I
103D CONGRESS
1ST SESSION
H. R. 1024
To amend the Internal Revenue Code of 1986 to provide incentives for
domestic oil and natural gas exploration and production, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 22, 1993
Mr. ANDREWS of Texas (for himself and Mr. BREWSTER) 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 provide
incentives for domestic oil and natural gas exploration
and 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; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Energy Independence, Infrastructure, and Investment
Act of 1993’’.
(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
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
TITLE I—ENERGY
INDEPENDENCE INCENTIVES
SEC. 101. FEE ON IMPORTED CRUDE OIL AND REFINED PE-
TROLEUM PRODUCTS.
(a) IN GENERAL.—Subtitle E (relating to alcohol, to-
bacco, and certain other excise taxes) is amended by add-
ing at the end thereof the following new chapter:
‘‘CHAPTER 55—IMPORTED CRUDE OIL AND
REFINED PETROLEUM PRODUCTS
‘‘Sec. 5891. Imposition of tax.
‘‘Sec. 5892. Definitions.
‘‘Sec. 5893. Registration.
‘‘Sec. 5894. Procedures; returns; penalties.
‘‘Sec. 5895. Adjustment for inflation.
‘‘SEC. 5891. IMPOSITION OF TAX.
‘‘(a) IMPOSITION OF TAX.—In addition to any other
tax imposed under this title, an excise tax is hereby im-
posed on—
‘‘(1) the first sale within the United States of
each barrel (or its equivalent) of—
‘‘(A) any crude oil, or
‘‘(B) any refined petroleum product,
that has been imported into the United States, and
‘‘(2) the use within the United States of each
barrel (or its equivalent) of—
‘‘(A) any crude oil, or
‘‘(B) any refined petroleum product,
that has been imported into the United States if no
tax has been imposed with respect to such crude oil
or refined petroleum product prior to such use.
‘‘(b) RATE OF TAX.—
‘‘(1) CRUDE OIL.—For purposes of paragraphs
(1)(A) and (2)(A) of subsection (a) the rate of tax
on any barrel (or its equivalent) shall be the excess,
if any, of—
‘‘(A) $25, over
‘‘(B) the energy policy price per barrel of
crude oil.
‘‘(2) REFINED
PETROLEUM
PRODUCT.—For
purposes of paragraphs (1)(B) and (2)(B) of sub-
section (a), the rate of tax on any barrel (or its
equivalent) shall be equal to—
‘‘(A) $3, plus
‘‘(B) the tax determined under paragraph
(1) of this subsection.
‘‘(3) FRACTIONAL PARTS OF BARRELS.—In the
case of a fraction of a barrel, the tax imposed by
subsection (a) shall be the same fraction of the
amount of such tax imposed on the whole barrel.
‘‘(c) DETERMINATION OF ENERGY POLICY PRICE.—
‘‘(3) REFINED
PETROLEUM
PRODUCT.—The
term ‘refined petroleum product’ shall have the same
meaning given to such term by section 3(5) of the
Emergency Petroleum Allocation Act of 1973 (15
U.S.C. 752(5)).
‘‘(4) EXPORT.—The term ‘export’ includes ship-
ment to a possession of the United States; and the
term ‘exported’ includes shipment to a possession of
the United States.
‘‘SEC. 5893. REGISTRATION.
‘‘Every person subject to tax under section 5891
shall, before incurring any liability for tax under such sec-
tion, register with the Secretary.
‘‘SEC. 5894. PROCEDURES; RETURNS; PENALTIES.
‘‘For purposes of this title, the tax imposed by section
5891 shall be treated in the same manner as the tax im-
posed by section 4986 (as in effect before its repeal).
‘‘SEC. 5895. ADJUSTMENT FOR INFLATION.
‘‘In the case of any calendar year beginning after
1993, the dollar amount referred to in section
5891(b)(1)(A) and section 5891(b)(2)(A) shall be in-
creased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year, by substituting ‘calendar year 1992’ for
‘calendar year 1989’ in subparagraph (B)
thereof.’’.
(b) CONFORMING AMENDMENT.—The table of chap-
ters for subtitle E is amended by adding at the end thereof
the following new item:
‘‘Chapter 55. Imported crude oil and refined petroleum prod-
ucts.’’.
