[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 374 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 374

 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 SENATE OF THE UNITED STATES

             February 16 (legislative day, January 5), 1993

Mr. Nickles (for himself and Mr. Boren) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 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 Representatives 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 otherwise expressly 
provided, whenever in this Act an amendment 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 
provision of the Internal Revenue Code of 1986.

                TITLE I--ENERGY INDEPENDENCE INCENTIVES

SEC. 101. FEE ON IMPORTED CRUDE OIL AND REFINED PETROLEUM PRODUCTS.

    (a) In General.--Subtitle E (relating to alcohol, tobacco, and 
certain other excise taxes) is amended by adding 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 imposed 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 subsection (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.--
            ``(1) In general.--For purposes of this section, the energy 
        policy price with respect to any week during which the tax 
        under subsection (a) is imposed shall be determined by the 
        Secretary and published in the Federal Register on the first 
        day of such week.
            ``(2) Basis of Determination.--For purposes of paragraph 
        (1), the energy policy price for any week is the weighted 
        average international price of a barrel of crude oil for the 
        preceding 4 weeks as determined by the Secretary, after 
        consultation with the Administrator of the Energy Information 
        Administration of the Department of Energy, pursuant to the 
        formula for determining such international price as used in 
        publishing the Weekly Petroleum Status Report and as in effect 
        on the date of the enactment of this section.
    ``(d) Liability for Payment of Tax.--
            ``(1) Sales.--The taxes imposed by subsection (a)(1) shall 
        be paid by the first person who sells the crude oil or refined 
        petroleum product within the United States.
            ``(2) Use.--The taxes imposed by subsection (a)(2) shall be 
        paid by the person who uses the crude oil or refined petroleum 
        product.
            ``(3) Tax-free exports.--
                    ``(A) In general.--Under regulations prescribed by 
                the Secretary, no tax shall be imposed under this 
                chapter on the sale of crude oil or refined petroleum 
                product for export or for resale by the purchaser to a 
                second purchaser for export.
                    ``(B) Proof of export.--Where any crude oil or 
                refined petroleum product has been sold free of tax 
                under subparagraph (A), such subparagraph shall cease 
                to apply with respect to the sale of such crude oil or 
                refined petroleum product, unless, within the 6-month 
                period which begins on the date of the sale, the seller 
                receives proof that the crude oil or refined petroleum 
                product has been exported.

``SEC. 5892. DEFINITIONS.

    ``For purposes of this chapter--
            ``(1) Crude oil.--The term `crude oil' means crude oil 
        other than crude oil produced from a well located in the United 
        States (within the meaning of section 638(2)) or a possession 
        of the United States.
            ``(2) Barrel.--The term `barrel' means 42 United States 
        gallons.
            ``(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 shipment 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 section, 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 imposed by section 4986 (as in 
effect before its repeal).

``SEC. 5890. ADJUSTMENT FOR INFLATION.

    ``In the case of any calendar year beginning after 1993, the dollar 
amount referred to in section 5886(b)(1)(A) and section 5886(b)(2)(A) 
shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                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 chapters for subtitle E is 
amended by adding at the end thereof the following new item:

                              ``Chapter 55. Imported crude oil and 
                                        refined petroleum products.''.
    (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 following 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 DEPLETION REPEALED FOR 
              OIL AND GAS PROPERTIES.

