Energy Security Act of 1987

Energy Security Act of 1987 - Repeals provisions of the Internal Revenue Code that identify intangible drilling costs as a tax preference item for purposes of determining alternative minimum tax liability.

Treats certain geological and geophysical costs as intangible drilling and development costs that a taxpayer may elect either to capitalize or to deduct for income tax purposes.

Establishes a percentage depletion of 27.5 percent for new, enhanced, or stripper production of domestic oil and natural gas for purposes of calculating the deduction for depletion. Exempts the deduction attributable to such production from the taxable income limitation applicable to independent producers and royalty owners.

Disallows percentage depletion for lease bonuses, advance royalties, or similar payments with respect to new, enhanced, or stripper production of oil and gas.

Increases: (1) from 50 to 100 percent the net income limitation on percentage depletion applicable to oil and gas wells; and (2) from 65 to 100 percent the taxable income limitation on the percentage depletion deduction for oil and gas property.

Permits a percentage depletion income tax deduction for proven oil and gas wells that have been transferred to a new owner. (Current law disallows the deduction after such a transfer.)

Applies the exemption of stripper well oil from the windfall profit tax after a transfer of such a well to a new owner. (Current law disallows the exemption after such a transfer.)

Revises a special windfall profit tax rule affecting the statute of limitations applicable to underpayments of the tax. (The statute of limitations on assessments for windfall profit tax liability would commence at the same time as that on the taxpayer's income tax return.) Limits the applicability of such rule revision to returns filed after February 29, 1980.

Repeals the windfall profit tax on domestic crude oil.