(c) DEDUCTIBILITY OF IMPORTED OIL TAX.—The
first sentence of section 164(a) (relating to deductions for
taxes) is amended by inserting after paragraph (5) the fol-
lowing new paragraph:
‘‘(6) The imported oil taxes imposed by section
5891.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to sales and use of
imported crude oil or refined petroleum products on or
after the date of the enactment of this Act.
TITLE II—INFRASTRUCTURE
INCENTIVES
SEC. 201. 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, 1992.
SEC. 202. 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, 1992.
SEC. 203. 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 (relating to foreign tax credit,
etc.) is amended by adding the following new section:
‘‘SEC. 30A. CRUDE OIL AND NATURAL GAS EXPLORATION
AND DEVELOPMENT CREDIT.
‘‘(a) GENERAL RULE.—There shall be allowed as a
credit against the tax imposed by this chapter for the tax-
able year 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) QUALIFIED INVESTMENT.—For purposes of this
section, the term ‘qualified investment’ means amounts
paid or incurred—
‘‘(1) for geological and geophysical expenditures
incurred 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,
‘‘(2) for the purpose of drilling and equipping
crude oil and natural gas wells (including pollution
control equipment used in connection with such
wells), or
‘‘(3) for the purpose of performing secondary or
tertiary recovery techniques,
on properties located in the United States or in a posses-
sion of the United States as defined in section 638 (relat-
ing to Continental Shelf areas), but only to the extent that
the expenditure is not a qualified cost under section 30B.
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) LIABILITY FOR TAX.—The credit allowable
under subsection (a) for any taxable year shall not
exceed—
‘‘(A) the sum of—
‘‘(i) the taxpayer’s minimum tax li-
ability under section 55(a) for such taxable
year, 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 subparts A and D of this part and sec-
tions 27, 28, 29, and 30.
‘‘(2) 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 (hereinafter 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. If
any portion of such excess is a carryback to a
taxable year beginning on or before the date of
the enactment of this section, this section shall
be deemed to have been in effect for such tax-
able year for purposes of allowing such
carryback as a credit under this section. The
entire amount of the unused credit shall be car-
ried to the earliest of the 18 taxable years to
which such credit may be carried, and then to
each of the other 17 taxable years to the extent
that, because of the limitation contained in
paragraph (1), such unused credit may not be
added for a prior taxable year to which such
unused credit may be carried.
‘‘(B) LIMITATIONS.—The amount of the
unused credit which may be taken into account
under subparagraph (A) for any succeeding tax-
able year shall not exceed the amount by which
the limitation provided by paragraph (1) for
such taxable year exceeds the sum of—
‘‘(i) the credit allowable under sub-
section (a) for such taxable year, and
‘‘(ii) the amounts which, by reason of
this paragraph, are added to the amount
allowable for such taxable year and which
are attributable to taxable years preceding
the unused credit year.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) AGGREGATION OF QUALIFIED INVESTMENT
EXPENSES.—
‘‘(A) CONTROLLED GROUPS; COMMON CON-
TROL.—In determining the amount of the cred-
it under this section, all members of the same
controlled group of corporations (within the
meaning of section 52(a)) and all persons under
common control (within the meaning of section
52(b)) shall be treated as a single taxpayer for
purposes of this section.
‘‘(B) APPORTIONMENT
OF
CREDIT.—The
credit (if any) allowable by this section to mem-
bers of any group (or to any person) described
in subparagraph (A) shall be such member’s or
person’s proportionate share of the qualified in-
vestment expenses giving rise to the credit de-
termined under regulations prescribed by the
Secretary.
‘‘(2) PARTNERSHIPS, S
CORPORATIONS, ES-
TATES AND TRUSTS.—
‘‘(A) PARTNERSHIPS
AND
S
CORPORA-
TIONS.—In the case of a partnership, the credit
shall be allocated among partners under regula-
tions prescribed by the Secretary. A similar rule
shall apply in the case of an S corporation and
its shareholders.
‘‘(B) PASS-THRU
IN
THE
CASE
OF
ES-
TATES
AND
TRUSTS.—Under regulations pre-
scribed by the Secretary, rules similar to the
rules of subsection (d) of section 52 shall apply.
