[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 595 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                 S. 595

  To amend the Internal Revenue Code of 1986 to establish a graduated 
   response to shrinking domestic oil and gas production and surging 
              foreign oil imports, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 11, 1999

  Mr. Domenici (for himself and Mr. Inhofe) 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 establish a graduated 
   response to shrinking domestic oil and gas production and surging 
              foreign oil imports, 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 ``Domestic Oil and 
Gas Crisis Tax Relief and Foreign Oil Reliance Reversal Act of 1999.''
    (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.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to establish a graduated response to shrinking domestic 
        oil and gas production and surging foreign oil imports;
            (2) to prevent the abandonment of marginal oil and gas 
        wells responsible for half of the domestic oil and gas 
        production of the United States;
            (3) to transform earned tax credits and other tax benefits 
        into working capital for the cash-strapped domestic oil and gas 
        producers and service companies;
            (4) to reverse the trend of increased dependence on foreign 
        oil and gas by encouraging exploration and development of oil 
        and gas reserves in the United States to achieve the goal of 
        doubling current domestic oil and gas production; and
            (5) to provide an emergency procedure for times when 
        foreign imports exceed 60 percent of the total United States 
        crude and oil product consumption, thereby recognizing that 
        when imports exceed a statutory level a national security 
        threat exists that demands Presidential action.

SEC. 3. FINDINGS.

    Congress finds the following:
            (1) Foreign oil consumption in the United States is 
        estimated to be equal to 56 percent of total oil consumption 
        and could reach 68 percent by the year 2010 if current prices 
        prevail.
            (2) The number of oil and gas rigs operating in the United 
        States is at the lowest count since 1944, when records of this 
        number began to be recorded.
            (3) If oil prices do not increase soon, the United States 
        could lose at least half of its marginal wells which, in the 
        aggregate, produce as much oil as the amount of oil the United 
        States imports from Saudi Arabia.
            (4) Oil and gas prices are unlikely to increase for the 
        next several years.
            (5) Declining production, well abandonment, and the lack of 
        exploration and development are shrinking the domestic oil and 
        gas industry.
            (6) It is essential in order for the United States to have 
        a vibrant economy to have a healthy domestic oil and gas 
        industry.
            (7) The world's richest oil producing regions in the Middle 
        East are experiencing great political stability.
            (8) The policy of the United Nations may make Iraq the 
        swing oil producing nation, thereby granting an enemy of the 
        United States a tremendous amount of power.
            (9) Reliance on foreign oil for more than 60 percent of the 
        daily oil and gas consumption in the United States is a 
        national security threat.
            (10) The United States is the leader of the free world and 
        has a worldwide responsibility to promote economic and 
        political security.
            (11) The exercise of traditional responsibilities in the 
        United States and abroad in foreign policy requires that the 
        United States be free of the risk of energy blackmail in times 
        of gas and oil shortages.
            (12) The level of the United States security is directly 
        related to the level of domestic production of oil, natural gas 
        liquids, and natural gas.
            (13) A national energy policy should be developed which 
        ensures that adequate supplies of oil are available at all 
        times free of the threat of embargo or other foreign hostile 
        acts.

SEC. 4. TABLE OF CONTENTS.

    The table of contents of this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code.
Sec. 2. Purposes.
Sec. 3. Findings.
Sec. 4. Table of contents.
    TITLE I--DOMESTIC OIL AND GAS PRODUCTION PRESERVATION PROVISIONS

Sec. 101. Tax credit for marginal domestic oil and natural gas well 
                            production.
Sec. 102. Exclusion of certain amounts received from recovered inactive 
                            wells.
Sec. 103. Enhanced oil recovery credit extended to certain nontertiary 
                            recovery methods.
       TITLE II--DOMESTIC OIL AND GAS INDUSTRY CRISIS TAX RELIEF

Sec. 200. Purpose.
                 Subtitle A--Credits to Cash Provisions

Sec. 201. 10-year carryback for unused minimum tax credit.
Sec. 202. 10-year carryback for percentage depletion for oil and gas 
                            property.
Sec. 203. 10-year net operating loss carryback for losses attributable 
                            to oil servicing companies and mineral 
                            interests of oil and gas producers.
Sec. 204. Waiver of limitations.
                   Subtitle B--Hard Times Tax Relief

Sec. 211. Phase-out of certain minimum tax preferences relating to 
                            energy production.
Sec. 212. Depreciation adjustment not to apply to oil and gas assets.
Sec. 213. Repeal certain adjustments based on adjusted current earnings 
                            relating to oil and gas assets.
Sec. 214. Enhanced oil recovery credit and credit for producing fuel 
                            from a nonconventional source allowed 
                            against minimum tax.
       Subtitle C--Oil-for-Food Program Compensating Tax Benefits

Sec. 220. Purpose.
Sec. 221. Increase in percentage depletion for stripper wells.
Sec. 222. Net income limitation on percentage depletion repealed for 
                            oil and gas properties.
Sec. 223. Election to expense geological and geophysical expenditures 
                            and delay rental payments.
Sec. 224. Extension of Spudding rule.
          TITLE III--FOREIGN OIL RELIANCE REVERSAL PROVISIONS

Sec. 300. Purpose.
Sec. 301. Crude oil and natural gas exploration and development credit.
            TITLE IV--NATIONAL SECURITY EMERGENCY PROVISIONS

Sec. 400. Purpose.
Sec. 401. Duties of the President.
Sec. 402. Congressional review.
Sec. 403. National security and oil production actions.

