Expenditures made by an operator for labor, fuel, repairs, hauling, and supplies used in drilling and completing a well for production. Intangible costs include also the construction of derricks, tanks, pipelines on the lease, buildings, and preparation of the drillsite, but do not include the material or equipment. The rule of thumb is, do the items for which expenditures were made have salvage value? If not they qualify under the tax laws as intangible drilling costs.
