§ 45I. 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—
(b)
Credit amount
For purposes of this section—
(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 $15 ($1.67 for qualified natural gas production), bears to
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
In the case of any taxable year beginning in a calendar year after 2005, 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 “2004” for “1990”).
(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 qualified 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-of-oil equivalents (as defined in section
45K
(d)(5)).
(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.
(d)
Other rules
(1)
Production attributable to the taxpayer
In the case of a qualified 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.