subparagraph (B) and inserting ‘‘, or’’, and by adding at 
the end the following new subparagraph: 
‘‘(C) is a qualified natural gas supply con-
tract (as defined in section 148(b)(4)).’’. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
SEC. 211. PREPAYMENT OF PREMIUM LIABILITY FOR COAL 
INDUSTRY HEALTH BENEFITS. 
(a) IN GENERAL.—Section 9704 (relating to liability 
of assigned operators) is amended by adding at the end 
the following new subsection: 
‘‘(j) PREPAYMENT OF PREMIUM LIABILITY.—
‘‘(1) IN GENERAL.—If—
‘‘(A) any assigned operator who is a mem-
ber of a controlled group of corporations (with-
in the meaning of section 52(a)) makes a pay-
ment meeting the requirements of paragraph 
(2) to the Combined Fund, and 
‘‘(B) the common parent of such group—
‘‘(i) is jointly and severally liable for 
any premium which would (but for this 
subsection) be required to be paid by such 
operator, and
‘‘(ii) provides security which meets the 
requirements of paragraph (3), 
then no person (other than such common parent) 
shall be liable for any premium for which such oper-
ator would otherwise be liable. 
‘‘(2) REQUIREMENTS.—A payment meets the 
requirements of this paragraph if—
‘‘(A) the amount of the payment is not less 
than the present value of the total premium li-
ability of the assigned operator for its assignees 
under this chapter with respect to the Com-
bined Fund (as determined by the operator’s 
enrolled 
actuary, 
as 
defined 
in 
section 
7701(a)(35)), using actuarial methods and as-
sumptions each of which is reasonable and 
which are reasonable in the aggregate, as deter-
mined by such enrolled actuary, 
‘‘(B) a signed actuarial report is filed with 
the Secretary of Labor by such enrolled actuary 
containing—
‘‘(i) the date of the actuarial valuation 
applicable to the report, and 
‘‘(ii) a statement by the enrolled actu-
ary signing the report that to the best of 
the actuary’s knowledge the report is com-
plete and accurate and that in the actu-
ary’s opinion the actuarial assumptions 
used are in the aggregate reasonably re-
lated to the experience of the operator and 
to reasonable expectations, and 
‘‘(C) a description of the security described 
in paragraph (3) is filed with the Secretary of 
Labor by the common parent, and 
‘‘(D) 30 calendar days have elapsed after 
the report required by subparagraph (B), and 
the description required by subparagraph (C), 
are filed with the Secretary of Labor, and the 
Secretary of Labor has not notified the as-
signed operator in writing that the require-
ments of this paragraph have not been satisfied. 
‘‘(3) SECURITY.—Security meets the require-
ments of this paragraph if—
‘‘(A) the security (in the form of a bond, 
letter of credit, or cash escrow) is provided to 
the trustees of the 1992 UMWA Benefit Plan, 
solely for the purpose of paying premiums for 
beneficiaries described in section 9712(b)(2)(B), 
equal in amount to one year’s liability of the as-
signed operator under section 9711, determined
by using the average cost of such operator’s li-
ability during its prior 3 calendar years; and 
‘‘(B) the security will remain in place for 
5 years. 
‘‘(4) USE OF PREPAYMENT.—Any payment to 
which this subsection applies (and earnings thereon) 
shall be used exclusively to pay premiums which 
would (but for this subsection) be required to be 
paid by the assigned operator making such pay-
ment.’’
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
TITLE III—PRODUCTION 
SEC. 301. OIL AND GAS FROM MARGINAL WELLS. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business credits) is 
amended by adding at the end the following: 
‘‘SEC. 45I. CREDIT FOR PRODUCING OIL AND GAS FROM 
MARGINAL WELLS. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the marginal well production credit for any taxable year 
is an amount equal to the product of—
‘‘(1) the credit amount, and
‘‘(2) the qualified credit oil production and the 
qualified natural gas production which is attrib-
utable to the taxpayer. 
