Page 445

TITLE 26-INTERNAL REVENUE CODE the total production of such property by the taxpayer's percentage participation in the revenues from such property. In applying this paragraph, there shall not be taken into account any production of crude oil or natural gas resulting from secondary or tertiary processes (as defined in regulations prescribed by the Secretary). (3) Depletable oil quantity (A) In general For purposes of paragraph (1), the tax- payer's depletable oil quantity shall be equal to- (i) the tentative quantity determined under the table contained in subpara- graph (B), reduced (but not below zero) by (ii) the taxpayer's average daily second- ary or tertiary production for the taxable year. (B) Phase-out table For purposes of subparagraph A)- In the case of pro- The tentative duction during the quantity calendar year: in barrels is: 1975 ...................................................... 2,000 1976 ...................................................... 1,800 1977 ...................................................... 1,600 1978 ...................................................... 1,400 1979 ...................................................... 1,200 1980 and thereafter ........................... 1,000 (4) Daily depletable natural gas quantity For purposes of paragraph (1), the deplet- able natural gas quantity of any taxpayer for any taxable year shall be equal to 6,000 cubic feet multiplied by the number of barrels of the taxpayer's depletable oil quantity to which the taxpayer elects to have this para- graph apply. The taxpayer's depletable oil quantity for any taxable year shall be re- duced by the number of barrels with respect to which an election under this paragraph ap- plies. Such election shall be made at such time and in such manner as the Secretary shall by regulations prescribe. (5) Applicable percentage For purposes of paragraph (1)- In the case of pro- duction during the The applicable calendar year: percentage is: 1975 ..................................................... 22 1976 ..................................................... 22 1977 ..................................................... 22 1978 ..................................................... 22 1979 ..................................................... 22 1980 ..................................................... 22 1981 ..................................................... 20 1982 ..................................................... 18 1983 ..................................................... 16 1984 and thereafter .......................... 15 (6) Oil and natural gas resulting from secondary or tertiary processes (A) In general Except as provided in subsection (d), the allowance for depletion under section 611 shall be computed in accordance with sec- tion 613 with respect to- (i) so much of the taxpayer's average daily secondary or tertiary production of domestic crude oil as does not exceed the taxpayer's depletable oil quantity (deter- mined without regard to paragraph (3)(A)(ii)); and (i) so much of the taxpayer's average daily secondary or tertiary production of domestic natural gas as does not exceed the taxpayer's depletable natural gas quantity (determined without regard to paragraph (3)(A)(ii)); and 22 percent shall be deemed to be speci- fied in subsection (b) of section 613 for pur- posei of subsection (a) of that section. (B) Average daily secondary or tertiary produc- tion For purposes of this subsection- (i) the taxpayer's average daily second- ary or tertiary production of domestic crude oil or natural gas for any taxable year shall be determined by dividing his aggregate production of domestic crude oil or natural gas, as the case may be, re- sulting from secondary or tertiary pro- cesses during the taxable year by the number of days in such taxable year, and (ii) in the case of a taxpayer holding a partial interest in the production from any property (including any interest held in any partnership) such taxpayer's pro- duction shall be considered to be that amount of such production determined by multiplying the total production of such property by the taxpayer's percentage participation in the revenues from such property. (C) Termination This paragraph shall not apply after De- cember 31, 1983. (7) Special rules (A) Production of crude oil In excess of deplet. able oil quantity If the taxpayer's average daily production of domestic crude oil exceeds his depletable oil quantity, the allowance under paragraph (1)(A) with respect to oil produced during the taxable year from each property in the United States shall be that amount which bears the same ratio to the amount of de- pletion which would have been allowable under section 613(a) for all of the taxpay- er's oil produced from such property during the taxable year (computed as if section 613 applied to all of such production at the rate specified in paragraph (5) or (6), as the case may be) as his depletable oil quantity bears to the aggregate number of barrels repre- senting the average daily production of do- mestic crude oil of the taxpayer for such year. (B) Production of natural gas in excess of deplet- able natural gas quantity If the taxpayer's average daily production of domestic natural gas exceeds his deplet- able natural gas quantity, the allowance under paragraph (1)(B) with respect to nat- ural gas produced during the taxable year from each property in the United States shall be that amount which bears the same ratio to the amount of depletion which Page 445 § 613A