Intangible Drilling Costs - IDC
Categories: Accounting
Intangibles: the things that are there, but also aren’t. Even oil wells have them.
Intangible drilling costs, or IDCs, are costs that go toward the making of an oil or gas well, but aren’t part of the operating costs when everything is said and done. IDCs are kind of like closing costs when you buy a house...all those one-time, little extra costs that add up.
For instance, before an oil or gas well is drilled, the area must be surveyed, the ground itself prepped and drained...basically anything that can’t be sold later. Since the drilling equipment still has salvage value, it’s a tangible drilling cost.
Intangible drilling costs are a thing, because they can be deducted on business taxes. This tax deduction was made in the early 1900s to encourage risky exploration and investment in gas and oil.
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