[Congressional Record Volume 159, Number 179 (Tuesday, December 17, 2013)]
[Senate]
[Page S8915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. INHOFE:
  S. 1833. A bill to amend the Internal Revenue Code of 1986 to 
eliminate the taxable income limit on percentage depletion for oil and 
natural gas produced from marginal properties; to the Committee on 
Finance.
  Mr. INHOFE. Mr. President, I would like to announce the 
reintroduction of a bill to amend the Internal Revenue Code to 
eliminate the taxable income limit on percentage depletion for oil and 
natural gas produced from marginal properties.
  Since 1926 small producers and millions of royalty owners have had 
the option to utilize percentage depletion to both simplify their 
accounting methodology and to account for the decline in the value of 
minerals produced from a property. Percentage depletion is particularly 
important to America's 700,000 low-volume marginal wells. The average 
marginal well produces barely 2 barrels per day, yet cumulatively they 
account for nearly 28 percent of domestic production in the lower 48 
states. Since every on-shore natural gas and oil well eventually 
declines into marginal production, the economic life span and 
corresponding production of all wells is extended by allowing the use 
of percentage depletion.
  Until 1998, the deduction marginal producers could take from 
percentage depletion was limited to 100 percent of taxable income from 
each individual property. Many producers, however, specialize in 
marginally producing wells and have many properties operating 
simultaneously. Naturally, some wells in a producer's portfolio are 
more productive than others. Some would have depletion rates greater 
than 100 percent of taxable income, while others would have depletion 
rates lower than the limit. Removing the taxable income limitation 
allows producers to take percentage depletion deductions on a 
portfolio-wide basis, which makes their entire operation more 
economical.
  Since 1998, Congress has understood this fact and has suspended the 
limitation. Unfortunately, the provision has never been made permanent. 
It has just been extended year after year as part of the Tax Extenders 
Package. Since we have had this suspension on the books for more than a 
decade, I think it is time to give producers the predictability they 
need by making this common sense tax accounting provision permanent.
  At a time when our unemployment rate remains over 7 percent, we need 
to be doing everything we can to encourage economic growth. The energy 
industry is a major contributor to our economy, and it has a lot of 
room to grow. The Congressional Research Service released a report that 
says the United States has the most energy potential under its soil 
than any other country on earth. Hiding beneath our soil are jobs, 
wealth, and lower deficits. We should allow this sector to grow. This 
is a common sense, easy way to do this, so I urge swift passage.
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