle C—Oil-for-Food Program
Compensating Tax Benefits
SEC. 220. PURPOSE.
The purpose of this subtitle is to provide compensa-
tion to the domestic oil and gas industry in the form of
tax benefits to offset the depressing impact that the Oil-
for-Food Program is having on the world market.
SEC. 221. INCREASE IN PERCENTAGE DEPLETION FOR
STRIPPER WELLS.
(a) IN GENERAL.—Subparagraph (C) of section
613A(c)(6) (relating to oil and natural gas produced from
marginal properties) is amended—
(1) by striking ‘‘25 percent’’ and inserting
‘‘27.5 percent’’ in the matter preceding clause (i);
and
(2) by striking ‘‘$20’’ and inserting ‘‘$28’’ in
clause (ii).
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 222. NET INCOME LIMITATION ON PERCENTAGE DE-
PLETION REPEALED FOR OIL AND GAS PROP-
ERTIES.
(a) IN GENERAL.—Section 613(a) (relating to per-
centage depletion) is amended by striking the second sen-
tence and inserting: ‘‘Except in the case of oil and gas
properties, such allowance shall not exceed 50 percent of
the taxpayer’s taxable income from the property (com-
puted without allowances for depletion).’’
(b) CONFORMING AMENDMENT.—Section 613A(c)(7)
(relating to special rules) is amended by striking subpara-
graph (C) and redesignating subparagraph (D) as sub-
paragraph (C).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 223. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES AND DELAY RENT-
AL PAYMENTS.
(a) PURPOSE.—The purpose of this section is to rec-
ognize that geological and geophysical expenditures and
delay rentals are ordinary and necessary business expenses
that should be deducted in the year the expense is in-
curred.
(b) ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES.—
(1) IN GENERAL.—Section 263 (relating to cap-
ital expenditures) is amended by adding at the end
the following new subsection:
‘‘(j) GEOLOGICAL
AND
GEOPHYSICAL
EXPENDI-
TURES FOR DOMESTIC OIL AND GAS WELLS.—Notwith-
standing subsection (a), a taxpayer may elect to treat geo-
logical and geophysical expenses incurred in connection
with the exploration for, or development of, oil or gas with-
in the United States (as defined in section 638) as ex-
penses which are not chargeable to capital account. Any
expenses so treated shall be allowed as a deduction in the
taxable year in which paid or incurred.’’
(2) 
CONFORMING
AMENDMENT.—Section
263A(c)(3) is amended by inserting ‘‘263(j),’’ after
‘‘263(i),’’.
(3) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendments made
by this subsection shall apply to expenses paid
or incurred after the date of the enactment of
this Act.
(B) TRANSITION
RULE.—In the case of
any expenses described in section 263(j) of the
Internal Revenue Code of 1986, as added by
this subsection, which were paid or incurred on
or before the date of the enactment of this Act,
the taxpayer may elect, at such time and in
such manner as the Secretary of the Treasury
may prescribe, to amortize the unamortized
portion of such expenses over the 36-month pe-
riod beginning with the month in which the
date of the enactment of this Act occurs. For
purposes of this subparagraph, the unamortized
portion of any expense is the amount remaining
unamortized as of the first day of the 36-month
period.
(c) ELECTION TO EXPENSE DELAY RENTAL PAY-
MENTS.—
(1) IN GENERAL.—Section 263 (relating to cap-
ital expenditures), as amended by subsection (b)(1),
is amended by adding at the end the following new
subsection:
‘‘(k) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL
AND GAS WELLS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a), a taxpayer may elect to treat delay rental pay-
ments incurred in connection with the development
of oil or gas within the United States (as defined in
section 638) as payments which are not chargeable
to capital account. Any payments so treated shall be
allowed as a deduction in the taxable year in which
paid or incurred.
‘‘(2) DELAY RENTAL PAYMENTS.—For purposes
of paragraph (1), the term ‘delay rental payment’
means an amount paid for the privilege of deferring
development of an oil or gas well.’’
(2) 
CONFORMING
AMENDMENT.—Section
263A(c)(3), as amended by subsection (b)(2), is
amended by inserting ‘‘263(k),’’ after ‘‘263(j),’’.
(3) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendments made
by this subsection shall apply to payments made
or incurred after the date of the enactment of
this Act.
(B) TRANSITION
RULE.—In the case of
any payments described in section 263(k) of the
Internal Revenue Code of 1986, as added by
this subsection, which were made or incurred on
or before the date of the enactment of this Act,
the taxpayer may elect, at such time and in
such manner as the Secretary of the Treasury
may prescribe, to amortize the unamortized
portion of such payments over the 36-month pe-
riod beginning with the month in which the
date of the enactment of this Act occurs. For
purposes of this subparagraph, the unamortized
portion of any payment is the amount remain-
ing unamortized as of the first day of the 36-
month period.
