Jim Inhofe: “I would like to announce the reintroduction of a bill to amend the Internal Revenue Code to eliminate the taxable income…”

“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 611,000 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.…”