Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). For this purpose, the term "property" means each separate interest you own in each mineral deposit in each separate tract or parcel of land. You can treat two or more separate interests as one property or as separate properties. See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests.
There are two ways of figuring depletion on mineral property.
- Cost depletion.
- Percentage depletion.
Generally, you must use the method that gives you the larger deduction. However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. See Oil and Gas Wells
To figure cost depletion you must first determine the following.
- The property's basis for depletion.
- The total recoverable units of mineral in the property's natural deposit.
- The number of units of mineral sold during the tax year.
To figure the property's basis for depletion, subtract all the following from the property's adjusted basis.
- Amounts recoverable through:
- Depreciation deductions,
- Deferred expenses (including deferred exploration and development costs), and
- Deductions other than depletion.
- The residual value of land and improvements at the end of operations.
- The cost or value of land acquired for purposes other than mineral production.
The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. Your adjusted basis can never be less than zero. See Publication 551, Basis of Assets, for more information on adjusted basis. taxmap/pubs/p535-050.htm#en_us_publink1000209039
The total recoverable units is the sum of the following.
- The number of units of mineral remaining at the end of the year (including units recovered but not sold).
- The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next).
You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. taxmap/pubs/p535-050.htm#en_us_publink1000209040
You determine the number of units sold during the tax year based on your method of accounting. Use the following table to make this determination.
|IF you |
|THEN the units sold during the year are ...|
|The cash method of accounting||The units sold for which you receive payment during the tax year (regardless of the year of sale).|
|An accrual method of accounting||The units sold based on your inventories and method of accounting for inventory.|
The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. taxmap/pubs/p535-050.htm#en_us_publink1000209042
Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps.
| Step || Action || Result |
| 1||Divide your property's|
basis for depletion by
total recoverable units.
|Rate per unit.|
| 2||Multiply the rate per|
unit by units sold
during the tax year.
|Cost depletion deduction.|Note.taxmap/pubs/p535-050.htm#en_us_publink1000209045
You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed.
Owners of oil and gas property may use an elective safe harbor in determining the property's recoverable reserves for purposes of computing cost depletion. If this election is made, special rules apply. See Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www.irs.gov/pub/irs-irbs/irb04-10.pdf
To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. The election, if made, is effective for the tax year in which it is made and all subsequent years. It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. Once revoked, it cannot be re-elected for the next 5 years.taxmap/pubs/p535-050.htm#en_us_publink1000209046
To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year.
The rates to be used and other conditions and qualifications for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells. Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits.taxmap/pubs/p535-050.htm#en_us_publink1000209047
When figuring your percentage depletion, subtract from your gross income from the property the following amounts.
- Any rents or royalties you paid or incurred for the property.
- The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year.
A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor.
Use the following fraction to figure the part of the bonus you must subtract.
| No. of units sold in the tax year |
Recoverable units from the property
For oil and gas wells and geothermal deposits, gross income from the property is defined later under Oil and Gas Wells. For property other than a geothermal deposit or an oil and gas well, gross income from the property is defined later under Mines and Geothermal Deposits.taxmap/pubs/p535-050.htm#en_us_publink1000209049
The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction.
Taxable income from the property means gross income from the property minus all allowable deductions (excluding any deduction for depletion or qualified domestic production activities) attributable to mining processes, including mining transportation. These deductible items include, but are not limited to, the following.
- Operating expenses.
- Certain selling expenses.
- Administrative and financial overhead.
- Intangible drilling and development costs.
- Exploration and development expenditures.
The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit.
- Do not deduct any net operating loss deduction from the gross income from the property.
- Corporations do not deduct charitable contributions from the gross income from the property.
- If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. See section 1.613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property.
You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies.
- You are either an independent producer or a royalty owner.
- The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine.
For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells
If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained later, cannot claim percentage depletion. For information on figuring the deduction, see Figuring percentage depletion
You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. taxmap/pubs/p535-050.htm#en_us_publink1000209053
You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you.
