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Problems on Expenses Qualifying for IDC Deduction IDC = Intangible Drilling Costs

• Which of the following expenditures qualify for the election to expense intangible drilling and development costs

1. Drilling costs billed to the operator/lessee by a contract driller. Does it make a difference if the drilling fee is on a per foot billing rate ore a well completion rate to a stated depth?
2. Legal fees paid by the lessee for the negotiating and drafting the drilling contract with an independent contractor
3. Drilling costs associated with a well to determine the best location for a platform location
4. Costs of constructing a dirt road to the drill site to access the property these include labor and gravel costs
5. Costs of renting trucks and cars to transport materials and individuals to the drill site. Would it make a difference if the cars and trucks are purchased by the operator
6. Costs of constructing pipelines from the wellhead to oil storage tanks that are needed in drilling operations as liquids come up the wellbore during drilling operations.
7. Labor and material costs of offshore drilling platforms
8. Costs of transporting the platforms described in prob 7 above to their offshore location, and costs of installing the platforms at that location
9. Costs of a flare boom installed on an offshore platform that is sized for peak production but needed during drilling operations
10. Costs of separation equipment located onshore due to regulatory requirements but needed for drilling offshore wells from an offshore platform
11. Costs of modules installed on a modular platform that are stacked in place to secure all of the modules but are not sued for drilling other than to support other modules that are used in drilling
12. Costs of drilling delineation wells to determine the reservoirs locations when the driller/operator is highly unlikely to ever produce from the well until a platform is installed although the well is capable of producing.

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