    (a) In General.--Section 613(a) (relating to percentage depletion) 
is amended by striking the second sentence 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 (computed 
without allowances for depletion).''.
    (b) Conforming Amendment.--Section 613A(c)(7) (relating to special 
rules) is amended by striking subparagraph (C) and redesignating 
subparagraph (D) as subparagraph (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 taxable 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 investment 
        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 existence, location, 
        extent, or quality of any crude oil or natural gas deposit, 
        including core testing and drilling 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 possession of the 
United States as defined in section 638 (relating 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 liability 
                        under section 55(a) for such taxable year, plus
                            ``(ii) the taxpayer's regular tax liability 
                        for such taxable year (as defined in section 
                        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 sections 27, 28, 29, and 30.
            ``(2) Carryback and carryforward of unused credit.--
                    ``(A) In general.--If the amount of the credit 
                allowed under subsection (a) for any taxable year 
                exceeds the limitation under paragraph (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 
                        development credit carryback to each of the 3 
                        taxable years preceding the unused credit 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 taxable year for purposes of allowing such 
                carryback as a credit under this section. The entire 
                amount of the unused credit shall be carried 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 taxable 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 subsection 
                        (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 section--
            ``(1) Aggregation of qualified investment expenses.--
                    ``(A) Controlled groups; common control.--In 
                determining the amount of the credit 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 members of any group (or 
                to any person) described in subparagraph (A) shall be 
                such member's or person's proportionate share of the 
                qualified investment expenses giving rise to the credit 
                determined under regulations prescribed by the 
                Secretary.
            ``(2) Partnerships, s corporations, estates and trusts.--
                    ``(A) Partnerships and s corporations.--In the case 
                of a partnership, the credit shall be allocated among 
                partners under regulations 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 estates and 
                trusts.--Under regulations prescribed by the Secretary, 
                rules similar to the rules of subsection (d) of section 
                52 shall apply.
            ``(3) Adjustments for certain acquisitions and 
        dispositions.--Under regulations prescribed 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 subsection (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 subchapter 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 allowed 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 eligible 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 equivalent during the taxable year in 
        which such barrel or barrel-of-oil equivalent was produced, 
        plus
            ``(2) the amount of severance tax paid or incurred 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 recovery 
                method, or
                    ``(D) harsh environment oil.
            ``(2) Eligible natural gas.--The term `eligible natural 
        gas' means gas, other than gas qualifying for the credit under 
        section 29, which is--
                    ``(A) from a stripper well property, or
                    ``(B) natural gas recovered through a tertiary 
                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 million.
                    ``(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 Continental 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.
                    ``(G) Stripper well property.--The term `stripper 
                well property' has the meaning given to such term by 
                subparagraph (E) of section 613A(c)(6).
                    ``(H) Property.--The term `property' means property 
                as defined in section 614.
                    ``(I) Heavy oil.--The term `heavy oil' means all 
                crude oil which is produced from a property if crude 
                oil produced and sold from such property during--
                            ``(i) the last month before July 1979 in 
                        which crude oil was produced and sold from such 
                        property, or
                            ``(ii) the taxable year had a weighted 
                        average gravity of 20 degrees API or less 
                        (corrected to 60 degrees Fahrenheit).
                    ``(J) Tertiary recovery method.--The term `tertiary 
                recovery method' means--
                            ``(i) any method which is described in 
                        subparagraphs (1) through (9) of section 
                        212.78(c) of the October 1979 energy 
                        regulations, or
                            ``(ii) any other method to provide tertiary 
                        enhanced recovery (including steam generation) 
                        which is approved by the Secretary for purposes 
                        of this section.
                    ``(K) Harsh environment oil.--The term `harsh 
                environment oil' means oil produced from a property 
                located north of the 49th parallel or under at least 
                400 feet of water.
                    ``(L) Severance tax.--The term `severance tax' 
                means a tax imposed by a State or political subdivision 
                thereof with respect to the extraction of crude oil.
                    ``(M) Energy regulations.--
                            ``(i) In general.--The term `energy 
                        regulations' means regulations prescribed under 
                        section 4(a) of the Energy Petroleum Allocation 
                        Act of 1973 (15 U.S.C. 753(a)).
                            ``(ii) June 1979 energy regulations.--The 
                        June 1979 energy regulations shall be the terms 
                        of the energy regulations as such terms existed 
                        on June 1, 1979.
                            ``(iii) October 1979 energy regulations.--
                        The October 1979 Energy Regulations shall be 
                        the terms of the energy regulations as such 
                        terms existed on October 30, 1979.
                            ``(iv) Continued application of regulations 
                        after decontrol.--Energy regulations shall be 
                        treated as continuing in effect without regard 
