I 
110TH CONGRESS 
1ST SESSION 
H. R. 586 
To restore fairness in the provision of incentives for oil and gas production, 
and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 19, 2007 
Mr. HINCHEY introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Natural 
Resources, for a period to be subsequently determined by the Speaker, 
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned 
A BILL 
To restore fairness in the provision of incentives for oil 
and gas production, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Energy Fairness for America Act’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
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shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; etc. 
Sec. 2. Termination of deduction for intangible drilling and development costs. 
Sec. 3. Termination of percentage depletion allowance for oil and gas wells. 
Sec. 4. Termination of enhanced oil recovery credit. 
Sec. 5. Termination of certain provisions of the Energy Policy Act of 2005. 
Sec. 6. Termination of certain tax provisions of the Energy Policy Act of 2005. 
Sec. 7. Revaluation of LIFO inventories of large integrated oil companies. 
Sec. 8. Modifications of foreign tax credit rules applicable to dual capacity tax-
payers. 
Sec. 9. Rules relating to foreign oil and gas income. 
Sec. 10. Elimination of deferral for foreign oil and gas extraction income. 
SEC. 2. TERMINATION OF DEDUCTION FOR INTANGIBLE 
DRILLING AND DEVELOPMENT COSTS. 
(a) IN GENERAL.—Section 263(c) is amended by 
adding at the end the following new sentence: ‘‘This sub-
section shall not apply to any taxable year beginning after 
the date of the enactment of this sentence.’’. 
(b) CONFORMING AMENDMENTS.—Paragraphs (2) 
and (3) of section 291(b) are each amended by striking 
‘‘section 263(c), 616(a),’’ and inserting ‘‘section 616(a)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 3. TERMINATION OF PERCENTAGE DEPLETION AL-
LOWANCE FOR OIL AND GAS WELLS. 
(a) IN GENERAL.—Section 613A is amended by add-
ing at the end the following new subsection: 
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‘‘(f) TERMINATION.—For purposes of any taxable 
year beginning after the date of the enactment of this sub-
section, the allowance for percentage depletion shall be 
zero.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 4. TERMINATION OF ENHANCED OIL RECOVERY CRED-
IT. 
(a) IN GENERAL.—Section 43 is amended by adding 
at the end the following new subsection: 
‘‘(f) TERMINATION.—This section shall not apply to 
any taxable year beginning after the date of the enactment 
of this subsection.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 5. TERMINATION OF CERTAIN PROVISIONS OF THE 
ENERGY POLICY ACT OF 2005. 
(a) IN GENERAL.—The following provisions of the 
Energy Policy Act of 2005 are repealed on and after the 
date of the enactment of this Act: 
(1) Section 342 (relating to program on oil and 
gas royalties in-kind). 
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(2) Section 343 (relating to marginal property 
production incentives). 
(3) Section 344 (relating to incentives for nat-
ural gas production from deep wells in the shallow 
waters of the Gulf of Mexico). 
(4) Section 345 (relating to royalty relief for 
deep water production). 
(5) Section 357 (relating to comprehensive in-
ventory of OCS oil and natural gas resources). 
(b) TERMINATION OF ALASKA OFFSHORE ROYALTY 
SUSPENSION.— 
(1) IN
GENERAL.—Section 8(a)(3)(B) of the 
Outer Continental Shelf Lands Act (43 U.S.C. 
1337(a)(3)(B)) is amended by striking ‘‘and in the 
Planning Areas offshore Alaska’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall take effect on and after the 
date of the enactment of this Act. 
SEC. 6. TERMINATION OF CERTAIN TAX PROVISIONS OF 
THE ENERGY POLICY ACT OF 2005. 
(a) ELECTRIC TRANSMISSION PROPERTY TREATED 
AS 15-YEAR PROPERTY.—Section 168(e)(3)(E)(vii) is 
amended by inserting ‘‘, and before the date of the enact-
ment of the Energy Fairness for America Act’’ after 
‘‘April 11, 2005’’. 
