Crude Oil Windfall Profit Tax, 1985

By Edward Chung*

Crude oil windfall profit tax (afteradjustments) for the fourth quarter of 1985 was$1.0 billion. This was the lowest amount ofwindfall profit tax reported since the firstfull quarter (June 1980) for which the tax wasreported. The total reported windfall profittax after adjustments since the enactment ofthe Crude Oil Windfall Profit Tax Act of 1980amounted to almost $78 billion through December1985.

The Crude Oil Wi ndf al l Prof it Tax Actimposed a Federal excise tax on domestic crudeoil extracted on or after March 1, 1980. Thetax was enacted in response to the plannedphaseout of Government price controls ondomestic crude oil. The Act was intended to taxa fair share of the additional revenuesreceived by oil producers and royalty owners asa result of oil price decontrol, yet notadversely affect domestic production. Congressdesignated the windfall profit tax to betemporary, with a 33-month gradual phaseout.This phaseout will begin in January 1988, if

Figure AComponents of windfall Profit Tax LiablItty BefGre Adjustments:Aggregate Valuea By Quatier Oil R*Mved, 19WJWS'6,Mon. of Dolt~

Adjusted Base ValuePlus State Severance

.- -j-T-U

After Full Decontrol

Removal Value

Wt~dtall Profit

$227.3 billion in net revenue (see theDefinitions) will have been realized by then;otherwise, no later than January 1991 [1].

The formula to calculate the "windfal 1profit" (WP) is:

where:WP = RP - (ABP + SST)

RP = Removal PriceABP = Adjusted Base PriceSST = State Severance Tax Adjustment

The windfall profit declined from a high of$11.9 billion for the quarter ending June 1981to $1.6 billion for the quarter ending December1985 (Figure A) [2]. This decrease was aresult of declines in the "removal price"(generally the price for which oil is sold) andrises in the "adjusted base price" and Stateseverance tax adjustment (see the Definitionsat the end of this article).

iTax Liability

Before Adjustments..............................

--*

........i...... I .

I

.........

I

I .........

I

........

I ..........I.........I.........i .........IF....... ~T ....... II f I I I I I

marw W80 Soo&) 9-oo J-31 S~p6i DWSI MIWEL2 An82 SapS2 DecU M&ra3 k~ 6J -'4p83 DW63 MariA J-FA S"64T DQC&4 NW115 "85 SopaS 0~85

Ouarter OW Removed

'Some Mk" rWPW ~JaA ~W~ t*A kkd~A~ -6, tl~e(ow data for rwnovel value, &**ted be" ~akm " state "vwwt* " # at "ourre .pww tas jw

;o(V Mond) only,

*Foreign Special Projects Section. Prepared with the assistance of PatriciaSlaughter under the direction of Michael Alexander, Chief. 85

86 Crude Oil Windfall Profit Tax, 1985

Since June 1981, when the average removalprice for domestic crude oil was at its height,the removal price had fallen by almost 23percent, from $33.09 to $25.43 per barrel forthe quarter ending December 1985 (Figure B).

The total windfall tax liability reported(after adjustments) for Calendar - Years1980-1985 totalled $77.8 billion. Of the totaltax, 1981 accounted for the largest proportion(33 percent) and 1985 the lowest (7 percent)--adecline from 1981 to 1985 of 78 percent (FigureC). Some returns report windfall profit taxonly; therefore, data for removal value,adjusted base value, State severance tax, andthe resulting windfall profit have beenadjusted to account for the missing detail.Concomitant with this decline in ' taxliabilities was a decrease in reported windfallprofit of 78 percent from 1981 to 1985.

The immediate cause for falling profits wasthe combined effect of declining removal price(down by 36 percent from 1981) accompanied by a1 percent growth in the sum of the adjustedbase value and State severance tax .(Figure D).The adjusted base price increased chiefly as aresult of a required inflation adjustmentderived f rom . the Gross National Product (GNP)

-imp11-ci-t-p.ri-ce-d.etl-ato.r-[-aI

Figure BComponents of Windfall.Profit Tax Liability:Averages per Barrel by Quarter Oil Removed, 1980-1985

,If '11 ["''

Tax Liability

........................................

