Repeal Tertiary Injectants Deduction
Tertiary injection expenses, including the injectant cost, can be fully deducted in the current tax
year. Supporters of the favorable current treatment of these expenses point to the importance of
tertiary recovery methods in maintaining the output of older wells, as well as the environmental
advantages of injecting carbon dioxide, a primary tertiary injectant, into wells. Repeal of the
deduction, or less favorable tax treatment of the expenses, would be likely to reduce oil output
from older producing fields during periods when the profit margin, and the price of oil, is low.
During a period of high oil prices, the repeal is likely to have a smaller effect on production
Repeal Passive Loss Exception for Working Interests
in Oil Properties
Repeal of the passive loss exception for working interests in oil and natural gas properties is a
relatively small item in terms of tax revenues, estimated at $82 million from FY2013 to FY2022.
The provision exempts working interests, investments, in gas and oil exploration and
development from being categorized as “passive income (or loss)” with respect to the Tax Reform
Act of 1986. This categorization permits the deduction of losses in oil and gas projects against
other active income earned without limitation, and is believed to act as an incentive to induce
investors to finance oil and gas projects.