‘‘(3) ADJUSTMENTS
FOR
CERTAIN
ACQUISI-
TIONS AND DISPOSITIONS.—Under regulations pre-
scribed by the Secretary, rules similar to the rules
contained in section 41(f)(3) shall apply with respect
to the acquisition or disposition of a taxpayer.
‘‘(4) SHORT TAXABLE YEARS.—In the case of
any short taxable year, qualified investment expenses
shall be annualized in such circumstances and under
such methods as the Secretary may prescribe by
regulation.
‘‘(5) DENIAL OF DOUBLE BENEFIT.—
‘‘(A) DISALLOWANCE
OF
DEDUCTION.—
Any deduction allowable under this chapter for
any costs taken into account in computing the
amount of the credit determined under sub-
section (a) shall be reduced by the amount of
such credit attributable to such costs.
‘‘(B) BASIS ADJUSTMENTS.—For purposes
of this subtitle, if a credit is determined under
this section for any expenditure with respect to
any property, the increase in the basis of such
property which would (but for this subsection)
result from such expenditures shall be reduced
by the amount of the credit so allowed.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subpart B of part IV of subchapter A of chapter 1
is amended by adding at the end thereof the following new
item:
‘‘Sec. 30A. Crude oil and natural gas exploration and development
credit.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures paid or incurred
after the date of enactment of this Act in taxable years
ending after such date.
SEC. 204. MARGINAL PRODUCTION CREDIT.
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to foreign tax credit, etc.),
as amended by section 203(a), is amended by adding the
following new section:
‘‘SEC. 30B. MARGINAL PRODUCTION CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year to the producer of eligible crude oil
or eligible natural gas an amount equal to 20 percent of
the qualified cost of each barrel of such oil or each barrel-
of-oil equivalent of such gas (or fractional part thereof)
produced during the taxable year.
‘‘(b) QUALIFIED COST.—For purposes of this section,
the term ‘qualified cost’ means, with respect to each barrel
of eligible crude oil or each barrel-of-oil equivalent of eligi-
ble natural gas, the sum of—
‘‘(1) such barrel’s or barrel-of-oil equivalent’s
pro rata share of the lease operating expenses (other
than business overhead expenses) paid or incurred
by the producer of such barrel or barrel-of-oil equiv-
alent during the taxable year in which such barrel
or barrel-of-oil equivalent was produced, plus
‘‘(2) the amount of severance tax paid or in-
curred by such producer with respect to such barrel
or barrel-of-oil equivalent.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE CRUDE OIL.—The term ‘eligible
crude oil’ means domestic crude oil which is—
‘‘(A) from a stripper well property,
‘‘(B) heavy oil,
‘‘(C) oil recovered through a tertiary recov-
ery method, or
‘‘(D) harsh environment oil.
‘‘(2) ELIGIBLE NATURAL GAS.—The term ‘eligi-
ble natural gas’ means gas, other than gas qualify-
ing for the credit under section 29, which is—
‘‘(A) from a stripper well property, or
‘‘(B) natural gas recovered through a ter-
tiary recovery method.
‘‘(3) OTHER DEFINITIONS.—
‘‘(A) CRUDE
OIL.—The term ‘crude oil’
has the meaning given to such term by the
June 1979 energy regulations.
‘‘(B) BARREL.—The term ‘barrel’ means
42 United States gallons.
‘‘(C) BARREL-OF-OIL
EQUIVALENT.—The
term ‘barrel-of-oil equivalent’ with respect to
any natural gas means that amount of such
natural gas which has a Btu content of 5.8 mil-
lion.
‘‘(D) DOMESTIC.—The term ‘domestic’
when used with respect to crude oil, means
crude oil produced from a property located in
the United States or a possession of the United
States.
‘‘(E) UNITED STATES.—The term ‘United
States’ has the meaning given to such term by
paragraph (1) of section 638 (relating to Con-
tinental Shelf areas).
‘‘(F) 
POSSESSION
OF
THE
UNITED
STATES.—The term ‘possession of the United
States’ has the meaning given to such term by
paragraph (2) of section 638.
regulations as such terms existed on Octo-
ber 30, 1979.
