[Congressional Record Volume 145, Number 39 (Thursday, March 11, 1999)]
[Senate]
[Pages S2583-S2591]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DOMENICI (for himself and Mr. Inhofe):
  S. 595. 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; to 
the Committee on Finance.


  THE DOMESTIC OIL AND GAS CRISIS TAX RELIEF AND FOREIGN OIL RELIANCE 
                          REVERSAL ACT OF 1999

  Mr. DOMENICI. Mr. President, I rise today to introduce the Domestic 
Oil and Gas Crisis Tax Relief and Foreign Oil Reliance Reversal Act of 
1999.
  It is a comprehensive, graduated approach to ensure that the United 
States retains control of its foreign policy and its economic destiny.
  I believe that oil is essential to our way of life. Oil is power.
  It has been pointed out by numerous commentators that major oil 
reserves and political volatility go together. The Middle East has the 
world's most abundant and cheapest oil, unfortunately, the U.S. does 
not.
  Saudi Arabia, United Arab Emirates and Kuwait are our current allies, 
but Iran and Iraq are not. Russia is a major natural gas producer, but 
reliable Russia is not.
  Our dependence on foreign oil is reaching 57 percent, projected to 
reach 68 percent by 2010 if current prices prevail.
  This isn't the usual boom and bust that the oil and gas industry goes 
through. The price has dropped by half in the past two years. In real 
terms, oil now costs roughly what it did before 1973. And prices could 
stay low or drop lower according to the March 6th, Economist magazine.
  Chairman Greenspan, thus, far has been more cautious.
  At a Budget Committee hearing recently, I asked Chairman Greenspan 
about the oil and gas depressed prices. For the first time that I can 
remember, Greenspan blessed Independent Petroleum Association of 
America (IPAA) numbers.
  Greenspan said, ``In the short term, profits for the oil and gas 
industry are likely to come under pressure. According to industry 
surveys, exploration and production spending in the U.S. is projected 
to decline 21 percent this year to $22.6 billion from $28.2 billion in 
1998. A recent survey by the Independent Petroleum Association of 
America (IPAA) estimates that over 36 thousand crude oil wells and more 
than 56 thousand natural gas wells have been shut down since November 
1997. During the same period, the IPAA estimates that 24 thousand jobs 
in the industry have been eliminated * * * The financial pressures are 
most serious among small producers in the United States.''
  Let me describe the financial pressures facing New Mexico.
  One of the city officials told me that oil and gas revenues were so 
low that the town of Eunice has to decide which it will keep open--the 
school or the hospital. There isn't enough tax revenue in the coffers 
to do both! In New Mexico, the oil and gas industry is a major source 
of revenue. For some communities it is the only significant source.
  The bill I am introducing today is a comprehensive, graduated 
response to the problem of the shrinking domestic oil and gas industry. 
It builds upon, and includes all of the provisions included in S. 325 
introduced by Senator Kay Bailey Hutchison and cosponsored by Senators 
Nickles, Murkowski, Breaux and Landreu and myself.
  The Hutchison bill focuses on helping our independent producers and 
maintaining marginal wells. These are wells that produce less than 15 
barrels a day by IRS definition, but in reality, on average produce 
about 2.2 barrels of oil a day. There are a lot of marginal wells in 
the United States, and together they produce as much oil as the United 
States imports from Saudi Arabia.
  I am also told if prices stay where they are the state could lose 
half of those wells by the end of the year.
  Title I of the bill I am introducing today is part of S. 325. It 
includes a marginal well tax credit designed to prolong marginal 
domestic oil and gas well production. The credit is equal to $3.00 a 
barrel.
  The bill also provides a Federal income tax exclusion for income 
earned from inactive wells. It is an incentive for producers to keep 
pumping and not to plug the wells because low prices make them 
uneconomic. Once a well is plugged, the oil from that well is lost for 
ever.
  The bill expands the Enhanced Oil Recovery credit (EOR) that was 
enacted in 1990.
  Enhanced oil recovery techniques can recover the other seventy-five 
percent of the oil left behind when regular techniques have pumped as 
much oil as they can from a well. The EOR credit is expanded to cover 
additional techniques and to be used by AMT taxpayers.
  The oil and gas industry is a capital intensive industry.
  When the price of oil drops, the cash flow for small producers dries 
up. There are countless producers who haven't been able to make an 
interest payment on their operating loans in months and as loans come 
due, the banks haven't been willing to renew them.
  The world is feasting on cheap oil, and yet the oil patch is starving 
for capital. This credit crunch is made all the more painful because 
producers know that they have accumulated tax