    TITLE I--DOMESTIC OIL AND GAS PRODUCTION PRESERVATION PROVISIONS

SEC. 101. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL GAS WELL 
              PRODUCTION.

    (a) Purpose.--The purpose of this section is to prevent the 
abandonment of marginal oil and gas wells responsible for half of the 
domestic production of oil and gas in the United States.
    (b) Credit for Producing Oil and Gas From Marginal Wells.--Subpart 
D of part IV of subchapter A of chapter 1 (relating to business 
credits) is amended by adding at the end the following new section:

``SEC. 45D. 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 crude oil production and the qualified 
        natural gas production which is attributable to the taxpayer.
    ``(b) Credit Amount.--For purposes of this section--
            ``(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 increase.--
                    ``(A) In general.--The $3 and 50 cents amounts 
                under paragraph (1) shall each be reduced (but not 
                below zero) by an amount which bears the same ratio to 
                such amount (determined without regard to this 
                paragraph) as--
                            ``(i) the excess (if any) of the applicable 
                        reference price over $14 ($1.56 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 for the calendar year preceding the 
                calendar year in which the taxable year begins.
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2000, 
                each of the dollar amounts contained in subparagraph 
                (A) shall be increased 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 `1999' 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 produced from a 
        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 as 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 proportionately reduced 
                        to reflect the ratio which the number of days 
                        in such taxable year bears to 365.
                            ``(ii) Wells not in production entire 
                        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 production bears to 
                        the total number of days in the taxable year.
            ``(3) Definitions.--
                    ``(A) Marginal well.--The term `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 equivalents, 
                                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 natural 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 taxpayer.--In the case 
        of a marginal 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 operating 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 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.''.
    ``(c) Credit Treated as Business Credit.--Section 38(b) is amended 
by striking ``plus'' at the end of paragraph (11), by striking the 
period at the end of paragraph (12) and inserting ``, plus'', and by 
adding at the end the following new paragraph:
            ``(13) the marginal oil and gas well production credit 
        determined under section 45D(a).''.
    (d) Credit Allowed Against Regular and Minimum Tax.--
            (1) In general.--Subsection (c) of section 38 (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 marginal oil and gas well 
        production credit.--
                    ``(A) In general.--In the case of the marginal oil 
                and gas well 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) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the marginal 
                                oil and gas well production credit).
                    ``(B) Marginal oil and gas well production 
                credit.--For purposes of this subsection, the term 
                `marginal oil and gas well production credit' means the 
                credit allowable under subsection (a) by reason of 
                section 45D(a).''.
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) is amended by inserting ``or the marginal oil 
        and gas well production credit'' after ``employment credit''.
    (e) Carryback.--Subsection (a) of section 39 (relating to carryback 
and carryforward of unused credits generally) is amended by adding at 
the end the following new paragraph:
            ``(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 separately 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 (B) 
                        thereof.''
    (f) Coordination With Section 29.--Section 29(a) is amended by 
striking ``There'' and inserting ``At the election of the taxpayer, 
there''.
    (g) 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 item:

                              ``45D. Credit for producing oil and gas 
                                        from marginal wells.''
    (h) Effective Date.--The amendments made by this section shall 
apply to production after the date of the enactment of this Act.

SEC. 102. EXCLUSION OF CERTAIN AMOUNTS RECEIVED FROM RECOVERED INACTIVE 
              WELLS.

    (a) Purpose.--The purpose of this section is to encourage producers 
to reopen wells that have not been producing oil and gas because the 
wells have been plugged or abandoned.
    (b) In General.--Part III of subchapter B of chapter 1 (relating to 
items specifically excluded from gross income) is amended by 
redesignating section 139 as section 140 and by inserting after section 
138 the following new section:

``SEC. 139. OIL OR GAS PRODUCED FROM A RECOVERED INACTIVE WELL.

    ``(a) In General.--Gross income does not include income 
attributable to independent producer oil from a recovered inactive 
well.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Independent producer oil.--The term `independent 
        producer oil' means crude oil or natural gas in which the 
        economic interest of the independent producer is attributable 
        to an operating mineral interest (within the meaning of section 
        614(d)), overriding royalty interest, production payment, net 
        profits interest, or similar interest.
            ``(2) Crude oil and natural gas.--The terms `crude oil' and 
        `natural gas' have the meanings given such terms by section 
        613A(e).
            ``(3) Recovered inactive well.--The term `recovered 
        inactive well' means a well if--
                    ``(A) throughout the time period beginning any time 
                prior to January 15, 1999, and ending on such date, 
                such well is inactive or has been plugged and 
                abandoned, as determined by the agency of the State in 
                which such well is located that is responsible for 
                regulating such wells, and
                    ``(B) during the 5-year period beginning on the 
                date of the enactment of this section, such well 
                resumes producing crude oil or natural gas.
            ``(4) Independent producer.--The term `independent 
        producer' means a producer of crude oil or natural gas whose 
        allowance for depletion is determined under section 613A(c).
    ``(c) Deductions.--No deductions directly connected with amounts 
excluded from gross income by subsection (a) shall be allowed.
    ``(d) Election.--
            ``(1) In general.--This section shall apply for any taxable 
        year only at the election of the taxpayer.
            ``(2) Manner.--Such election shall be made, in accordance 
        with regulations prescribed by the Secretary, not later than 
        the time prescribed for filing the return (including extensions 
        thereof) and shall be made annually on a property-by-property 
        basis.''
    (c) Minimum Tax.--Section 56(g)(4)(B) is amended by adding at the 
end the following new clause:
                            ``(iii) Inactive wells.--In the case of 
                        income attributable to independent producers of 
                        oil recovered from an inactive well, clause (i) 
                        shall not apply to any amount allowable as an 
                        exclusion under section 139.''
    (d) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 139 and inserting the following:

