Energy Security Tax Act of 1989

Energy Security Tax Act of 1989 - 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.

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

Establishes a three-year statute of limitations with respect to assessments of any tax deficiency in connection with underpayments of windfall profit tax resulting from good faith determinations that no return was due for a removal year.

Establishes a crude oil and natural gas exploration and development tax credit as a component of the general business credit. Allows a five percent credit for qualified investments exceeding $10,000,000, ten percent for those of $10,000,000 or less. Permits the credit as an offset against the taxpayer's minimum tax liability. Terminates the credit three years after this Act's enactment.