[[Page S2584]]

benefits and credits that they have not been able to use, first, 
because they were Alternative Minimum Tax (AMT) taxpayers, and more 
recently, because low prices have devastated their bottomline.
  The AMT was intended to make sure that profitable companies paid 
their fair share of taxes. It has not worked as it was intended. In 
practice, the AMT imposes four penalties on investments made by U.S.-
based taxpayers who explore for and produce oil and natural gas. 
Penalties are imposed on drilling investment and asset depreciation. 
These penalties significantly increase the after-tax costs and the 
business risks of drilling new wells. This is a very imprudent policy 
at a time when the U.S. is experiencing historically low drilling 
activity and growing import dependency.
  The AMT increases the cost of capital of AMT taxpayers by 
approximately 15 to 20 percent over what it would be under the regular 
corporate income tax according to testimony given before the Senate 
Finance Committee.
  TITLE II of the bill tries to correct the past imprudence of the AMT 
and other tax cod provisions by providing domestic oil and gas industry 
crisis tax relief triggered when the price of oil is below $15 a 
barrel.
  This title of the bill creates what I call a ``credits to cash'' 
program.
  The purpose 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.
  This is accomplished by creating a ten year carry-back for unused AMT 
credits, and unused percentage depletion for oil and gas producers. The 
bill would also eliminate one of the most restrictive limitations on an 
oil and gas producer's ability to claim his intangible drilling costs--
the so-called 65 percent net income limitation. The bill repeals it so 
that producers can finally recover their out of pocket costs.

  The bill also includes a provision similar to a bill introduced by 
Congressman Thomas. My bill allows both producers and the oil and gas 
service industry to go back ten years and use up their Net operating 
losses (NOL)s.