                              ``Sec. 139. Oil or gas produced from a 
                                        recovered inactive well.
                              ``Sec. 140. Cross references to other 
                                        Acts.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

SEC. 103. ENHANCED OIL RECOVERY CREDIT EXTENDED TO CERTAIN NONTERTIARY 
              RECOVERY METHODS.

    (a) Purpose.--The purpose of this section is to extend the 
productive lives of existing domestic oil and gas wells in order to 
recover the 75 percent of the oil and gas that is not recoverable using 
primary oil and gas recovery techniques.
    (b) In General.--Clause (i) of section 43(c)(2)(A) (defining 
qualified enhanced oil recovery project) is amended to read as follows:
                            ``(i) which involves the application (in 
                        accordance with sound engineering principles) 
                        of--
                                    ``(I) one or more tertiary recovery 
                                methods (as defined in section 
                                193(b)(3)) which can reasonably be 
                                expected to result in more than an 
                                insignificant increase in the amount of 
                                crude oil which will ultimately be 
                                recovered, or
                                    ``(II) one or more qualified 
                                nontertiary recovery methods which are 
                                required to recover oil with 
                                traditionally immobile characteristics 
                                or from formations which have proven to 
                                be uneconomical or noncommercial under 
                                conventional recovery methods,''
    (c) Qualified Nontertiary Recovery Methods.--Section 43(c)(2) is 
amended by adding at the end the following new subparagraphs:
                    ``(C) Qualified nontertiary recovery method.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `qualified 
                        nontertiary recovery method' means any recovery 
                        method described in clause (ii), (iii), or 
                        (iv), or any combination thereof.
                            ``(ii) Enhanced gravity drainage (egd) 
                        methods.--The methods described in this clause 
                        are as follows:
                                    ``(I) Horizontal drilling.--The 
                                drilling of horizontal, rather than 
                                vertical, wells to penetrate any 
                                hydrocarbon-bearing formation which has 
                                an average in situ calculated 
                                permeability to fluid flow of less than 
                                or equal to 12 or less millidarcies and 
                                which has been demonstrated by use of a 
                                vertical wellbore to be uneconomical 
                                unless drilled with lateral horizontal 
                                lengths in excess of 1,000 feet.
                                    ``(II) Gravity drainage.--The 
                                production of oil by gravity flow from 
                                drainholes that are drilled from a 
                                shaft or tunnel dug within or below the 
                                oil-bearing zone.
                            ``(iii) Marginally economic reservoir 
                        repressurization (merr) methods.--The methods 
                        described in this clause are as follows, except 
                        that this clause shall only apply to the first 
                        1,000,000 barrels produced in any project:
                                    ``(I) Cyclic gas injection.--The 
                                increase or maintenance of pressure by 
                                injection of hydrocarbon gas into the 
                                reservoir from which it was originally 
                                produced.
                                    ``(II) Flooding.--The injection of 
                                water into an oil reservoir to displace 
                                oil from the reservoir rock and into 
                                the bore of a producing well.
                            ``(iv) Other methods.--Any method used to 
                        recover oil having an average laboratory 
                        measured air permeability less than or equal to 
                        100 millidarcies when averaged over the 
                        productive interval being completed, or an in 
                        situ calculated permeability to fluid flow less 
                        than or equal to 12 millidarcies or oil defined 
                        by the Department of Energy as being immobile.
                    ``(D) Authority to add other nontertiary recovery 
                methods.--The Secretary shall provide procedures under 
                which--
                            ``(i) the Secretary may treat methods not 
                        described in clause (ii), (iii), or (iv) of 
                        subparagraph (C) as qualified nontertiary 
                        recovery methods, and
                            ``(ii) a taxpayer may request the Secretary 
                        to treat any method not so described as a 
                        qualified nontertiary recovery method.
                The Secretary may only specify methods as qualified 
                nontertiary recovery methods under this subparagraph if 
                the Secretary determines that such specification is 
                consistent with the purposes of subparagraph (C) and 
                will result in greater production of oil and natural 
                gas.''
    (d) Conforming Amendment.--Clause (iii) of section 43(c)(2)(A) is 
amended to read as follows:
                            ``(iii) with respect to which--
                                    ``(I) in the case of a tertiary 
                                recovery method, the first injection of 
                                liquids, gases, or other matter 
                                commences after December 31, 1990, and
                                    ``(II) in the case of a qualified 
                                nontertiary recovery method, the 
                                implementation of the method begins 
                                after December 31, 1998.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1998.

       TITLE II--DOMESTIC OIL AND GAS INDUSTRY CRISIS TAX RELIEF

SEC. 200. PURPOSE.

    The purpose of this title is to transform earned tax credits and 
other accumulated tax benefits into working capital for the cash-
strapped domestic oil and gas producers and service companies.

