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) a marginal well, or
‘‘(B) a new 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 as qualified crude oil
production or qualified natural gas production
to the extent production from the well during
the taxable year exceeds—
‘‘(i) in the case of a marginal well,
1,095 barrels or barrel equivalents, or
‘‘(ii) in the case of a new well, 5,475
barrels or barrel equivalents.
‘‘(B) SPECIAL RULE WHERE WELL PRO-
DUCES BOTH.—In the case of a new well which
produces crude oil and natural gas, the limita-
tion for any taxable year applicable to natural
gas produced from the well shall be reduced by
the barrel equivalents (expressed in cubic feet)
of the crude oil produced from the well during
the taxable year.
‘‘(C) 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 the 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) MARGINAL WELL.—The term ‘mar-
ginal well’ means a domestic well (other than a
new 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) NEW
WELL.—The term ‘new well’
means a domestic well drilled after December
31, 1994.
‘‘(C) CRUDE OIL, ETC.—The terms ‘crude
oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have
the meanings given such terms by section
613A(e).
‘‘(D) BARREL
EQUIVALENT.—The term
‘barrel equivalent’ means, with respect to natu-
ral gas, a conversion 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 marginal well or new well
in which there is more than one owner of operating
interests 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 as defined in section 614(d).
‘‘(3) PRODUCTION
FROM
NONCONVENTIONAL
SOURCES
EXCLUDED.—In the case of production
from a 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 sec-
tion 29 with respect to the well.’’
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) of such Code is amended by striking ‘‘plus’’
at the end of paragraph (10), by striking the period at
the end of paragraph (11) and inserting ‘‘, plus’’, and by
adding at the end the following new paragraph:
‘‘(12) the new and marginal oil and gas well
production credit determined under section 45C(a).’’
(c) CREDIT ALLOWED AGAINST REGULAR AND MINI-
MUM TAX.—
(1) IN GENERAL.—Subsection (c) of section 38
of such Code (relating to limitation based on amount
of tax) is amended by redesignating paragraph (3)
as paragraph (4) and by inserting after paragraph
(2) the following new paragraph:
‘‘(3) SPECIAL RULES FOR OIL AND GAS PRO-
DUCTION CREDIT.—
‘‘(A) IN GENERAL.—In the case of the oil
and gas production 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) subparagraph (A) 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 oil and
gas production credit).
‘‘(B) OIL
AND
GAS
PRODUCTION
CRED-
IT.—For purposes of this subsection, the term
‘oil and gas production credit’ means the credit
allowable under subsection (a) by reason of sec-
tion 45C(a).’’
(2) CONFORMING AMENDMENT.—Subclause (II)
of section 38(c)(2)(A)(ii) of such Code is amended
by inserting ‘‘or the oil and gas production credit’’
after ‘‘employment credit’’.
(d) COORDINATION WITH SECTION 29.—Section
29(a) of such Code 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
of such Code is amended by adding at the end the follow-
ing item:
‘‘Sec. 45C. Credit for producing oil and gas from new wells and
marginal wells.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to production after the date of the
enactment of this Act.
Æ