....................... I

After Full Decontrol

I I

Adjusted Base PriceAnd State Severance Tax

Adjustment

Fioure CWindfall Profit Tax Liability AfterAdjustments by Year, 1980-1985

............. I ........Prior to Full Decontrol

M~EV J-60 _I'PB0 Deca; J-8, SeP81 D0081 M18-2 J,MB2 ~3W

NOTE &-aLW Of WM COMR43 dU" 19W- U~We 'vam casea `v'~ tn~ 'emc',,justed base price and M Form 6047 was M49d. ThO data M the Nura an

........................................................................................ .....

D-B" Ma P3 J~ B3 B3 D-9.3 W164 ~~64 S~pl~l D-84 M118-5 J-6.5 Snp 65

. Figure DComponents of Windfall Profit Tax Liability After Adjustments, 1WO-Im"Billions of Dollars.100

80 "

70-

60-

50-40-

30-

20-

10~-

48.1

P~221.9

9.9

48.9L43.8

25.9

52.3

L~0.8

16.7

53.3

19.9

10.7

L~4.9

87~ 5.6

1980 1981 1982 1983 1984 1985Year Oil Removed

1 Some returns report windfall profit tax liability only, therefore, data for removal Value. adjusted base value andstate severance tax adjustment have been adjuste~ to reflect totals as if all returns reported this detail.

2 Represents only 10 months.

Removal Value

92.7

83.1

73.4

Adjusted Base ValueAnd State SeveranceTax Adjustment

Windfall Profit

68.4

52.7 53.7

Ll 5.8

Tax Liability-AfterAdjustments

89

88 . Crude Oil Windfall Profit Tax, 1985

Figure E is a summary, by quarter, of taxliability before and after adjustments sincethe tax went into effect in 1980, as shown onwindfall profit tax returns. The adjustmentswere necessary because of errors by withholdingagents during previous quarters or, morefrequently, because of application of the netincome limitation.

Figure E--Windfall Profit Tax Before and AfterAdjustments

[Millions of dollars]

Quarter Tax Before Total Tax AfterEnding Adjustments Adjustments Adjustments

Total ...... $83,668 -$5,911 $77,757

Mar. 19801.,.. 788 - 788June 1980 ... 2,842 -21 2,821Sept. 1980 ... 3,413 -88 3,325Dec. 1980 3,918 -927 2,991-Mar. 1981 6,953 +242 7,195June 1981 ... 7,253 -107 7,146Sept. 1981 ... 6,344 -251 6,093Dec. 1981 ... 6,007 -497. 5,510Mar. 1982 ...' 5,222 -221 5,001June 1982 ... 4,283 -295 3,988

-Sep_t.-_1_98L._._._4.,_4O_4-,-445-3,959Dec. 1982 ... 4,440 -634 3,806Mar.. 1983 ... 3,320 -193 3,127June 1983 ... 2,951 -203 2,748Sept. 1983 ... 2,822 -300 2,522Dec. 1983 ... 2,736 -465 2,271Mar. 1984 ... 2,622 -228 2,394June 1984 ... ~2,468 -218 2,250Sept. 1984 ... 2,447 -200 2,247Dec. 1984 ... .-2,236 -256 1,980Mar. 1985 ... 1,850 -117 1,733June 1985 ... 1,653 -132 1,5;21Sept. 1985 ... 1,442 -146 1,296Dec. 1985 ... 1,254 -209 1,045

lOne month only.