                 Subtitle A--Credits to Cash Provisions

SEC. 201. 10-YEAR CARRYBACK FOR UNUSED MINIMUM TAX CREDIT.

    (a) In General.--Section 53(c) of the Internal Revenue Code of 1986 
(relating to limitation) is amended by adding at the end the following 
new paragraph:
            ``(2) Special rule for taxpayers with unused energy minimum 
        tax credits.--
                    ``(A) In general.--If, during the 10-taxable year 
                period ending with the current taxable year, a taxpayer 
                has an unused energy minimum tax credit for any taxable 
                year in such period (determined without regard to the 
                application of this paragraph to the current taxable 
                year)--
                            ``(i) paragraph (1) shall not apply to each 
                        of the taxable years in such period for which 
                        the taxpayer has an unused energy minimum tax 
                        credit (as so determined), and
                            ``(ii) the credit allowable under 
                        subsection (a) for each of such taxable years 
                        shall be equal to the excess (if any) of--
                                    ``(I) the sum of the regular tax 
                                liability and the net minimum tax for 
                                such taxable year, over
                                    ``(II) the sum of the credits 
                                allowable under subparts A, B, D, E, 
                                and F of this part.
                    ``(B) Energy minimum tax credit.--For purposes of 
                this paragraph, the term `energy minimum tax credit' 
                means the minimum tax credit which would be computed 
                with respect to any taxable year if the adjusted net 
                minimum tax were computed by only taking into account 
                items attributable to--
                            ``(i) the taxpayer's mineral interests in 
                        oil and gas property, and
                            ``(ii) the taxpayer's active conduct of a 
                        trade or business of providing tools, products, 
                        personnel, and technical solutions on a 
                        contractural basis to persons engaged in oil 
                        and gas exploration and production.''
    (b) Conforming Amendments.--Section 53(c) of such Code (as in 
effect before the amendment made by subsection (a)) is amended--
            (1) by striking ``The'' and inserting:
            ``(1) In general.--Except as provided in paragraph (2), the 
        '', and
            (2) by redesignating paragraphs (1) and (2) as 
        subparagraphs (A) and (B).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998, and to any 
taxable year beginning on or before such date to the extent necessary 
to apply section 53(c)(2) of the Internal Revenue Code of 1986 (as 
added by subsection (a)).

SEC. 202. 10-YEAR CARRYBACK FOR PERCENTAGE DEPLETION FOR OIL AND GAS 
              PROPERTY.

    (a) In General.--Subsection (d)(1) of section 613A (relating to 
limitations on percentage depletion in case of oil and gas wells) is 
amended to read as follows:
            ``(1) Limitation based on taxable income.--
                    ``(A) In general.--The deduction for the taxable 
                year attributable to the application of subsection (c) 
                shall not exceed the taxpayer's taxable income for the 
                year computed without regard to--
                            ``(i) any depletion on production from an 
                        oil or gas property which is subject to the 
                        provisions of subsection (c),
                            ``(ii) any net operating loss carryback to 
                        the taxable year under section 172,
                            ``(iii) any capital loss carryback to the 
                        taxable year under section 1212, and
                            ``(iv) in the case of a trust, any 
                        distributions to its beneficiary, except in the 
                        case of any trust where any beneficiary of such 
                        trust is a member of the family (as defined in 
                        section 267(c)(4)) of a settlor who created 
                        inter vivos and testamentary trusts for members 
                        of the family and such settlor died within the 
                        last six days of the fifth month in 1970, and 
                        the law in the jurisdiction in which such trust 
                        was created requires all or a portion of the 
                        gross or net proceeds of any royalty or other 
                        interest in oil, gas, or other mineral 
                        representing any percentage depletion allowance 
                        to be allocated to the principal of the trust.
                    ``(B) Carrybacks and carryforwards.--
                            ``(i) In general.--If any amount is 
                        disallowed as a deduction for the taxable year 
                        (in this subparagraph referred to as the 
                        `unused depletion year') by reason of 
                        application of subparagraph (A), the disallowed 
                        amount shall be treated as an amount allowable 
                        as a deduction under subsection (c) for--
                                    ``(I) each of the 10 taxable years 
                                preceding the unused depletion year, 
                                and
                                    ``(II) the taxable year following 
                                the unused depletion year,
                        subject to the application of subparagraph (A) 
                        to such taxable year.
                            ``(ii) Applicable rules.--Rules similar to 
                        the rules of section 39 shall apply for 
                        purposes of this subparagraph.
                    ``(C) Allocation of disallowed amounts.--For 
                purposes of basis adjustments and determining whether 
                cost depletion exceeds percentage depletion with 
respect to the production from a property, any amount disallowed as a 
deduction on the application of this paragraph shall be allocated to 
the respective properties from which the oil or gas was produced in 
proportion to the percentage depletion otherwise allowable to such 
properties under subsection (c).''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1998, and to any taxable 
year beginning on or before such date to the extent necessary to apply 
section 613A(d)(1)(B) of the Internal Revenue Code of 1986 (as added by 
subsection (a)).

SEC. 203. 10-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE 
              TO OIL SERVICING COMPANIES AND MINERAL INTERESTS OF OIL 
              AND GAS PRODUCERS.