                        to decontrol 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 percent' 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 liability 
                        under section 55(a) for such taxable year, plus
                            ``(ii) the taxpayer's regular tax liability 
                        for such taxable year (as defined in section 
                        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 sections 27, 28, 29, 30, and 30A.
            ``(2) Carryback and carryforward of unused credit.--
                    ``(A) In general.--If the amount of the credit 
                allowed under subsection (a) for any taxable year 
                exceeds the limitation under paragraph (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 taxable year for purposes of allowing such 
                carryback as a credit under this section. The entire 
                amount of the unused credit shall be carried 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 taxable 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 subsection 
                        (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 enhanced 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 enhanced 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 recovery 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 following:
                            ``(i) Any amount paid or incurred during 
                        the taxable year for tangible property--
                                    ``(I) which is an integral part of 
                                a qualified advanced secondary recovery 
                                project, and
                                    ``(II) with respect to which 
                                depreciation (or amortization in lieu 
                                of depreciation) is allowable under 
                                this chapter.
                            ``(ii) Any intangible drilling and 
                        development costs--
                                    ``(I) which are paid or incurred in 
                                connection with a qualified advanced 
                                secondary recovery project, and
                                    ``(II) with respect to which the 
                                taxpayer may make an election under 
                                section 263(c) for the taxable year.
                            ``(iii) Any qualified secondary advanced 
                        injectant expenses which are paid or incurred 
                        in connection with a qualified advanced 
                        secondary recovery project.
                    ``(B) Qualified advanced secondary recovery 
                project.--The term `qualified advanced secondary 
                recovery project' means any project which meets the 
                requirements of subparagraph (C) and which involves 1 
                of the following advanced secondary recovery methods:
                            ``(i) A method which is used to produce 
                        unrecovered oil which remains in a reservoir 
                        after conventional production because of 
                        heterogeneity and mobility differences between 
                        oil and water.
                            ``(ii) A reservoir characterization 
                        technique which pinpoints the location of new 
                        well sites without regard to traditional 
                        spacing requirements (including advanced well 
                        logging, advanced geophysical detection 
                        technologies, advanced geocellular reservoir 
                        computer modeling, and precision drilling).
                            ``(iii) A drilling method in which the 
                        wellbore is deviated from the vertical by a 
                        short- or long-range radius technique at a 
                        direction parallel to the bedding plane.
                            ``(iv) Any other advanced secondary 
                        recovery method approved by the Secretary for 
                        purposes of this section.
                    ``(C) Requirements for qualified advanced secondary 
                recovery project.--
                            ``(i) In general.--A project meets the 
                        requirements of a qualified advanced secondary 
                        recovery project if--
                                    ``(I) such project involves the 
                                application (in accordance with sound 
                                engineering principles) of 1 or more 
                                advanced secondary recovery methods 
                                which can reasonably be expected to 
                                result in more than an insignificant 
                                increase in the amount of crude oil 
                                which will ultimately be recovered,
                                    ``(II) such project is located 
                                within the United States (within the 
                                meaning of section 638(1)), and
                                    ``(III) such project commences 
                                after December 31, 1992.
                            ``(ii) Certification.--A project shall not 
                        be treated as a qualified advanced secondary 
                        recovery project unless the operator submits to 
                        the Secretary (at such times and in such manner 
                        as the Secretary provides) a certification from 
                        a petroleum engineer that the project meets 
                        (and continues to meet) the requirements of 
                        clause (i).''.
    (c) No Double Certification.--Section 43(c), as amended by 
subsection (b), is amended by adding at the end thereof the following 
new paragraph:
            ``(6) Only 1 certification allowed.--For purposes of this 
        section, the term `qualified enhanced oil recovery project' 
        shall not include any project which is certified as a qualified 
        advanced secondary recovery project under paragraph (3) and the 
        term `qualified advanced secondary recovery project' shall not 
        include any project which is certified as an enhanced oil 
        recovery project under paragraph (2).''.
    (d) Conforming Amendments.--
            (1) Paragraph (4) of section 43(c), as redesignated, is 
        amended by inserting ``and qualified advanced secondary 
        recovery costs'' after ``qualified enhanced oil recovery 
        costs''.
            (2) The heading for subsection (c) of section 43 is amended 
        by inserting ``and Qualified Advanced Secondary Recovery 
        Costs'' after ``Costs''.
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply in the case of amounts paid or incurred in taxable years 
        beginning after December 31, 1992.
            (2) Expansion of projects.--For purposes of section 
        43(c)(3)(C)(i)(III) of the Internal Revenue Code of 1986 (as 
        added by subsection (b)), any significant expansion after 
        December 31, 1992, of a project begun before January 1, 1993, 
        shall be treated as a project which commences after December 
        31, 1992.