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(b) TEMPORARY EXPENSING OF EQUIPMENT USED 
IN REFINING LIQUID FUELS.—Section 179C(c)(1) is 
amended— 
(1) by striking ‘‘January 1, 2012’’ and insert-
ing ‘‘the date of the enactment of the Energy Fair-
ness for America Act’’, and 
(2) by striking ‘‘January 1, 2008’’ and insert-
ing ‘‘the date of the enactment of the Energy Fair-
ness for America Act’’. 
(c) NATURAL GAS DISTRIBUTION LINES TREATED 
AS 15-YEAR PROPERTY.—Section 168(e)(3)(E)(viii) is 
amended by striking ‘‘January 1, 2011’’ and inserting 
‘‘the date of the enactment of the Energy Fairness for 
America Act’’. 
(d) NATURAL GAS GATHERING LINES TREATED AS 
7-YEAR PROPERTY.—Section 168(e)(3)(C)(iv) is amended 
by inserting ‘‘, and before the date of the enactment of 
the Energy Fairness for America Act’’ after ‘‘April 11, 
2005’’. 
(e) DETERMINATION OF SMALL REFINER EXCEP-
TION TO OIL DEPLETION DEDUCTION.—Section 1328(b) 
of the Energy Policy Act of 2005 is amended by inserting 
‘‘and beginning before the date of the enactment of the 
Energy Fairness for America Act’’ after ‘‘this Act’’. 
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(f) AMORTIZATION
OF
GEOLOGICAL
AND
GEO-
PHYSICAL EXPENDITURES.—Section 167(h) is amended 
by adding at the end the following new paragraph: 
‘‘(5) TERMINATION.—This subsection shall not 
apply to any taxable year beginning after the date 
of the enactment of the Energy Fairness for Amer-
ica Act.’’. 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on and after the date of the 
enactment of this Act. 
SEC. 7. REVALUATION OF LIFO INVENTORIES OF LARGE IN-
TEGRATED OIL COMPANIES. 
(a) GENERAL RULE.—Notwithstanding any other 
provision of law, if a taxpayer is an applicable integrated 
oil company for its last taxable year ending in calendar 
year 2006, the taxpayer shall— 
(1) increase, effective as of the close of such 
taxable year, the value of each historic LIFO layer 
of inventories of crude oil, natural gas, or any other 
petroleum product (within the meaning of section 
4611) by the layer adjustment amount, and 
(2) decrease its cost of goods sold for such tax-
able year by the aggregate amount of the increases 
under paragraph (1). 
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If the aggregate amount of the increases under paragraph 
(1) exceed the taxpayer’s cost of goods sold for such tax-
able year, the taxpayer’s gross income for such taxable 
year shall be increased by the amount of such excess. 
(b) LAYER ADJUSTMENT AMOUNT.—For purposes of 
this section— 
(1) IN GENERAL.—The term ‘‘layer adjustment 
amount’’ means, with respect to any historic LIFO 
layer, the product of— 
(A) $18.75, and 
(B) the number of barrels of crude oil (or 
in the case of natural gas or other petroleum 
products, the number of barrel-of-oil equiva-
lents) represented by the layer. 
(2) BARREL-OF-OIL
EQUIVALENT.—The term 
‘‘barrel-of-oil equivalent’’ has the meaning given 
such term by section 29(d)(5) (as in effect before its 
redesignation by the Energy Tax Incentives Act of 
2005). 
(c) APPLICATION OF REQUIREMENT.— 
(1) NO CHANGE IN METHOD OF ACCOUNTING.— 
Any adjustment required by this section shall not be 
treated as a change in method of accounting. 
(2) UNDERPAYMENTS OF ESTIMATED TAX.—No 
addition to the tax shall be made under section 6655 
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of the Internal Revenue Code of 1986 (relating to 
failure by corporation to pay estimated tax) with re-
spect to any underpayment of an installment re-
quired to be paid with respect to the taxable year 
described in subsection (a) to the extent such under-
payment was created or increased by this section. 