‘‘(iv) CONTINUED
APPLICATION
OF
REGULATIONS
AFTER
DECONTROL.—En-
ergy regulations shall be treated as con-
tinuing in effect without regard to decon-
trol of oil prices or any other termination
of the application of such regulations.
‘‘(d) SPECIAL RULE FOR OFFSHORE WELLS.—In the
case of eligible crude oil or eligible natural gas produced
from a property located under at least 400 feet (but less
than 1,200 feet) of water, the percentage determined
under the following table shall be substituted for ‘20 per-
cent’ in subsection (a):
‘‘If distance (in feet) of the property
under water is—
At least
But less than
The percentage is—
400
600
5 percent
600
900
10 percent
900
1,200
15 percent
‘‘(e) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) LIABILITY FOR TAX.—The credit allowable
under subsection (a) for any taxable year shall not
exceed—
‘‘(A) the sum of—
‘‘(i) the taxpayer’s minimum tax li-
ability under section 55(a) for such taxable
year, 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 subparts A and D of this part and sec-
tions 27, 28, 29, 30, and 30A.
‘‘(2) 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 (hereinafter in
this paragraph referred to as the ‘unused credit
year’), such excess shall be—
‘‘(i) an oil and gas production credit
carryback to each of the 3 taxable years
preceding the unused credit year, and
‘‘(ii) an oil and gas production 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. If
any portion of such excess is a carryback to a
taxable year beginning on or before the date of
the enactment of this section, this section shall
be deemed to have been in effect for such tax-
able year for purposes of allowing such
carryback as a credit under this section. The
entire amount of the unused credit shall be car-
ried to the earliest of the 18 taxable years to
which such credit may be carried, and then to
each of the other 17 taxable years to the extent
that, because of the limitation contained in
paragraph (1), such unused credit may not be
added for a prior taxable year to which such
unused credit may be carried.
‘‘(B) LIMITATIONS.—The amount of the
unused credit which may be taken into account
under subparagraph (A) for any succeeding tax-
able year shall not exceed the amount by which
the limitation provided by paragraph (1) for
such taxable year exceeds the sum of—
‘‘(i) the credit allowable under sub-
section (a) for such taxable year, and
‘‘(ii) the amounts which, by reason of
this paragraph, are added to the amount
allowable for such taxable year and which
are attributable to taxable years preceding
the unused credit year.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subpart B of part IV of subchapter A of chapter 1,
as amended by section 203(b), is amended by adding at
the end thereof the following new item:
‘‘Sec. 30B. Marginal production credit.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures paid or incurred
after the date of enactment of this Act in taxable years
ending after such date.
SEC. 205. EXPANSION OF ENHANCED OIL RECOVERY
CREDIT.
(a) IN GENERAL.—Section 43(a) (relating to en-
hanced oil recovery credit) is amended to read as follows:
‘‘(a) GENERAL RULE.—For purposes of section 38,
the enhanced oil recovery credit for any taxable year is
an amount equal to—
‘‘(1) 15 percent of the taxpayer’s qualified en-
hanced oil recovery costs for such taxable year, plus
‘‘(2) in the case of a taxpayer (other than an
integrated oil company as defined in section
291(b)(4)), 15 percent of the taxpayer’s advanced
secondary recovery costs for such taxable year.’’.
(b) ADVANCED
SECONDARY
RECOVERY
COSTS,
ETC.—Section 43(c) (defining qualified enhanced oil re-
covery costs) is amended by redesignating paragraphs (3)
and (4) as paragraphs (4) and (5), respectively, and by
inserting after paragraph (2) the following new paragraph:
‘‘(3) 
ADVANCED
SECONDARY
RECOVERY
COSTS.—
‘‘(A) IN GENERAL.—The term ‘advanced
secondary recovery costs’ means any of the fol-
lowing:
‘‘(i) Any amount paid or incurred dur-
ing the taxable year for tangible prop-
erty—
‘‘(I) which is an integral part of
a qualified advanced secondary recov-
ery project, and
‘‘(II) with respect to which de-
preciation (or amortization in lieu of
depreciation) is allowable under this
chapter.
‘‘(ii) Any intangible drilling and devel-
opment costs—