The Tax Reform Act of 1986 contains few provisions aimed specifically at the oil and gas industry. It does, however, contain dramatic changes for both individuals and corporations as a whole. The effect of some of the major changes is discussed from the viewpoint of project evaluation. Three representative projects- a drilling deal, a field development and waterflood, and an acquisition were studied.

If the Alternative Minimum Tax is not included, it appears that the new tax law does not significantly change the present value of typical oil and gas projects. Compared to the old tax law, the new law increases the tax liability in the early years of a project and decreases it in later years.

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