SEC. 224. EXTENSION OF SPUDDING RULE.
(a) IN GENERAL.—Section 461(i)(2)(A) (relating to
special rule for spudding of oil or gas wells) is amended
by striking ‘‘90th day’’ and inserting ‘‘180th day’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1998.
TITLE III—FOREIGN OIL RELI-
ANCE REVERSAL PROVISIONS
SEC. 300. PURPOSE.
The purpose of this title is to reverse the trend of
increased foreign dependence of oil and gas by encour-
aging exploration and development of oil and gas reserves
in the United States to achieve the goal of doubling cur-
rent domestic oil and gas production.
SEC. 301. CRUDE OIL AND NATURAL GAS EXPLORATION
AND DEVELOPMENT CREDIT.
(a) CRUDE OIL AND NATURAL GAS EXPLORATION
AND DEVELOPMENT CREDIT.—Subpart B of part IV of
subchapter A of chapter 1 is amended by adding at the
end the following new section:
‘‘SEC. 30B. CRUDE OIL AND NATURAL GAS EXPLORATION
AND DEVELOPMENT CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the crude oil and natural gas exploration and development
credit determined under this section for any applicable
taxable year shall be an amount equal to the sum of—
‘‘(1) 20 percent of so much of the taxpayer’s
qualified investment for the taxable year as does not
exceed $1,000,000, plus
‘‘(2) 10 percent of so much of such qualified in-
vestment for the taxable year as exceeds $1,000,000.
‘‘(b) APPLICABLE TAXABLE YEAR.—For purposes of
subsection (a)—
‘‘(1) IN GENERAL.—The term ‘applicable tax-
able year’ means any taxable year during which the
imports of foreign crude and oil product are deter-
mined by the Secretary of Energy to exceed 50 per-
cent of the amount of United States crude and oil
product consumption for such year.
‘‘(2) DETERMINATION.—A determination under
paragraph (1) shall be made not later than March
1 of each year with respect to the preceding calendar
year.
‘‘(c) QUALIFIED INVESTMENT.—For purposes of this
section, the term ‘qualified investment’ means amounts
paid or incurred by a taxpayer—
‘‘(1) for the purpose of ascertaining the exist-
ence, location, extent, or quality of any crude oil or
natural gas deposit, including core testing and drill-
ing test wells located in the United States or in a
possession of the United States as defined in section
638, or
‘‘(2) for the purpose of developing a property
(located in the United States or in a possession of
the United States as defined in section 638) on
which there is a reservoir capable of commercial pro-
duction and such amounts are paid or incurred in
connection with activities which are intended to re-
sult in the recovery of crude oil or natural gas on
such property.
‘‘(d) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) LIABILITY FOR TAX.—The credit allowable
under subsection (a) for any taxable year shall not
exceed the excess (if any) of—
‘‘(A) the sum of—
‘‘(i) the taxpayer’s tentative minimum
tax liability under section 55(b) for such
taxable year determined without regard to
this section, plus
‘‘(ii) the taxpayer’s regular tax liabil-
ity for such taxable year (as defined in sec-
tion 26(b)), over
‘‘(B) the sum of the credits allowable
against the taxpayer’s regular tax liability
under part IV (other than section 43 and this
section).
‘‘(2) APPLICATION OF THE CREDIT.—Each of
the following amounts shall be reduced by the full
amount of the credit determined under paragraph
(1):
‘‘(A) the taxpayer’s tentative minimum tax
under section 55(b) for the taxable year, and
‘‘(B) the taxpayer’s regular tax liability (as
defined in section 26(b)) reduced by the sum of
the credits allowable under part IV (other than
section 43 and this section).
If the amount of the credit determined under para-
graph (1) exceeds the amount described in subpara-
graph (B) of paragraph (2), then the excess shall be
deemed to be the adjusted net minimum tax for such
taxable year for purposes of section 53.
‘‘(3) CARRYBACK AND CARRYFORWARD OF UN-
USED CREDIT.—
‘‘(A) IN GENERAL.—If the amount of the
credit allowed under subsection (a) for any tax-
able year exceeds the limitation under para-
graph (1) for such taxable year (hereafter in
this paragraph referred to as the ‘unused credit
year’), such excess shall be—
‘‘(i) an oil and gas exploration and de-
velopment credit carryback to each of the
3 taxable years preceding the unused cred-
it year, and
‘‘(ii) an oil and gas exploration and
development credit carryforward to each of
the 15 taxable years following the unused
credit year,
and shall be added to the amount allowable as
a credit under subsection (a) for such years, ex-
cept that no portion of the unused oil and gas
exploration and development credit for any tax-