‘‘(b) CREDIT AMOUNT.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The credit amount is—
‘‘(A) $3 per barrel of qualified crude oil 
production, and 
‘‘(B) 50 cents per 1,000 cubic feet of 
qualified natural gas production. 
‘‘(2) REDUCTION AS OIL AND GAS PRICES IN-
CREASE.—
‘‘(A) IN GENERAL.—The $3 and 50 cents 
amounts under paragraph (1) shall each be re-
duced (but not below zero) by an amount which 
bears the same ratio to such amount (deter-
mined without regard to this paragraph) as—
‘‘(i) the excess (if any) of the applica-
ble reference price over $15 ($1.67 for 
qualified natural gas production), bears to 
‘‘(ii) $3 ($0.33 for qualified natural 
gas production). 
The applicable reference price for a taxable 
year is the reference price of the calendar year
preceding the calendar year in which the tax-
able year begins. 
‘‘(B) INFLATION
ADJUSTMENT.—In the 
case of any taxable year beginning in a calendar 
year after 2003, each of the dollar amounts 
contained in subparagraph (A) shall be in-
creased to an amount equal to such dollar 
amount multiplied by the inflation adjustment 
factor for such calendar year (determined under 
section 43(b)(3)(B) by substituting ‘2002’ for 
‘1990’). 
‘‘(C) REFERENCE PRICE.—For purposes of 
this paragraph, the term ‘reference price’ 
means, with respect to any calendar year—
‘‘(i) in the case of qualified crude oil 
production, the reference price determined 
under section 29(d)(2)(C), and 
‘‘(ii) in the case of qualified natural 
gas production, the Secretary’s estimate of 
the annual average wellhead price per 
1,000 cubic feet for all domestic natural 
gas. 
‘‘(c) QUALIFIED CRUDE OIL
AND NATURAL GAS 
PRODUCTION.—For purposes of this section—
‘‘(1) IN GENERAL.—The terms ‘qualified crude 
oil production’ and ‘qualified natural gas production’ 
mean domestic crude oil or natural gas which is pro-
duced from a qualified marginal well. 
‘‘(2) LIMITATION ON AMOUNT OF PRODUCTION 
WHICH MAY QUALIFY.—
‘‘(A) IN GENERAL.—Crude oil or natural 
gas produced during any taxable year from any 
well shall not be treated or qualified crude oil 
production or qualified natural gas production 
to the extent production from the well during 
the taxable year exceeds 1,095 barrels or barrel 
equivalents. 
‘‘(B) PROPORTIONATE REDUCTIONS.—
‘‘(i) SHORT TAXABLE YEARS.—In the 
case of a short taxable year, the limitations 
under this paragraph shall be proportion-
ately reduced to reflect the ratio which the 
number of days in such taxable year bears 
to 365. 
‘‘(ii) WELLS NOT IN PRODUCTION EN-
TIRE YEAR.—In the case of a well which is 
not capable of production during each day 
of a taxable year, the limitations under 
this paragraph applicable to the well shall
be proportionately reduced to reflect the 
ratio which the number of days of produc-
tion bears to the total number of days in 
the taxable year. 
‘‘(3) DEFINITIONS.—
‘‘(A) QUALIFIED
MARGINAL
WELL.—The 
term ‘qualified marginal well’ means a domestic 
well—
‘‘(i) the production from which during 
the taxable year is treated as marginal 
production under section 613A(c)(6), or 
‘‘(ii) which, during the taxable year—
‘‘(I) has average daily production 
of not more than 25 barrel equiva-
lents, and 
‘‘(II) produces water at a rate 
not less than 95 percent of total well 
effluent. 
‘‘(B) CRUDE OIL, ETC.—The terms ‘crude 
oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have 
the meanings given such terms by section 
613A(e). 
‘‘(C) BARREL
EQUIVALENT.—The term 
‘barrel equivalent’ means, with respect to nat-
ural gas, a conversation ratio of 6,000 cubic 
feet of natural gas to 1 barrel of crude oil. 