    (a) In General.--Paragraph (1) of section 172(b) (relating to years 
to which loss may be carried) is amended by adding at the end the 
following new subparagraph:
                    ``(H) Losses on operating mineral interests of oil 
                and gas producers and oilfield servicing companies.--In 
                the case of a taxpayer which has an eligible oil and 
                gas loss (as defined in subsection (j)) for a taxable 
                year, such eligible oil and gas loss shall be a net 
                operating loss carryback to each of the 10 taxable 
                years preceding the taxable year of such loss.''
    (b) Eligible Oil and Gas Loss.--Section 172 is amended by 
redesignating subsection (j) as subsection (k) and by inserting after 
subsection (i) the following new subsection:
    ``(j) Eligible Oil and Gas Loss.--For purposes of this section--
            ``(1) In general.--The term `eligible oil and gas loss' 
        means the lesser of--
                    ``(A) the amount which would be the net operating 
                loss for the taxable year if only income and deductions 
                attributable to--
                            ``(i) mineral interests in oil and gas 
                        wells, and
                            ``(ii) the active conduct of a trade or 
                        business of providing tools, products, 
                        personnel, and technical solutions on a 
                        contractual basis to persons engaged in oil and 
                        gas exploration and production,
                are taken into account, and
                    ``(B) the amount of the net operating loss for such 
                taxable year.
            ``(2) Coordination with subsection (b)(2).--For purposes of 
        applying subsection (b)(2), an eligible oil and gas loss for 
        any taxable year shall be treated in a manner similar to the 
        manner in which a specified liability loss is treated.
            ``(3) Election.--Any taxpayer entitled to a 10-year 
        carryback under subsection (b)(1)(H) from any loss year may 
        elect to have the carryback period with respect to such loss 
        year determined without regard to subsection (b)(1)(H). Such 
        election shall be made in such manner as may be prescribed by 
        the Secretary and shall be made by the due date (including 
        extensions of time) for filing the taxpayer's return for the 
        taxable year of the net operating loss. Such election, once 
        made for any taxable year, shall be irrevocable for such 
        taxable year.''
    (c) Effective Date.--The amendments made by this section shall 
apply to net operating losses for taxable years beginning after 
December 31, 1998, and to any taxable year beginning on or before such 
date to the extent necessary to apply section 172(b)(1)(H) of the 
Internal Revenue Code of 1986 (as added by subsection (a)).

SEC. 204. WAIVER OF LIMITATIONS.

    If refund or credit of any overpayment of tax resulting from the 
application of the amendments made by this subtitle is prevented at any 
time before the close of the 1-year period beginning on the date of the 
enactment of this Act by the operation of any law or rule of law 
(including res judicata), such refund or credit may nevertheless be 
made or allowed if claim therefor is filed before the close of such 
period.

                   Subtitle B--Hard Times Tax Relief

SEC. 211. PHASE-OUT OF CERTAIN MINIMUM TAX PREFERENCES RELATING TO 
              ENERGY PRODUCTION.

    (a) Energy Preferences for Integrated Oil Companies.--Section 56 
(relating to alternative minimum taxable income) is amended by adding 
at the end the following new subsection:
    ``(h) Adjustment Based on Energy Preference.--
            ``(1) In general.--In computing the alternative minimum 
        taxable income of any taxpayer which is an integrated oil 
        company (as defined in section 291(b)(4)) for any taxable year 
        beginning after 1998, there shall be allowed as a deduction an 
        amount equal to the alternative tax energy preference 
        deduction.
            ``(2) Phase-out of deduction as oil prices increases.--The 
        amount of the deduction under paragraph (1) (determined without 
        regard to this paragraph) shall be reduced (but not below zero) 
        by the amount which bears the same ratio to such amount as--
                    ``(A) the amount by which the reference price for 
                the calendar year preceding the calendar year in which 
                the taxable year begins exceeds $14, bears to
                    ``(B) $3.
        For purposes of this paragraph, the reference price for any 
        calendar year shall be determined under section 29(d)(2)(C) and 
        the $14 amount under subparagraph (A) shall be adjusted at the 
        same time and in the same manner as under section 43(b)(3).
            ``(3) Alternative tax energy preference deduction.--For 
        purposes of paragraph (1), the term `alternative tax energy 
        preference deduction' means an amount equal to the sum of--
                    ``(A) the intangible drilling cost preference, and
                    ``(B) the depletion preference.
            ``(4) Intangible drilling cost preference.--For purposes of 
        this subsection, the term `intangible drilling cost preference' 
        means the amount by which alternative minimum taxable income 
        would be reduced if it were computed without regard to section 
        57(a)(2).
            ``(5) Depletion preference.--For purposes of this 
        subsection, the term `depletion preference' means the amount by 
        which alternative minimum taxable income would be reduced if it 
        were computed without regard to section 57(a)(1).
            ``(6) Alternative minimum taxable income.--For purposes of 
        paragraphs (1), (4), and (5), alternative minimum taxable 
        income shall be determined without regard to the deduction 
        allowable under this subsection and the alternative tax net 
        operating loss deduction under subsection (a)(4).
            ``(7) Regulations.--The Secretary may by regulation provide 
        for appropriate adjustments in computing alternative minimum 
        taxable income or adjusted current earnings for any taxable 
        year following a taxable year for which a deduction was allowed 
        under this subsection to ensure that no double benefit is 
        allowed by reason of such deduction.''
    (b) Repeal of Limit on Reduction for Independent Producers.--
Subparagraphs (E) of section 57(a)(2) (relating to exception for 
independent producers) is amended to read as follows:
                    ``(E) Exception for independent producers.--In the 
                case of any oil or gas well, this paragraph shall not 
                apply to any taxpayer which is not an integrated oil 
                company (as defined in section 291(b)(4)).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after, and amounts paid or incurred in 
taxable years after, December 31, 1998.