The net i ncome limitation generated anadjustm

.ent bec

.ause it limits the windfall

profit to 90 percent of the net income perbarrel of oil and was estimated by certaintaxpayers for the current quarter endingDecember 1985. The adjustments to the previousquarter were 'for under- or over-withholdingfrom previous quarters that the depositing orwithholding agent (usually the first purchaser)corrected by adjusting.the amounts withheld insucceeding quarters. Producers claimed as arefund or a credit on their income tax returnsadditional over-withholding of windfall profittax, due to error or the net income limitation,that was not corrected by the withholdingagent. The amount of the two types of taxadjustments for the fourth quarter of 1985 isshown below:

Adjustments to tax, fourth quarter 1985(Millions)

Net income limitation -$190Prior quarters - -19Total Adjustments -$209

Based on returns of taxpayers that providedcomplete detail on the windfall profit taxcomputation [4], "tier one oil" continued todominate production for the quarter endingDecember 1985. Tier one oil (all domesticallyproduced crude oil other than oil specificallyclassified as tier two or tier three, or oilexplicitly exempted from the tax) represented46 percent of total production. "Tier twooil," which represented 11 percent of totalproduction, is oil produced from stripper wellproperty not qualifying for the stripperexemption and oil from economic interests in aNaval Petroleum Reserve held by the UnitedStates. "Tier three oil," which is heavy oil,incremental tertiary oil and newly discoveredoil (the latter represented 53 percent of tierthree oil), accounted for 43 percent of totalproduction (Figure F). Since the inception ofthe tax, tier three oil, which is generallytaxed at a rate lower than tier one oil, hasaccounted for a steadily increasing percentage

-of-tota-l-production.

DATA SOURCES AND LIMITATIONS

The windfall profit tax is reported on theQuarterly Federal Excise Tax Return, Form 720.Form 6047, Windfall Profit Tax, shows how thetax is computed and is filed as an attachmentto Form 720. Tabulations in this article arebased on the Forms 6047 reporting a taxliability. Therefore, total -domestic taxableproduction will be somewhat understated.Returns are due 2 months after the end of thequarter in which the oil-is removed. Data arebased on all returns with a tax liability of $1million or more before adjustments and a10-percent sample of all other returns.

Sampling and nonsampling error was' controlledby a variety of methods. Although efforts weremade to secure missing returns, some returnsmay have been omitted because of time and otherstatistical processing constraints. Attempts.were made to correct imbalances in taxpayerentries for the components of windfall profit.If this proved impossible, an out-of-balance-eturn was treated as a return on which thecomponents were not reported, and thereforeonly the tax liability for each tier wastabulated from it. However, for returns thatdid not report the tax computation detail (forFigures -A and D only), the components wereestimated using a fa

'ctor derived from the

relationship of the tax liability for thosereporting all 'of the tax computation detail tothe total reported tax, liability. A number of

I

I

Crude Oil Windfall Profit Tax, 1985

Figure FComponents of 011,~Reported forWindfall Profit Tax Puirpos". byYear, 1981-1985Thousand Barrels,30OOr-

2500

2000t-

1500

10001--

Soo

1981 ;'1982 ig'84 1985

Tier Three Sadiem-chil

Tief Two NowSaderoft

verification checks were performed at allstages of manual data abstraction and computercompilation.

The Statistics of Income Bulletin al soincludes data on excise tax collections. Theexcise tax collection figures show theliability after adjustments, as reported onForm 720, from returns entered into theInternal Revenue Service (IRS) computerizedBusiness Master File (BMF) each quarter. Anumber of considerations affect comparisons ofdata from these two sources. Returns are notdue until 2 months after the close of thetaxable quarter; however, the interval betweenthe close of the taxable period and the finalrecording of the return often varies, so thatthe quarterly BMF totals may represent morethan one taxable period. On the other hand,the data presented here have been tabulated forspecific taxable periods. As a result, the twosets of statistics are not directly comparable.

DEFINITIONS

89

The follwoing are brief definitions of theterms used in the tables.

Ad~usted BaseF

Price.--The base price multi-plied by the -InTl-ation adjustment," which wasderived from the Gross National Product (GNP)"implicit price deflator."

Adjustments to Tax Liability.--Correctionsapplied to the current quarter's tax liabilityto correct for the "net income limitation" andover- and under-withholding in previousquarters.

