Property factor - Intangible drilling costs

Intangible drilling and development costs incurred by oil and gas producing companies in connection with oil and gas properties must be included in the property factor. Intangible drilling and development costs include such elements as wages, fuel, repairs, hauling, draining, roadbuilding, surveying, geological works, construction of derricks, tanks, pipelines, and other physical structures necessary for the drilling of wells and their preparation for the production of oil and gas, and supplies incident to and necessary for the drilling of wells and clearing of ground. The amount to be included in the property factor is the amount capitalized for financial reporting purposes using the successful effort accounting method. An election to expense intangible drilling costs for federal income tax purposes has no effect on their inclusion in the property factor. Unproven properties must be included in the property factor until such time as they have been determined to be impaired and have been expensed for book purposes. All costs relating to exploratory wells that have been capitalized and classified as uncompleted wells, equipment, and facilities (wells in progress or wells in process) must be included in the property factor until such time as the well is determined to be a dry hole and the costs have been expensed for book purposes. Delay rentals, which are not capitalized for book purposes, are includable in the property factor at their net annual rental rate and are not capitalized times eight.