For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. A partnership and a trust are related persons if one person holds a significant ownership interest in each of them.
For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following.
- The value of the outstanding stock of a corporation.
- The interest in the profits or capital of a partnership.
- The beneficial interests in an estate or trust.
Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. taxmap/pubs/p535-050.htm#en_us_publink1000209054
You cannot claim percentage depletion if both the following apply.
- You sell oil or natural gas or their by-products directly or through a related person in any of the following situations.
- Through a retail outlet operated by you or a related person.
- To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products.
- To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person.
- The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year.
For the purpose of determining if this rule applies, do not count the following.
- Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users.
- Bulk sales of aviation fuels to the Department of Defense.
- Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year.
To determine if you and another person are related persons, see Related person
under Refiners who cannot claim percentage depletion
You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person.
You are not
considered to be selling through a related person who is a retailer if all the following apply.
- You do not have a significant ownership interest in the retailer.
- You sell your production to persons who are not related to either you or the retailer.
- The retailer does not buy oil or natural gas from your customers or persons related to your customers.
- There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer.
- Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale.
You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. For a definition of the term "transfer," see section 1.613A-7(n) of the regulations. For a definition of the term "interest in proven oil or gas property," see section 1.613A-7(p) of the regulations.taxmap/pubs/p535-050.htm#en_us_publink1000209058
Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production exceeds depletable quantities.
In addition, there is a limit on the percentage depletion deduction. See Taxable income limit
Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. taxmap/pubs/p535-050.htm#en_us_publink1000209060
If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property.
You have a partial interest in the production from a property if you have a net profits interest in the property. To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. Then multiply the total production from the property by your percentage participation to figure your share of the production.taxmap/pubs/p535-050.htm#en_us_publink1000209061
John Oak owns oil property in which Paul Elm owns a 20% net profits interest. During the year, the property produced 10,000 barrels of oil, which John sold for $200,000. John had expenses of $90,000 attributable to the property. The property generated a net profit of $110,000 ($200,000 − $90,000). Paul received income of $22,000 ($110,000 × .20) for his net profits interest.
Paul determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). Paul determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). taxmap/pubs/p535-050.htm#en_us_publink1000209062
Generally, your depletable oil quantity is 1,000 barrels. Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity.taxmap/pubs/p535-050.htm#en_us_publink1000209063
You have both oil and natural gas production. To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. Your depletable natural gas quantity is 2.16 million cubic feet of gas (360 × 6000). You must reduce your depletable oil quantity to 640 barrels (1000 − 360).
If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity.taxmap/pubs/p535-050.htm#en_us_publink1000209064
You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year.
- Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest).
- You and your spouse and minor children.
A related person is anyone mentioned in the related persons discussion under Nondeductible loss
in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children.
Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. They share the depletable quantity. Under this rule, a controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that the stock ownership requirement in that definition is "more than 50%" rather than "at least 80%."taxmap/pubs/p535-050.htm#en_us_publink1000209066
For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation.
If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP.
Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. taxmap/pubs/p535-050.htm#en_us_publink1000209067
If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows.
- Figure your average daily production of oil or natural gas for the year.
- Figure your depletable oil or natural gas quantity for the year.
- Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%.
- Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). This is your depletion allowance for that property for the year.
If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following.
- 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. For a definition of taxable income from the property, see Taxable income limit, earlier, under Mineral Property.
- 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback.
You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. Add it to your depletion allowance (before applying any limits) for the following year.
For tax years beginning in 2009, the 100% taxable income limit does not apply to percentage depletion on marginal production of oil and natural gas. For information on marginal production, see section 613A(c)(6) of the Internal Revenue Code.
Generally, each partner or shareholder, and not the partnership or S corporation, figures the depletion allowance separately. (However, see Electing large partnerships must figure depletion allowance,
later.) Each partner or shareholder must decide whether to use cost or percentage depletion. If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources.
The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property.
Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. However, in some cases, it is figured according to the partner's interest in partnership income.