Base Price.--For tier one oil, the upper tierceiling price, as defined by Department ofEnergy price control regulations, which wouldhave applied to the oil had it been producedand sold in May 1979, reduced by $0.21. Fortiers two and three oil, the base prices were$15.20 and $16.55, respectively, adjusted forgrade and quality.

Crude Oil.--The term applied only to naturalcrude petroleum and did not include syntheticpetroleum, such as oil from shale or tar sands.It did, however, include natural gas liquidstreated as crude oil under the June 1979 energypricing regulations issued by the Department ofEnergy.

Deposit Requirements.--The timing of anyfirst purchaser to deposit amounts withhelddepended on the identity of the first pur-chaser. Major refiners, other than independentrefiners, were required to make semi-monthlydeposits of the withholding tax. All otherfirst purchasers were required to make with-holding deposits no later than 45 days afterthe oil was removed from the premises, exceptindependent refiners that purchased oil underdelayed payments contracts. The latter wererequired to make deposits by the first day ofthe third month beginning after the month ofremoval.

Exempt Alaskan Oil.--Oil from a reservoirother than the Sadlerochit reservoir that hadbeen commercially exploited by any well northof the Arctic Circle and oil produced north ofthe divides of the Alaska and Aleutian Ranges,and at least 75 miles from the nearest point ofthe Trans-Alaskan Pipeline System.

. Exempt Charitable Oil.--Oil produced fromeconomic interests held Fy qualified charitablemedical facilities, educational institutions,and child care organizations (as defined in In-ternal Revenue Code section 170), if such in-terests were held on January 21, 1980, and atall times thereafter; and oil produced frominterests held by a church on January 21, 1980,if, before January 22, 1980, the net proceeds

90 Crude Oil Windfall Profit Tax, 1985

from such oil were dedicated to the support ofa medical facility, educational institution, orchild care facility.

Exempt Governmental Oil.--Oil produced froman economic. interest held by a State or a po-litical subdivision (including agencies andinstrumenta1ities), the net income from whichwas used for public purposes. .

Exempt Indian Oil.--Oil produced from mineralinterests held by or on behalf of Indian tribesor individuals on January 21, 1980, which wasone of the following: (a) production receivedby Indian tribes and individuals from TribalTrust Lands (the title to such land was held bythe United'States in*trust for the tribes); (b)production from land or mineral interests heldby an Indian tribe eligible for servicesprovided to Indians by the Secretary of the In-terior; or (c), oil, the proceeds from whichwere paid into the U.S. Treasury to the creditof tribal or native trust funds pursuant tolaw. This exemption also applied to productionby any Alaskan Native Corporation prior to1991, including wholly-owned subsidiaries ofsuch corporations.

Removal Price.--Generally,. the price forwhich a barrFT of oil was sold. In someinstances, a constructive sales price was used.

Sadlerochit Oil.--Crude oil production fromthe SadlerocFl-treservoir in the Prudhoe Bayoil field in Alaska.

State Severance Tax Adjustment.--A taximposed by a State with respect to theextraction of oil. The windfall profit wasreduced by the amount by which the severancetax exceeded that which would have been imposedhad the oil been valued at its adjusted baseprice.

Stripper Oil.--In general, oil from. a pro-perty for which the average daily productionper wel 1 was 10 barrels or less for anyconsecutive 12-month period after 1972.

Tier One Oil.--All domestically-producedcrude oil other than any oil classified in tiertwo or three, or explicitly exempted by lawfrom the tax. This included the bulk of domes-tic oil from reservoirs proven to be productivebefore 1979.

Exempt Royalty Oil.--Qualified royalty owners-wer-e-exemp-t-J-rom- the wi-ndfall-p-rof-i-t-t-ax-on

-t

-wo

barrels of oil per day for each day of the cal-endar quarter for oil removed after December

1981. For 1985 and thereafter, three bar-rels per day were to be exempt.

Exempt Stripper Oil.--Oil removed fromstripper wells could qualify for exemption fromthe windfall profit tax if the followingconditions were met:

(1) The oi I had to be removed -f rom a stripperwell property after 1982;

(2) The oil had to be extracted by anindependent producer; . 1

(3) The oil had to be attributable to theindependent producer's working interestin the property; and

(4) The stripper well property could not be aproperty transferred by a nonindependentproducer on or after July 23, 1981.