SEC. 212. DEPRECIATION ADJUSTMENT NOT TO APPLY TO OIL AND GAS ASSETS.

    (a) In General.--Subparagraph (B) of section 56(a)(1) (relating to 
depreciation adjustments) is amended to read as follows:
                    ``(B) Exceptions.--This paragraph shall not apply 
                to--
                            ``(i) property described in paragraph (1), 
                        (2), (3), or (4) of section 168(f), or
                            ``(ii) property used in the active conduct 
                        of the trade or business of exploring for, 
                        extracting, developing, or gathering crude oil 
                        or natural gas.''
    (b) Conforming Amendment.--Paragraph (4)(A) of section 56(g) 
(relating to adjustments based on adjusted current earnings) is amended 
by adding at the end the following new clause:
                            ``(vi) Oil and gas property.--In the case 
                        of property used in the active conduct of the 
                        trade or business of exploring for, extracting, 
                        developing, or gathering crude oil or natural 
                        gas, the amount allowable as depreciation or 
                        amortization with respect to such property 
                        shall be determined in the same manner as for 
                        purposes of computing the regular tax.''
    (c) Effective Date.--The amendment made by this section shall apply 
to property placed in service in taxable years beginning after December 
31, 1998.

SEC. 213. REPEAL CERTAIN ADJUSTMENTS BASED ON ADJUSTED CURRENT EARNINGS 
              RELATING TO OIL AND GAS ASSETS.

    (a) Depreciation.--Clause (vi) of section 56(g)(4)(A), as added by 
section 212(b), is amended to read as follows:
                            ``(vi) Oil and gas property.--This 
                        subparagraph shall not apply to property used 
                        in the active conduct of the trade or business 
                        of exploring for, extracting, developing, or 
                        gathering crude oil or natural gas.''
    (b) Intangible Drilling Costs.--Clause (i) of section 56(g)(4)(D) 
is amended by striking the second sentence and inserting ``In the case 
of any oil or gas well, this clause shall not apply in the case of 
amounts paid or incurred in taxable years beginning after December 31, 
1998.''.
    (c) Depletion.--Clause (ii) of section 56(g)(4)(F) is amended to 
read as follows:
                            ``(ii) Exception for oil and gas wells.--In 
                        the case of any taxable year beginning after 
                        December 31, 1998, clause (i) (and subparagraph 
                        (C)(i)) shall not apply to any deduction for 
                        depletion computed in accordance with section 
                        613A.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 214. ENHANCED OIL RECOVERY CREDIT AND CREDIT FOR PRODUCING FUEL 
              FROM A NONCONVENTIONAL SOURCE ALLOWED AGAINST MINIMUM 
              TAX.

    (a) Enhanced Oil Recovery Credit Allowed Against Regular and 
Minimum Tax.--
            (1) Allowing credit against minimum tax.--Subsection (c) of 
        section 38 (relating to limitation based on amount of tax), as 
        amended by section 101(d), is amended by redesignating 
        paragraph (4) as paragraph (5) and by inserting after paragraph 
        (3) the following new paragraph:
            ``(4) Special rules for enhanced oil recovery credit.--
                    ``(A) In general.--In the case of the enhanced oil 
                recovery 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) subparagraphs (A) and (B) 
                                thereof shall not apply, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the enhanced 
                                oil recovery credit).
                    ``(B) Enhanced oil recovery credit.--For purposes 
                of this subsection, the term `enhanced oil recovery 
                credit' means the credit allowable under subsection (a) 
                by reason of section 43(a).''.
            (2) Conforming amendments.--
                    (A) Subclause (II) of section 38(c)(2)(A)(ii), as 
                amended by section 101(d), is amended by striking ``or 
                the marginal oil and gas well production credit'' and 
                inserting ``, the marginal oil and gas well production 
                credit, or the enhanced oil recovery credit''.
                    (B) Subclause (II) of section 38(c)(3)(A)(ii), as 
                added by section 101(d), is amended by inserting ``or 
                the enhanced oil recovery credit'' after ``recovery 
                credit''.
    (b) Credit for Producing Fuel From a Non-conventional Source.--
            (1) Allowing credit against minimum tax.--Section 29(b)(6) 
        is amended to read as follows:
                    ``(6) Application with other credits.--The credit 
                allowed by subsection (a) for any taxable year shall 
                not exceed--
                            ``(A) the regular tax for the taxable year 
                        and the tax imposed by section 55, reduced by
                            ``(B) the sum of the credits allowable 
                        under subpart A and section 27.''
            (2) Conforming amendments.--
                    (A) Section 53(d)(1)(B)(iii) is amended by 
                inserting ``as in effect on the date of the enactment 
                of the Domestic Oil and Gas Crisis Tax Reliance 
                Reversal Act of 1999,'' after ``29(b)(6)(B),''.
                    (B) Section 55(c)(2) is amended by striking 
                ``29(b)(6),''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

       Subtitle C--Oil-for-Food Program Compensating Tax Benefits

SEC. 220. PURPOSE.