(d) APPLICABLE INTEGRATED OIL COMPANY.—For 
purposes of this section, the term ‘‘applicable integrated 
oil company’’ means an integrated oil company (as defined 
in section 291(b)(4) of the Internal Revenue Code of 
1986) which has an average daily worldwide production 
of crude oil of at least 500,000 barrels for the taxable 
year and which had gross receipts in excess of 
$1,000,000,000 for its last taxable year ending during cal-
endar year 2006. For purposes of this subsection all per-
sons treated as a single employer under subsections (a) 
and (b) of section 52 of the Internal Revenue Code of 
1986 shall be treated as 1 person and, in the case of a 
short taxable year, the rule under section 448(c)(3)(B) 
shall apply. 
SEC. 8. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO DUAL CAPACITY TAXPAYERS. 
(a) IN GENERAL.—Section 901 (relating to credit for 
taxes of foreign countries and of possessions of the United 
States) is amended by redesignating subsection (m) as 
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subsection (n) and by inserting after subsection (l) the fol-
lowing new subsection: 
‘‘(m) SPECIAL RULES RELATING TO DUAL CAPACITY 
TAXPAYERS.— 
‘‘(1) GENERAL
RULE.—Notwithstanding any 
other provision of this chapter, any amount paid or 
accrued by a dual capacity taxpayer to a foreign 
country or possession of the United States for any 
period shall not be considered a tax— 
‘‘(A) if, for such period, the foreign coun-
try or possession does not impose a generally 
applicable income tax, or 
‘‘(B) to the extent such amount exceeds 
the amount (determined in accordance with reg-
ulations) which— 
‘‘(i) is paid by such dual capacity tax-
payer pursuant to the generally applicable 
income tax imposed by the country or pos-
session, or 
‘‘(ii) would be paid if the generally ap-
plicable income tax imposed by the country 
or possession were applicable to such dual 
capacity taxpayer. 
Nothing in this paragraph shall be construed to 
imply the proper treatment of any such amount 
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not in excess of the amount determined under 
subparagraph (B). 
‘‘(2) DUAL
CAPACITY
TAXPAYER.—For pur-
poses of this subsection, the term ‘dual capacity tax-
payer’ means, with respect to any foreign country or 
possession of the United States, a person who— 
‘‘(A) is subject to a levy of such country or 
possession, and 
‘‘(B) receives (or will receive) directly or 
indirectly a specific economic benefit (as deter-
mined in accordance with regulations) from 
such country or possession. 
‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 
For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘generally 
applicable income tax’ means an income tax (or 
a series of income taxes) which is generally im-
posed under the laws of a foreign country or 
possession on income derived from the conduct 
of a trade or business within such country or 
possession. 
‘‘(B) EXCEPTIONS.—Such term shall not 
include a tax unless it has substantial applica-
tion, by its terms and in practice, to— 
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‘‘(i) persons who are not dual capacity 
taxpayers, and 
‘‘(ii) persons who are citizens or resi-
dents of the foreign country or posses-
sion.’’ 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxes paid or accrued in 
taxable years beginning after the date of the enact-
ment of this Act. 
(2) 
CONTRARY
TREATY
OBLIGATIONS 
UPHELD.—The amendments made by this section 
shall not apply to the extent contrary to any treaty 
obligation of the United States. 
SEC. 9. RULES RELATING TO FOREIGN OIL AND GAS IN-
COME. 
(a) SEPARATE BASKET FOR FOREIGN TAX CRED-
IT.—Paragraph (1) of section 904(d), as in effect for 
years beginning after 2006, is amended by striking ‘‘and’’ 
at the end of subparagraph (A), by striking the period 
at the end of subparagraph (B) and inserting ‘‘, and’’, 
and by adding at the end the following: 
‘‘(C) foreign oil and gas income.’’ 
(b) DEFINITION.—Section 904(d)(2), as in effect for 
years after 2006, is amended by redesignating subpara-
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