Net Income Limitation. --The windfall profiton a barrel of oil c-o-uTd not exceed 90 percentof the net income attrIbutable to the barrel.

Net Revenue.--This equaled the gross revenuefrom the windfall profit tax or excise tax(excluding that. amount attributable to U.S.Government interests), less the reduction ofincome tax resulting from taxpayers claimingincome tax deductions for windfall profit taxpaid Figures presented in this report are thegros; tax liabilities reported by thewithholding agents on Form 6047 and are beforethe reductions mentioned above.

-Tier Two Oil.--Any ofl from a stripper well-p rope rty-wit-hi n-t he-meani-ng-of-t he-June-1-9 79Department of Energy pricing regulations and oilfrom a U.S. economic interest in a Naval Petro-leum Reserve. Note that the Crude Oil WindfallProfit Tax Act of 1980 defined tier two oil asfrom a "National" Petroleum Reserve. This wasamended to ' read "Naval" Petroleum Reserve bythe Technical Corrections Act of 1982.

Tier Three Oil, Heavy Oil.--All crude oil (1)produced from property That had a. weightedaverage gravity of 16.0 degrees or less on theAmerican Petroleum Institute (API) scale,corrected to 60 degrees Fahrenheit, for thelast month of production before July 1979-, or(2) oil from a property with a weighted averagegravity of 16.0 degrees API or less, correctedto 60 degrees Fahrenheit, for the taxableperiod.

Tier Three Oil, Incremental Tertiary Oil.--Production in excess of a base level on aproperty on which~a qualified tertiary recoveryproject (one using one of several

.specific

chemical, fluid or gaseous recovery methods toextract oil not recoverable using standardtechniques) had been undertaken. Thenon-incremental oil (i.e., the amount ofproduction up to the base level) remained inthe otherwise applicable tier.

Tier Three Oil, Newly Discovered Oil.--Crudeoil sold afTer May 31, 1979, and pr-o-d-uced from(1) an outer continental shelf area for whichthe lease was entered into on or after January1, 1979, and from which there was no production

Crude Oil Windfall Profit Tax, 1985

in Calendar Year 1978 or (2) an on-shore pro-perty developed after Calendar Year 1978.

Windfall Profit.--The excess of the removalprice of the barrel of oil over the sum of theadjusted base price and the State severance taxadjustment.

NOTES AND REFERENCES

[I] Staff of the Joint Committee on TaxationGeneral Explanation of the Crude OiiWindfall Profit Tax Act of 1980, U.S.Government Printing Office,

[21 Since the windfall profit tax has fallen tosuch a low level, statistics will no longerbe published each quarter. However, thetables will be published annually in the

91

Fall issue of the Statistics of IncomeBulletin.

The table showing annual fiscal yearreceipts was not produced due to the datanot being available at time of publication.

[31 The inflation adjustment, calculated by theInternal Revenue Service, Research Division,is published quarterly in the InternalRevenue Bulletin. (See Internal RevenueBulletin 1985-37, September 16, 1989.)

[4] At the inception of the windfall profit tax(March 1980), taxpayers were not requiredto complete the detail called for on theForm 6047, which shows how the tax wascomputed. However, taxpayers were requiredto provide full information as of January1981.