    The purpose of this subtitle is to provide compensation to the 
domestic oil and gas industry in the form of tax benefits to offset the 
depressing impact that the Oil-for-Food Program is having on the world 
market.

SEC. 221. 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, 1998.

SEC. 222. 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 Amendments.--
            (1) Section 613A(c)(7) (relating to special rules) is 
        amended by striking subparagraph (C) and redesignating 
        subparagraph (D) as subparagraph (C).
            (2) Section 613A(c)(6) (relating to oil and natural gas 
        produced from marginal properties) is amended by striking 
        subparagraph (H).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 223. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES 
              AND DELAY RENTAL PAYMENTS.

    (a) Purpose.--The purpose of this section is to recognize that 
geological and geophysical expenditures and delay rentals are ordinary 
and necessary business expenses that should be deducted in the year the 
expense is incurred.
    (b) Election To Expense Geological and Geophysical Expenditures.--
            (1) In general.--Section 263 (relating to capital 
        expenditures) is amended by adding at the end the following new 
        subsection:
    ``(j) Geological and Geophysical Expenditures for Domestic Oil and 
Gas Wells.--Notwithstanding subsection (a), a taxpayer may elect to 
treat geological and geophysical expenses incurred in connection with 
the exploration for, or development of, oil or gas within the United 
States (as defined in section 638) as expenses which are not chargeable 
to capital account. Any expenses so treated shall be allowed as a 
deduction in the taxable year in which paid or incurred.''
            (2) Conforming amendment.--Section 263A(c)(3) is amended by 
        inserting ``263(j),'' after ``263(i),''.
            (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to expenses paid or incurred 
                after the date of the enactment of this Act.
                    (B) Transition rule.--In the case of any expenses 
                described in section 263(j) of the Internal Revenue 
                Code of 1986, as added by this subsection, which were 
                paid or incurred on or before the date of the enactment 
                of this Act, the taxpayer may elect, at such time and 
                in such manner as the Secretary of the Treasury may 
                prescribe, to amortize the unamortized portion of such 
                expenses over the 36-month period beginning with the 
                month in which the date of the enactment of this Act 
                occurs. For purposes of this subparagraph, the 
                unamortized portion of any expense is the amount 
                remaining unamortized as of the first day of the 36-
                month period.
    (c) Election To Expense Delay Rental Payments.--
            (1) In general.--Section 263 (relating to capital 
        expenditures), as amended by subsection (b)(1), is amended by 
        adding at the end the following new subsection:
    ``(k) Delay Rental Payments for Domestic Oil and Gas Wells.--
            ``(1) In general.--Notwithstanding subsection (a), a 
        taxpayer may elect to treat delay rental payments incurred in 
        connection with the development of oil or gas within the United 
        States (as defined in section 638) as payments which are not 
        chargeable to capital account. Any payments so treated shall be 
        allowed as a deduction in the taxable year in which paid or 
        incurred.
            ``(2) Delay rental payments.--For purposes of paragraph 
        (1), the term `delay rental payment' means an amount paid for 
        the privilege of deferring development of an oil or gas well.''
            (2) Conforming amendment.--Section 263A(c)(3), as amended 
        by subsection (b)(2), is amended by inserting ``263(k),'' after 
        ``263(j),''.
                    (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to payments made or incurred 
                after the date of the enactment of this Act.
                    (B) Transition rule.--In the case of any payments 
                described in section 263(k) of the Internal Revenue 
                Code of 1986, as added by this subsection, which were 
                made or incurred on or before the date of the enactment 
                of this Act, the taxpayer may elect, at such time and 
                in such manner as the Secretary of the Treasury may 
                prescribe, to amortize the unamortized portion of such 
                payments over the 36-month period beginning with the 
                month in which the date of the enactment of this Act 
                occurs. For purposes of this subparagraph, the 
                unamortized portion of any payment is the amount 
                remaining unamortized as of the first day of the 36-
                month period.

SEC. 224. EXTENSION OF SPUDDING RULE.

    (a) In General.--Section 461(i)(2)(A) (relating to special rule for 
spudding of oil or gas wells) is amended by striking ``90th day'' and 
inserting ``180th day''.
    (b) Effective Date--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1998.

          TITLE III--FOREIGN OIL RELIANCE REVERSAL PROVISIONS

SEC. 300. PURPOSE.

    The purpose of this title is to reverse the trend of increased 
foreign dependence of oil and gas by encouraging exploration and 
development of oil and gas reserves in the United States to achieve the 
goal of doubling current domestic oil and gas production.

``SEC. 301. 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 is amended by adding 
at the end the following new section:

``SEC. 30B. CRUDE OIL AND NATURAL GAS EXPLORATION AND DEVELOPMENT 
              CREDIT.

