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EJ 13: Permanently ceasing petroleum mining operations
or “Tax deduction when you permanently stop oil or gas operations”
You could also call this:

“Tax deduction for drilling a well that doesn't produce oil or gas”

You need to know about a rule for when someone drills a dry well while looking for oil or gas. This happens when they spend money to drill a well, but then have to stop because they realise it won’t produce any oil or gas that they can sell. If this happens, they have to abandon the well.

If you’ve spent money on drilling this kind of well, you might be able to claim some of that money back on your taxes. The rule says that if you haven’t already claimed all of this money back through other tax rules, you can claim the rest of it in the same year that you stopped drilling.

This rule is part of a bigger set of rules about how to handle money spent on looking for and producing oil and gas when it comes to taxes. If you want to know more about the other parts of these rules, you can look at section DT 5, section EJ 12, and section EJ 12B of the tax law.

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Next up: EJ 13C: Well not producing

or “Tax rules for petroleum miners when a well stops producing”
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Part E Timing and quantifying rules
Spreading of specific expenditure

EJ 13BDry well drilled

  1. This section applies when—

  2. the petroleum miner has petroleum development expenditure for a well, the drilling of which stops in an income year, and, from the time of stopping, the well—
    1. will never produce petroleum in commercial quantities; and
      1. is abandoned; and
      2. part of a deduction under section DT 5 (Petroleum development expenditure) for the petroleum development expenditure described in paragraph (a) has not been allocated under section EJ 12 or EJ 12B.

        1. The part of the deduction described in subsection (1) is allocated to the income year.

        Notes
        • Section EJ 13B: inserted (with effect on 1 April 2008), on , by section 129(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).