I

92 Crude Oil Windfall Profit Tax, 1985

Table l.--Windfall Profit Tax Liability by Oil Tier, Tax Rate and Aggregate Components of Windfall Profit,Quarter Ending December 1985

[Money Amounts are in millions of dollars]

Oil tier and tax rateNumber ofbarrelsof oil(000's)

Removalvalue

Adjustedbase

value

Stateseverance

taxadjustment

Windfallprofit

Taxliabilitybefore

adjustments

(1) (2) (3) (4) (5) (6)

Returns with tax liability shown by oiltier and tax rate, total .................. 466,675 11,874 10,160 81 1,634 1,248

Tier one, other than Sadlerochit oil:Taxed at 70 percent .................... 197,913 5,133 3,631 61 1,440 1,050Taxed at 50 percent .................... 17,535 477 329 8 140 67

Tier one, - Sadl'erochit oil : (1) (1) (1)Taxed at 70 percent ..................... ~1,333 .24 24Taxed at 50 percent .................... - - - -

Tie'r two oil:Taxed at 60 percent ..................... 47,945 1,261 1,040 8 212 121Taxed at 30 percent .................... 2,092 44 37 (1) 7 3

Tier three oil (taxed at 30 percent):Newly discovered oi 12 ................... 105,634 .2,684 2,820 2- -139 4'Incremental tertiary oil ............... 55,275. .1,452 1,436 (1) 16 2Heavy oil .......... .................... 38,948 799 842 (1) -43 1

Returns with total tax liability only ....... - 6

IAmount is less than $500,000.

72We-wl-y discovered oil is taxed at 29.-5-~-erc-enf--fFom-1-984-t~-o--1987-.NOTE: Detail may not add to total because of rounding.

Ta.ble.2.--Average Windfall Profit Tax Liability for Returns Reporting Components of.Windfall Profit by Oil Tier

and Tax Rate, Quarter Ending December 1985

Oil tier and tax rate

Returns with tax liability shown by oiltier and tax rate, total ..................

Tier one, other than Sadlerochit oil:Taxed at 70 percent ....................Taxed at 50 percent ....................

Tier one, Sadlerochit oil:Taxed at 70 percent ....................

Taxed at 50 percent ....................

.Tier two oil:Taxed at 60 percent ....................Taxed at 30 percent ....................

Tier three oil (taxed at 30 percent):Newly discovered oil ....................Incremental tertiary oil ...............Heavy oil ...............................

Averagedaily

production(000's)

(barrels)

(1)

5,073

2,151191

14

52123

1,148601423

Removalprice

(2)

25.44

25.9327.20

18.24

26.3021.13

25.4026.2720.51

Average per barrel (in dollars)

Adjustedbase

price

(3)

21 .77

18.3418.76

18.08

21.7017.78

26.6925.9721.61

Stateseverance

taxadjustment

(4)

.17

.30

.43

.01

Windf a 1 1prof it

(5)

3.50

7.298.01

4.433.18

Taxliabi I itybefore

adjustments

(6)

2.67

5.303.84

.12

2.511.64

.03

.03

.01

I

'Newly discovered oil is taxed at 22.5 percent from 1984 to 1987.2Amount under $0.005.NOTE: Detail may not add to total because of rounding.

Crude Oil Windfall Profit Tax, 1985

Table 3.--Exempt Oil Volume by Tier and Category, Quarter Ending December 1985

[Thousands of barrels]

93

Tier threeTier Tier

Exempt oil Total one two Newly Incremental Heavydiscovered tertiary oil

oil oil

(1) (2) (3) (4) (5) (6)

Total ......................................... 75,116 10,809 45,002 17,107 1,582 615

Exempt governmental interest .................... 11,461 7,251 730 2,059 947 473

Exempt charitable interest ...................... 796 312 302 89 80 13

Exempt Indian oil ............................... 931 316 158 304 144 9

Exempt Alaskan oil .............................. 11,473 114 - 11,359 - -

Exempt royalty oil .............................. 10,114 2,817 3,470 3,296 411 120

Exempt stripper oil ............................. 40,342 -I - -

40,342 -I

- -

NOTE: Detail may not add to total because of rounding.