    ``(a) General Rule.--The crude oil and natural gas exploration and 
development credit determined under this section for any applicable 
taxable year shall be 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) Applicale Taxable Year.--For purposes of subsection (a)--
            ``(1) In general.--The term `applicable taxable year' means 
        any taxable year beginning in a calendar year during which the 
        imports of foreign crude and oil product are determined by the 
        Secretary of Energy to exceed 50 percent of the amount of 
        United States crude and oil product consumption for such year.
            ``(2) Determination.--A determination under paragraph (1) 
        shall be made not later than March 1 of each year with respect 
        to the preceding calendar year.
    ``(c) Qualified Investment.--For purposes of this section, the term 
`qualified investment' means amounts paid or incurred by a taxpayer--
            ``(1) 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 located 
        in the United States or in a possession of the United States as 
        defined in section 638, or
            ``(2) for the purpose of developing a property (located in 
        the United States or in a possession of the United States as 
        defined in section 638) on which there is a reservoir capable 
        of commercial production and such amounts are paid or incurred 
        in connection with activities which are intended to result in 
        the recovery of crude oil or natural gas on such property.
    ``(d) Limitation Based on Amount of Tax.--
            ``(1) Liability for tax.--The credit allowable under 
        subsection (a) for any taxable year shall not exceed the excess 
        (if any) of--
                    ``(A) the sum of--
                            ``(i) the taxpayer's tentative minimum tax 
                        liability under section 55(b) for such taxable 
                        year determined without regard to this section, 
                        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 part IV (other 
                than section 43 and this section).
            ``(2) Application of the credit.--Each of the following 
        amounts shall be reduced by the full amount of the credit 
        determined under paragraph (1):
                    ``(A) the taxpayer's tentative minimum tax under 
                section 55(b) for the taxable year, and
                    ``(B) the taxpayer's regular tax liability (as 
                defined in section 26(b)) reduced by the sum of the 
                credits allowable under part IV (other than section 43 
                of this section).
        If the amount of the credit determined under paragraph (1) 
        exceeds the amount described in subparagraph (B) of paragraph 
        (2), then the excess shall be deemed to be the adjusted net 
        minimum tax for such taxable year for purposes of section 53.
            ``(3) Carryback and carryforward of un-used 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 (hereafter 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, except that no 
                portion of the unused oil and gas exploration and 
                development credit for any taxable year may be carried 
                to a taxable year ending before the date of the 
                enactment of this section.
                    ``(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.
    ``(e) 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. 30B. Crude oil and natural gas exploration and development 
                            credit.''

    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 1998.

            TITLE IV--NATIONAL SECURITY EMERGENCY PROVISIONS

SEC. 400. PURPOSE.

    The purpose of this title is to recognize that a national security 
threat exists when foreign crude oil, oil product, and natural gas 
imports exceed 60 percent of United States oil and gas consumption and 
to create an emergency procedure to address that threat.

SEC. 401. DUTIES OF THE PRESIDENT.

    (a) Establishment of Ceiling.--The President shall establish a 
National Security Energy Independence Ceiling (Referred to in this 
title as the ``ceiling level'') which shall represent a ceiling level 
beyond which foreign crude oil, oil product, and natural gas imports as 
a share of United States crude and oil product consumption shall not 
rise.
    (b) Level of Ceiling.--The ceiling level established under 
subsection (a) shall not exceed 60 percent of United States crude oil, 
oil product, and natural gas consumption for any annual period.
    (c) Report.--
            (1) Contents.--
                    (A) In general.--The President shall prepare and 
                submit an annual report to Congress containing a 
                national security projection for energy independence 
                (in this title referred to as the ``projection''), 
                which shall contain a forecast of domestic oil and 
                liquid natural gas (commonly known as ``NGL'') demand 
                and production, and imports of crude oil, oil product, 
                and natural gas, for the subsequent 3 years.
                    (B) Required adjustments.--The projection shall 
                contain appropriate adjustments for expected price and 
                production changes.
            (2) Presentation.--The projection prepared under paragraph 
        (1) shall be presented to Congress with the Budget.
            (3) Certification.--The President shall certify in the 
        report whether foreign crude oil, oil product, and natural gas 
        imports will exceed the ceiling level for any year during the 3 
        years succeeding the date of the report.

SEC. 402. CONGRESSIONAL REVIEW.

    (a) Review.--Congress shall have 10 continuous session days after 
submission of each projection under section 401 to review the 
projection and make a determination whether the ceiling level will be 
violated within 3 years.
    (b) Certification Binding.--Unless disapproved or modified by joint 
resolution, the Presidential certification shall be binding 10 session 
days after submitted to Congress.

SEC. 403. NATIONAL SECURITY AND OIL AND GAS PRODUCTION ACTIONS.

    (a) National Security and Oil and Gas Production Policy.--
            (1) Submission.--Upon certification under section 401(c)(3) 
        that the ceiling level will be exceeded, the President shall, 
        within 90 days, submit a National Security and Oil and Gas 
        Production Policy (in this section referred to as the 
        ``policy'') to Congress. The policy shall prevent crude oil, 
        oil product, and natural gas imports from exceeding the ceiling 
        level.
            (2) Approval.--Unless disapproved or modified by joint 
        resolution, the policy shall be effective 90 session days after 
        submitted to Congress.
    (b) Contents of Policy.--The National Security and Oil Production 
Policy may include--
            (1) energy conservation actions, including improved fuel 
        efficiency for automobiles;
            (2) expansion of the Strategic Petroleum Reserves to 
        maintain a larger cushion against projected oil import 
        blockages;
            (3) additional production incentives for domestic oil and 
        gas, including tax and other incentives for stripper well 
        production, offshore, frontier, and other oil produced with 
        tertiary recovery techniques;
            (4) regulatory burden relief; and
            (5) other policy initiatives designed to lower foreign 
        import reliance.
                                 <all>