The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests.
Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property.
Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms.
- Form 6198, At-Risk Limitations.
- Form 8582, Passive Activity Loss Limitations.
An electing large partnership, rather than each partner, generally must figure the depletion allowance. The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance.
An electing large partnership is one that meets both the following requirements.
- The partnership had 100 or more partners in the preceding year.
- The partnership chooses to be an electing large partnership.
An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. Disqualified persons must figure it themselves, as explained earlier.
All the following are disqualified persons.
- Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners, earlier).
- Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners, earlier).
- Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. Average daily production is discussed earlier.
You can use percentage depletion for a well that produces natural gas either sold under a fixed contract or produced from geopressured brine. taxmap/pubs/p535-050.htm#en_us_publink1000209076
Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. The contract must have been in effect from February 1, 1975, until the date of sale of the gas. Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. taxmap/pubs/p535-050.htm#en_us_publink1000209077
Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. This is natural gas that is both the following.
- Produced from a well you began to drill after September 1978 and before 1984.
- Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine.
Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion.taxmap/pubs/p535-050.htm#en_us_publink1000209079
For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit.
The following is a list of the percentage depletion rates for the more common minerals.
| DEPOSITS || RATE |
|Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica||22%|
|Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States||15%|
|Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well||14%|
|Coal, lignite, and sodium chloride||10%|
|Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates||71/2%|
|Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone)||5%|
You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. taxmap/pubs/p535-050.htm#en_us_publink1000209081
The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of:
- The percentage depletion deduction for the tax year (figured without regard to this reduction), minus
- The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year).
For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. Mining includes all the following.
- Extracting ores or minerals from the ground.
- Applying certain treatment processes.
- Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied.
Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. taxmap/pubs/p535-050.htm#en_us_publink1000209084
Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. taxmap/pubs/p535-050.htm#en_us_publink1000209085
The processes included as mining depend on the ore or mineral mined. To qualify as mining, the treatment processes must be applied by the mine owner or operator. For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. taxmap/pubs/p535-050.htm#en_us_publink1000209086
If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining.
If you wish to include transportation of more than 50 miles in the computation of gross income from mining, file an application in duplicate with the IRS. Include on the application the facts concerning the physical and other requirements which prevented the construction and operation of the plant within 50 miles of the point of extraction. Send this application to:
Internal Revenue Service
Associate Chief Counsel
Passthroughs and Special Industries
1111 Constitution Ave., N.W., IR-5300
Washington, DC 20224
You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply.
- You disposed of it after holding it for more than 1 year.
- You disposed of it under a contract under which you retain an economic interest in the coal or iron ore.
Treat any gain on the disposition as a capital gain.
This rule does not apply if you dispose of the coal or iron ore to one of the following persons.
- A related person (as listed in chapter 2 of Publication 544).
- A person owned or controlled by the same interests that own or control you.
Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. For percentage depletion purposes, a geothermal deposit is not considered a gas well.
Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. See Gross income from the property
earlier, under Oil and Gas Wells.
Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property.
A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. taxmap/pubs/p535-050.htm#en_us_publink1000209092
Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion. taxmap/pubs/p535-050.htm#en_us_publink1000209093
To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion, treating the number of units for which the advanced royalty is received as the number of units sold. taxmap/pubs/p535-050.htm#en_us_publink1000209094
In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits. Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. However, in the case of independent producers and royalty owners of oil and gas property, bonuses and advance royalty payments are not a part of gross income. taxmap/pubs/p535-050.htm#en_us_publink1000209095
If you receive a bonus on a lease that expires, terminates, or is abandoned before you derive any income from the extraction of mineral, include in income for the year of expiration, termination, or abandonment, the depletion deduction you took. Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted.
For advanced royalties, include in income for the year of lease termination, the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before termination. Increase your adjusted basis in the property by the amount you include in income. taxmap/pubs/p535-050.htm#en_us_publink1000209096
These are payments for deferring development of the property. Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production.