Table 4.--Windfall Profit Tax Liability by Oil Tier, Tax Rate and Aggregate Components of Windfall Profit,January through December 1985

[Money amounts are in millions of dollars]

Oil tier and tax rateNumber ofbarrelsof oil(000's)

Removalvalue

Adjustedbase

value

Stateseverance

taxadjustment

Windfallprofit

Taxliabilitybefore

adjustments

(1) (2) (3) (4) (5) (6)

Returns with tax liability shown by oiltier and tax rate, total .................. 2,035,908 51,080 429399 381 8,300 5,901

Tier one, other than Sadlerochit oil:Taxed at 70 percent .................... 907,689 23,800 16,279 282 7,239 4,984Taxed at 50 percent .................... 78,467 2,068 1,430 38 601 301

Tier one, Sadlerochit oil:Taxed at 70 percent .................... 94,651 1,659 1,657 5 -4 18Taxed at 50 percent .................... - - - - - -

Tier two oil:Taxed at 60 percent .................... 197,701 5,098 4,151 36 911 517Taxed at 30 percent .................... 9,964 160 136 1 23 20

Tier three oil (taxed at 30 percent):Newly discovered oil .................... 428,153 10,682 11,143 14 -474 27Incremental tertiary oil ............... 192,280 4,948 4,864 5 79 27Heavy oil .............................. 127,004 -2,664 2,739 (2) -75 6

Returns with total tax liability only .......I

- - --

- 299

'Newly discovered oil is taxed at 22.5 percent from 1984 to 1987.2Amount is less than $500,000.NOTE: Detail may not add to total because of rounding.

94 Crude Oil Windfall Profit Tax, 1985

Table 5-Average Windfall Profit Tax Liability for Returns Reporting Components of Windfall Profit by Oil Tierand Tax Rate, January through December 1985

Oil tier and tax rate

Returns with tax liability shown by oiltier and tax rate, total ..................

Tier one, other than Sadlerochit oil:Taxed at 70 percent ....................Taxed at 50 percent ....................

Tie~ one, Sadlerochit oil:Taxed at 70 percent ....................Taxed at 50 percent ....................

Tier two oil:Taxed at 60 percent ....................Taxed at 30 percent ....................

Tier three oil (taxed at 30 percent):Newly discovered oil....................Incremental tertiary oil ...............Heavy oil ..............................

(1)

5,578

2,487215

259

54227

1,173527348

1 Newly discovered oil is taxed at 22.5 percent from 19842Amount is less than $0.005.

NOTE:-Det-ai-l-may-not-add-to-total-because--of-rounding.-

Removalprice

(2)

24.98

26.3026.11

17.51

25.6214.76

24.8025.5221.18

to 1987.

Average per barrel (in dollars)

Adjustedbase

price

(3)

20.54

17-8218.06

17.50

20.7712.60

25.8125.0221.54

Stateseverance

taxadjustment

(4)

.19

.31

.49

.06

.03

.03(2)

Wi ndf a 11prof it

(5)

4.25

8.177.56

-.04

4.672.03

-1.04.46

-.36

Taxliabi 1 ity

beforeadjustments

(6)

2.97

5.543.83

.19

2.642.15

.07

.18

.06

Table 6.--Exe~pt Oil Volume by Tier and Category,,January through December 1985

[Thousands of barrels]

Tier threeTier Tier

Exempt oil Total one two Newly Incremental Heavydiscovered tertiary oil

oil oil

(1) (2) (3) (4) (5) (6)

Total .......................................... 292,944 60,844 165,123 59,235 5,395 2,347

Exempt governmental interest .................... 61,647 45,618 3,076 7,978 3,130 1,845

Exempt charitable interest ...................... 3,399. 1,515 1,125 366 357 36

Exempt Indian oil ............................... 4,055. 1,5§0 686 1,413 348 19

Exempt Alaskan oil ............................... 36,080 457 - 35,623 -

Exempt royalty oil .............................. 40,666 11,664 13,139 13,856 1,560 447

Exempt stripper oil ............................. 147,097 -1

147,0971

-I

-I

I -

Averagedaily

production(000's)

(barrels)

NOTE: Detail may not add to total because of rounding.