‘‘(d) OTHER RULES.—
‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX-
PAYER.—In the case of a qualified marginal well in 
which there is more than one owner of operating in-
terests in the well and the crude oil or natural gas 
production exceeds the limitation under subsection 
(c)(2), qualifying crude oil production or qualifying 
natural gas production attributable to the taxpayer 
shall be determined on the basis of the ratio which 
taxpayer’s revenue interest in the production bears 
to the aggregate of the revenue interests of all oper-
ating interest owners in the production. 
‘‘(2) OPERATING
INTEREST
REQUIRED.—Any 
credit under this section may be claimed only on 
production which is attributable to the holder of an 
operating interest. 
‘‘(3) PRODUCTION
FROM
NONCONVENTIONAL 
SOURCES
EXCLUDED.—In the case of production 
from a qualified marginal well which is eligible for 
the credit allowed under section 29 for the taxable 
year, no credit shall be allowable under this section 
unless the taxpayer elects not to claim the credit 
under section 29 with respect to the well.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) is amended by striking ‘‘plus’’ at the end of 
paragraph (16), by striking the period at the end of para-
graph (17) and inserting ‘‘, plus’’, and by adding at the 
end the following: 
‘‘(18) the marginal oil and gas well production 
credit determined under section 45I(a).’’. 
(c) CARRYBACK.—Subsection (a) of section 39 (relat-
ing to carryback and carryforward of unused credits gen-
erally) is amended by adding at the end the following: 
‘‘(3) 10-YEAR CARRYBACK FOR MARGINAL OIL 
AND GAS WELL PRODUCTION CREDIT.—In the case 
of the marginal oil and gas well production credit—
‘‘(A) this section shall be applied sepa-
rately from the business credit (other than the 
marginal oil and gas well production credit), 
‘‘(B) paragraph (1) shall be applied by 
substituting ‘10 taxable years’ for ‘1 taxable 
years’ in subparagraph (A) thereof, and 
‘‘(C) paragraph (2) shall be applied—
‘‘(i) by substituting ‘31 taxable years’ 
for ‘21 taxable years’ in subparagraph (A) 
thereof, and
‘‘(ii) by substituting ‘30 taxable years’ 
for ‘20 taxable years’ in subparagraph (A) 
thereof.’’. 
(d) COORDINATION WITH SECTION 29.—Section 
29(a) is amended by striking ‘‘There’’ and inserting ‘‘At 
the election of the taxpayer, there’’. 
(e) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
is amended by adding at the end the following:
‘‘Sec. 45I. Credit for producing oil and gas from marginal wells.’’.
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to production in taxable years be-
ginning after December 31, 2003. 
SEC. 302. TEMPORARY SUSPENSION OF LIMITATION BASED 
ON 65 PERCENT OF TAXABLE INCOME AND 
EXTENSION OF SUSPENSION OF TAXABLE IN-
COME LIMIT WITH RESPECT TO MARGINAL 
PRODUCTION. 
(a) LIMITATION BASED ON 65 PERCENT OF TAX-
ABLE INCOME.—Subsection (d) of section 613A (relating 
to limitation on percentage depletion in case of oil and 
gas wells) is amended by adding at the end the following 
new paragraph: 
‘‘(6) TEMPORARY SUSPENSION OF TAXABLE IN-
COME LIMIT.—Paragraph (1) shall not apply to tax-
able years beginning after December 31, 2003, and
before January 1, 2007, including with respect to 
amounts carried under the second sentence of para-
graph (1) to such taxable years.’’. 
(b) EXTENSION OF SUSPENSION OF TAXABLE IN-
COME LIMIT WITH RESPECT
TO MARGINAL PRODUC-
TION.—Subparagraph (H) of section 613A(c)(6) (relating 
to temporary suspension of taxable income limit with re-
spect to marginal production) is amended by striking 
‘‘2004’’ and inserting ‘‘2007’’. 
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 303. AMORTIZATION OF DELAY RENTAL PAYMENTS. 
