Loss from working share of oil and gas wells should be deductible from ordinary income.
"Active vs. Passive Income
The tax code specifies that a working interest (as opposed to a royalty interest) in an oil and gas well is not considered to be a passive activity. This means that all net losses are active income incurred in conjunction with well-head production and can be offset against other forms of income such as wages, interest and capital gains."
https://www.irs.gov/irm/part4/irm_04-041-001#idm[phone number removed]824