   Hard times tax relief when price of oil is less than $14 a barrel

  The National Energy Policy Act partially eliminated Intangible 
Drilling Costs as a preference item under the AMT. This bill finishes 
the job for any year when the price of oil is less than $14 a barrel 
(phased out when oil prices hit $17)
  IDCs are up front, out of pocket costs that have to be paid before a 
producer even knows whether there will be any oil produced.
  IDCs are one of the principal ordinary and necessary business costs 
of the oil and gas industry. IDCs can comprise up to 80 percent of the 
total costs incurred in developing a well.
  IDCs are comparable to research and development costs because they 
are incurred before a capital asset is known to exist. Examples of IDCs 
include amounts paid to negotiate and finalize drilling contracts; 
costs to prepare the drill site, costs of transporting and setting up 
the rigs and costs of cementing casing in place; costs for wages, fuel, 
repairs, supplies, and other costs in the drilling, shooting and 
cleaning of wells, onsite preparation for the drilling of wells, and 
the construction of the physical structures that are necessary for the 
drilling of wells. IDCs are funded with cold, hard cash and typically 
cannot be financed by a bank or financial institution, and must be paid 
through an operator's internal cash flow or outside equity money 
supplied by an investor.
  Under the regular corporate tax, IDCs are generally allowed to be 
expensed.
  If they were the expenses of any other business they would not be 
included as add-back preference items for purposes of the AMT. We took 
the first step to correcting this injustice in the National Energy 
Policy Act. It is time to finish the job now.
  Percentage depletion is also an ordinary and necessary business cost. 
It recognizes that the economic profit from successful wells must 
compensate for economic losses from dry holes and marginal wells that 
do not recover their investment. Percentage depletion also recognizes 
that oil and gas properties are wasting assets with no residual value. 
These expenses correspond to ordinary business expenses that are 
deductible for every other business without limitations.
  The bill would also eliminate the depreciation adjustment under the 
AMT for oil and gas assets so that the depreciation schedules for the 
regular tax are also used for AMT.
  The oil and gas industry must spend significant amounts of capital to 
acquire, find, develop and produce oil and gas resources The regular 
tax system's modified accelerated cost recovery system (MACRS) is 
designed to encourage such investments. The incentive of accelerated 
tax depreciation is especially important in periods when oil is cheap 
and companies are under economic pressure to reduce capital investment 
and jobs. Yet, the depreciation adjustment required under the AMT 
results in removing much of the regular tax incentive precisely when it 
is needed most. This occurs because companies in the industry are more 
likely to be subject to AMT in periods of low commodity prices.
  While the AMT is the second tax system imbedded in our Internal 
Revenue code, the Accumulated Current Earnings (ACE) effectively acts 
as a third system of taxation, in addition to the regular tax system 
and the AMT. ACE generally acts to measure income in the same manner 
``earnings and profits'' which is a measure of income used by ``C'' 
corporations to determine whether their dividends will be taxable. 
Under ACE, a corporate taxpayer must compute the deductions for 
equipment depreciation (pre-1994), and intangible drilling cost 
recovery in a third manner in addition to that mandated under the 
regular tax system and the AMT.
  Congress has nibbled at fixing the ACE several times in the 1990's. 
It is time to get rid of it and its complexity. The bill eliminates the 
Adjusted Current Earnings adjustment (ACE) as it applies to IDCs.
  The bill would also permit the EOR credit and the Section 29 credit 
to reduce the Alternative Minimum Tax.
  The Alternative Minimum Tax (AMT) imposes tax penalties on the oil 
and gas industry. It taxes investment, not income, and it is more 
punitive the less profitable a company is. The longer prices are low 
and profits thin, the harsher is the AMT's impact.
  The bill recognizes that the Oil for Food program is contributing to 
the depressed oil and gas prices and is causing economic hardship for 
our domestic oil and gas producers. To compensate our domestic industry 
for the economic loss that is being caused by this UN policy, the bill 
would restore percentage depletion to 27.5 percent. It also would 
include the remaining tax provisions included in S. 325 e.g., Allows 
expensing geological and geophysical expenditures Allows producers to 
make an election to Expense Delay Rentals payments; and provides an 
Extension of Spudding rule
  Title III of the bill would be triggered whenever foreign oil 
reliance exceeds 50 percent. 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 here at home in the 
U.S. Our goal should be to double current domestic oil and gas 
production.
  The bill provides a 20 percent exploration and development credit.
  Title IV recognizes that 60 percent foreign oil dependence is a 
national security risk and provides for an emergency procedure. When 
foreign imports exceed 60 percent the President is required to 
implement an energy security strategic plan designed to prevent crude 
oil and product imports from exceeding 60 percent. I will remind my 
colleagues that when we experienced the economic disruption of the 1973 
oil embargo our dependence on foreign oil was only 36 percent.
  Mr. President, we need a comprehensive response to foreign oil 
dependence. We need to have a healthy domestic oil and gas industry. 
This bill along with measures to help the industry through the current 
credit crunch are essential. I ask that my colleagues join me in 
developing a comprehensive plan to insure our energy and foreign policy 
independence.
  Mr. President, I ask unanimous consent that the text of the bill and 
a summary be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

[[Page S2585]]

                                 S. 595

       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 II--FOREIGN OIL RELIANCE REVERSAL PROVISIONS

Sec. 300. Purpose.
Sec. 301. Crude oil and natural gas exploration and development credit.

                TITLE IV--NATIONAL 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

[[Page S2586]]

     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 propose of 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 there of.
       ``(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.

[[Page S2587]]

       ``(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--
       ``(II) 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

[[Page S2588]]

     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).

[[Page S2589]]

       (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 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 of 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

[[Page S2590]]

     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.
                                  ____


    Domestic Oil and Gas Crisis Tax Relief and Foreign Oil Reliance 
                          Reversal Act of 1999

     SEC. 2. PURPOSES.

       To establish a graduated response to shrinking domestic oil 
     and gas production and surging foreign oil imports;
       To prevent the abandonment of marginal oil and gas wells 
     responsible for half of U.S. domestic production;
       To transform earned tax credits and other benefits into 
     working capital for the cash-strapped domestic oil and gas 
     producers and service companies;
       To compensate U.S. producers for the hardship the Oil for 
     Food program is causing them;
       To reverse the trend of increased foreign oil and gas 
     dependence by encouraging exploration and development of oil 
     and gas reserves in the U.S. to achieve the goal of doubling 
     current domestic oil and gas production;
       To provide an emergency procedure when foreign imports 
     exceed 60 percent, thereby recognizing that when imports 
     exceed a Congressionally legislated peril point, a national 
     security threat exists that demands Presidential action.

     SEC. 3. FINDINGS.