(a) IN GENERAL.—Section 167 (relating to deprecia-
tion) is amended by redesignating subsection (h) as sub-
section (i) and by inserting after subsection (g) the fol-
lowing new subsection: 
‘‘(h) AMORTIZATION OF DELAY RENTAL PAYMENTS 
FOR DOMESTIC OIL AND GAS WELLS.—
‘‘(1) IN GENERAL.—Any delay rental payment 
paid or incurred in connection with the development 
of oil or gas wells within the United States (as de-
fined in section 638) shall be allowed as a deduction 
ratably over the 24-month period beginning on the 
date that such payment was paid or incurred.
‘‘(2) HALF-YEAR CONVENTION.—For purposes 
of paragraph (1), any payment paid or incurred dur-
ing the taxable year shall be treated as paid or in-
curred on the mid-point of such taxable year. 
‘‘(3) EXCLUSIVE METHOD.—Except as provided 
in this subsection, no depreciation or amortization 
deduction shall be allowed with respect to such pay-
ments. 
‘‘(4) TREATMENT
UPON
ABANDONMENT.—If 
any property to which a delay rental payment relates 
is retired or abandoned during the 2-year period de-
scribed in paragraph (1), no deduction shall be al-
lowed on account of such retirement or abandon-
ment and the amortization deduction under this sub-
section shall continue with respect to such payment. 
‘‘(5) DELAY RENTAL PAYMENTS.—For purposes 
of this subsection, the term ‘delay rental payment’ 
means an amount paid for the privilege of deferring 
development of an oil or gas well under an oil or gas 
lease.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2003.
SEC. 304. AMORTIZATION OF GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES. 
(a) IN GENERAL.—Section 167 (relating to deprecia-
tion) is amended by redesignating subsection (i) as sub-
section (j) and by inserting after subsection (h) the fol-
lowing new subsection: 
‘‘(i) AMORTIZATION
OF GEOLOGICAL
AND GEO-
PHYSICAL EXPENDITURES.—
‘‘(1) IN
GENERAL.—Any geological and geo-
physical expenses paid or incurred in connection 
with the exploration for, or development of, oil or 
gas within the United States (as defined in section 
638) shall be allowed as a deduction ratably over the 
24-month period beginning on the date that such ex-
pense was paid or incurred. 
‘‘(2) SPECIAL
RULES.—For purposes of this 
subsection, rules similar to the rules of paragraphs 
(2), (3), and (4) of subsection (h) shall apply.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to costs paid or incurred in taxable 
years beginning after December 31, 2003. 
SEC. 305. EXTENSION AND MODIFICATION OF CREDIT FOR 
PRODUCING FUEL FROM A NONCONVEN-
TIONAL SOURCE. 
(a) IN GENERAL.—Section 29 is amended by adding 
at the end the following new subsection:
‘‘(h) EXTENSION FOR OTHER FACILITIES.—
‘‘(1) EXTENSION FOR OIL AND CERTAIN GAS.—
In the case of a well for producing qualified fuels de-
scribed in subparagraph (A) or (B)(i) of subsection 
(c)(1)—
‘‘(A) APPLICATION OF CREDIT FOR NEW 
WELLS.—Notwithstanding subsection (f), this 
section shall apply with respect to such fuels—
‘‘(i) which are produced from a well 
drilled after the date of the enactment of 
this subsection and before January 1, 
2007, and 
‘‘(ii) which are sold not later than the 
close of the 4-year period beginning on the 
date that such well is drilled, or, if earlier, 
January 1, 2010. 
‘‘(B) EXTENSION
OF
CREDIT
FOR
OLD 
WELLS.—Subsection (f)(2) shall be applied by 
substituting ‘2007’ for ‘2003’ with respect to 
wells described in subsection (f)(1)(A) with re-
spect to such fuels. 
