View all text of Subpart D [§ 38 - § 45AA]

§ 45I. Credit for producing oil and gas from marginal wells
(a) General ruleFor 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 amountFor purposes of this section—
(1) In generalThe 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 generalThe $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 $15 ($1.67 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 of the calendar year preceding the calendar year in which the taxable year begins.
(B) Inflation adjustment
(C) Reference priceFor 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 45K(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 productionFor purposes of this section—
(1) In general
(2) Limitation on amount of production which may qualify
(A) In general
(B) Proportionate reductions
(i) Short taxable years
(ii) Wells not in production entire year
(3) Definitions
(A) Qualified marginal wellThe term “qualified 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-of-oil equivalents (as so defined), and(II) produces water at a rate not less than 95 percent of total well effluent.
(B) Crude oil, etc.
(d) Other rules
(1) Production attributable to the taxpayer
(2) Operating interest required
(3) Production from nonconventional sources excluded
(Added Pub. L. 108–357, title III, § 341(a), Oct. 22, 2004, 118 Stat. 1485; amended Pub. L. 109–58, title XIII, § 1322(a)(3)(B), (D), Aug. 8, 2005, 119 Stat. 1011; Pub. L. 109–135, title IV, § 412(k), Dec. 21, 2005, 119 Stat. 2637.)