       (a) Findings.--The Congress finds that--
       (1) U.S. foreign oil consumption is estimated at 56 percent 
     and could reach 68 percent by 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 tally began.
       (3) If prices do not increase soon, the U.S. could lose at 
     least half of its marginal wells which in aggregate produce 
     as much oil as we import from Saudi Arabia;
       (4) Oil and gas prices are unlikely to increase for at 
     least several years;
       (5) Declining production, well abandonment and greatly 
     reduced exploration and development are shrinking the 
     domestic oil and gas industry;
       (6) The world's richest oil producing regions in the Middle 
     East are experiencing greater political instability;
       (7) U.N. policy may make Iraq the swing oil producing 
     nation, thereby granting Saddem Hussein a tremendous amount 
     of power;
       (8) Reliance on foreign oil for more than 60 percent of our 
     daily oil and gas consumption is a national security threat;
       (9) the level of the United States energy security is 
     directly related to the level of domestic production of oil, 
     natural gas liquids, and natural gas; and
       (10) a national security policy should be developed which 
     ensures that adequate supplies of oil shall be available at 
     all times free of the threat of embargo or other foreign 
     hostile acts.

     SEC. 4. TABLE OF CONTENTS.

    TITLE I--DOMESTIC OIL AND GAS PRODUCTION PRESERVATION PROVISIONS

       (101(a)) Purpose: To prevent the abandonment of marginal 
     oil and gas wells responsible for half of U.S. Domestic 
     production
       (101) Tax credit to prolong marginal domestic oil and gas 
     well production.
       (  ) Expand definition of marginal well to include high 
     water content wells.
       (102) Exclusion of certain amounts received from the 
     production of wells reopened after they have been plugged or 
     abandoned.
       (103) Tax credits to prolong domestic oil and gas well 
     production through secondary and other nontertiary recovery 
     methods in order to produce the remaining 75 percent of oil 
     and gas that is not recoverable using primary methods.

  TITLE II--DOMESTIC OIL AND GAS INDUSTRY CRISIS TAX RELIEF TRIGGERED 
                WHEN PRICE OF OIL IS BELOW $15 A BARREL

     A. Credits to cash provisions
       (200) Purpose: 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.
       (201) Ten year carry-back for unused AMT credits for oil 
     and gas producers and servicing firms.
       (202) Ten year carry-back for unused percentage depletion 
     for oil and gas producers.
       (  ) Repeal 65 percent of net rule.
       (203) Ten year carry-back for NOLs for producers and 
     servicing firms.
     B. Hard times tax relief when price of oil is less than $14 a 
         barrel
       (211) Remove IDCs as AMT tax preference in any year when 
     price of oil is less than $14 a barrel (Phased out when oil 
     prices hit $17).
       (212) Eliminate the depreciation adjustment under the AMT 
     for oil and gas assets so that the depreciation schedules for 
     the regular tax is also used for AMT.
       (213) Eliminate the Adjusted Current Earnings adjustment 
     (ACE) as it applies to IDCs.

[[Page S2591]]

       (214) Permit EOR credit and Section 29 credit to reduce the 
     Alternative Minimum Tax.
     C. Tax benefits to offset the depressing impact on oil prices 
         that the Food for Oil Program is having
       (221) Restore percentage depletion to 27.5 percent.
       (222) Repeal net income limitation on percentage depletion.
       (223) Allow Expensing geological and geophysical 
     expenditures.
       (223) Allow Election to Expense Delay Rentals payments.
       (224) Extension of Spudding rule.

  TITLE III--FOREIGN OIL RELIANCE REVERSAL PROVISIONS TRIGGERED WHEN 
                       IMPORTS EXCEED 50 PERCENT

       (300) Purpose: To reverse the trend of increased foreign 
     dependence of oil and gas by encouraging exploration and 
     development of oil and gas reserves in the U.S. to achieve 
     the goal of doubling current domestic oil and gas production.
       (301) 20 percent exploration and development credit when 
     imports exceed 50 percent.

  TITLE IV--NATIONAL SECURITY EMERGENCY WHEN IMPORTS EXCEED 60 PERCENT

       (400) Purpose: To provide an emergency procedure when 
     foreign imports exceed 60 percent to require the President to 
     implement an energy security strategic plan to designed to 
     prevent crude and product imports from exceeding 60 percent.
       (401) Duties of the President.
       (402) Congressional Review of the Strategic plan proposed 
     by the President.
       (403) Energy Security strategic plan and course of action.
                                 ______