(1) Oil and gas field machinery and equipment shall be valued using the cost approach to market value. The taxpayer must provide to the department the acquired cost, the year acquired, and an itemized description of each piece of machinery and equipment. The acquired cost will be trended to current replacement cost and then depreciated according to the schedule mentioned in (2).

(2) The department shall prepare a 15-year trended depreciation schedule for oil and gas field machinery and equipment. Trend factors and depreciation factors published by "Marshall and Swift Publication Company" will be used to develop the trended depreciation schedules. The trend factors shall be the most recent available from the "Chemical Industry Cost Indexes" listed in the above publication.

(3) The trended depreciation schedule referred to in (1) and (2) is listed below and shall be used for tax year 2012. 

OIL AND GAS FIELD PRODUCTION EQUIPMENT TRENDED DEPRECIATION SCHEDULE
YEAR NEW/ ACQUIRED	% GOOD	TREND FACTOR	TRENDED % GOOD
2012	100%	1.000	100%
2011	95%	1.000	95%
2010	90%	1.021	92%
2009	85%	1.006	86%
2008	79%	1.042	82%
2007	73%	1.089	79%
2006	68%	1.153	78%
2005	62%	1.211	75%
2004	55%	1.314	72%
2003	49%	1.360	67%
2002	43%	1.387	60%
2001	37%	1.395	52%
2000	31%	1.408	44%
1999	26%	1.431	37%
1998	23%	1.438	33%
1997 and older	20%	1.453	29%

(4) All downhole equipment in oil and gas wells is exempt from taxation. Downhole equipment includes:

(a) sucker rods;

(b) tubing;

(c) casing; and

(d) submersible pumps.

(5) Downhole equipment which is not in an oil or gas well shall be taxed as class eight property.

(6) This rule is effective for tax years beginning after December 31, 2011.