118 STAT. 1486 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(C) REFERENCE PRICE.—For purposes of this para graph, 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 29(d)(2)(C), and ‘‘(ii) in the case of qualified natural gas production, the Secretary’s estimate of the annual average well head price per 1,000 cubic feet for all domestic natural gas. ‘‘(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 29(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. ‘‘(3) DEFINITIONS.— ‘‘(A) QUALIFIED MARGINAL WELL.—The 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.—The terms ‘crude oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have the meanings given such terms by section 613A(e). ‘‘(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
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