‘‘(2) EXTENSION FOR FACILITIES PRODUCING 
QUALIFIED FUEL FROM LANDFILL GAS.—
‘‘(A) IN GENERAL.—In the case of a facil-
ity for producing qualified fuel from landfill gas
which was placed in service after June 30, 
1998, and before January 1, 2007, this section 
shall apply to fuel produced at such facility dur-
ing the 5-year period beginning on the later 
of—
‘‘(i) the date such facility was placed 
in service, or 
‘‘(ii) the date of the enactment of this 
subsection. 
‘‘(B) REDUCTION OF CREDIT FOR CERTAIN 
LANDFILL FACILITIES.—In the case of a facility 
to which paragraph (1) applies and which is 
subject to the 1996 New Source Performance 
Standards/Emissions Guidelines of the Environ-
mental Protection Agency, subsection (a)(1) 
shall be applied by substituting ‘$2’ for ‘$3’. 
‘‘(3) SPECIAL
RULES.—In determining the 
amount of credit allowable under this section solely 
by reason of this subsection—
‘‘(A) DAILY LIMIT.—The amount of quali-
fied fuels sold during any taxable year which 
may be taken into account by reason of this 
subsection with respect to any project shall not 
exceed an average barrel-of-oil equivalent of 
200,000 cubic feet of natural gas per day. Days
before the date the project is placed in service 
shall not be taken into account in determining 
such average. 
‘‘(B) EXTENSION PERIOD TO COMMENCE 
WITH UNADJUSTED CREDIT AMOUNT.—In the 
case of fuels sold during 2003, the dollar 
amount applicable under subsection (a)(1) shall 
be $3 (without regard to subsection (b)(2)). In 
the case of fuels sold after 2003, subparagraph 
(B) of subsection (d)(2) shall be applied by sub-
stituting ‘2003’ for ‘1979’.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to fuel sold after the date of the 
enactment of this Act. 
SEC. 306. BUSINESS RELATED ENERGY CREDITS ALLOWED 
AGAINST REGULAR AND MINIMUM TAX. 
(a) IN GENERAL.—Subsection (c) of section 38 (re-
lating to limitation based on amount of tax) is amended 
by redesignating paragraph (4) as paragraph (5) and by 
inserting after paragraph (3) the following new paragraph: 
‘‘(4) SPECIAL RULES FOR SPECIFIED ENERGY 
CREDITS.—
‘‘(A) IN GENERAL.—In the case of speci-
fied energy credits—
‘‘(i) this section and section 39 shall 
be applied separately with respect to such 
credits, and 
‘‘(ii) in applying paragraph (1) to 
such credits—
‘‘(I) the tentative minimum tax 
shall be treated as being zero, 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 specified 
energy credits). 
‘‘(B) SPECIFIED
ENERGY
CREDITS.—For 
purposes of this subsection, the term ‘specified 
energy credits’ means the credits determined 
under sections 45G, 45H, and 45I.’’. 
(b) 
CONFORMING
AMENDMENTS.—Paragraphs 
(2)(A)(ii)(II) and (3)(A)(ii)(II) of section 38(c) are each 
amended by inserting ‘‘or the specified energy credits’’ 
after ‘‘employee credit’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act.
100
SEC. 307. TEMPORARY REPEAL OF ALTERNATIVE MINIMUM 
TAX PREFERENCE FOR INTANGIBLE DRILL-
ING COSTS. 
(a) IN GENERAL.—Clause (ii) of section 57(a)(2)(E) 
is amended by adding at the end the following new sen-
tence: ‘‘The preceding sentence shall not apply to taxable 
years beginning after December 31, 2003, and before Jan-
uary 1, 2006.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 308. ALLOWANCE OF ENHANCED RECOVERY CREDIT 
AGAINST THE ALTERNATIVE MINIMUM TAX. 
(a) IN GENERAL.—Subparagraph (B) of section 
38(c)(4), as amended by section 306, is amended by add-
ing at the end the following new sentence: ‘‘For taxable 
years beginning after December 31, 2003, and before Jan-
uary 1, 2006, such term includes the credit determined 
under section 43.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003.
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