SEC. 206. EXPANSION OF STRIPPER WELL DEFINITION.

    (a) In General.--Clause (i) of section 613A(c)(6)(E) (defining 
stripper well property) is amended by striking ``15'' and inserting 
``25''.
    (b) Effective Date.--The amendment 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.

                    TITLE III--INVESTMENT INCENTIVES

SEC. 301. AMORTIZATI0N OF GEOLOGICAL AND GEOPHYSICAL COSTS.

    (a) In General.--Section 263 (relating to capital expenditures) is 
amended by adding at the end the following new subsection:
    ``(j) Special Rule for Certain Geological and Geophysical Costs.--
Geological and geophysical costs for the purpose of ascertaining the 
existence, location, extent, or quality of any deposit of oil or gas 
within the United States (within the meaning of section 638(1)) or a 
possession of the United States (within the meaning of section 638(2)) 
shall be allowed as a deduction ratably over the 5-year period 
beginning with the taxable year in which such costs were paid or 
incurred.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to costs paid or incurred after the date of the enactment of this Act 
in taxable years ending after such date.

SEC. 302. DEPRECIATION ADJUSTMENTS NOT TO APPLY TO ENVIRONMENTAL 
              PROPERTY.

    (a) In General.--Subparagraph (B) of section 56(a)(1) (relating to 
depreciation adjustments) is amended to read as follows:
                    ``(B) Exception.--With respect to any oil or gas 
                producer, this paragraph shall not apply to--
                            ``(i) property described in paragraph (1), 
                        (2), (3), or (4) of section 168(f), or
                            ``(ii) environmental improvement assets (as 
                        defined in section 59(k)).''.
    (b) Environmental Improvement Assets.--Section 59 (relating to 
definition and special rules) is amended by adding at the end the 
following new subsection:
    ``(k) Environmental Improvement Assets.--
            ``(1) In general.--For purposes of section 56(a)(1)(B)(ii), 
        the term `environmental improvement asset' means tangible 
        property which is--
                    ``(A) of a character subject to the allowance for 
                depreciation provided in section 167 or is 
                nondepreciable real property;
                    ``(B) used for, or is functionally related to 
                property used for, one or more of the following 
                purposes--
                            ``(i) source reduction,
                            ``(ii) solid waste minimization,
                            ``(iii) waste conversion or recycling,
                            ``(iv) reduction of environmental hazards,
                            ``(v) compliance with environmental 
                        permits, rules, and similar requirements,
                            ``(vi) prevention, containment or control 
                        of unplanned releases, or
                            ``(vii) the manufacture, distribution and 
                        sale of alternate fuels and blending stocks or 
                        fuel additives for reformulated fuels, and
                    ``(C) located and used exclusively in the United 
                States during the taxable year.
        If only a portion of property described in subparagraphs (A) 
        and (C) is described in subparagraph (B), such portion shall be 
        treated as an environmental improvement asset.
            ``(2) Other definitions.--For purposes of this subsection--
                    ``(A) Source reduction.--The term `source 
                reduction' means reduction of the amount of regulated 
                substances or other pollutants from fixed or mobile 
                sources released into the environment if such reduction 
                reduces hazards to public health or environment.
                    ``(B) Waste minimization.--The term `waste 
                minimization' means the reduction in the generation of, 
                or the recovery of commercially usable products from, 
                residual materials which are classified as, or which if 
                disposed would be classified as, solid wastes (within 
                the meaning of the Resource Conservation and Recovery 
                Act).
                    ``(C) Waste conversion or recycling.--The term 
                `waste conversion or recycling' means the processing or 
                conversion of liquid, solid, or gaseous wastes into 
                fuel, energy, or other commercially usable products, 
                and the production of such products if production 
                occurs at the same facility as the conversion.
                    ``(D) Abatement of environmental hazards.--The term 
                `abatement of environmental hazards' includes the 
                abatement, reduction, monitoring, or stabilization of 
                potential human exposure to toxic chemicals, hazardous 
                or extremely hazardous substances, or harmful 
                radiation.
                    ``(E) Unplanned releases.--The term `unplanned 
                releases' means any release of regulated substances 
                (except federally permitted releases), including indoor 
                releases.
                    ``(F) Regulated substance.--The term `regulated 
                substance' includes any substance the release or 
                emission of which is prohibited, limited, or regulated 
                by Federal or State law or by Federal regulations (as 
                determined without regard to whether a particular 
                release would have been prohibited or limited).
                    ``(G) Release.--The term `release' means any 
                spilling, leaking, pouring, discharging, escaping, 
                dumping, or disposing into the environment, including 
                the abandonment or discarding of barrels or other 
                closed receptacles.''.
    (c) Conforming Amendment.--Subparagraph (A) of section 56(g)(4) is 
amended by adding at the end the following new clause:
                            ``(vi) This subparagraph shall not apply to 
                        environmental improvement assets (as defined in 
                        section 59(k)).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 1992.

                                 <all>

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