I am not impressed by that biased Forbes text, which appears to be written by an oil lobbyist.
Depletion Allowance ($1 billion subsidy – low estimate is $900 million) The depletion allowance allows companies to treat reserves in the ground as a capitalized asset that may be written down by 15% per year. The government only allows the “subsidy” for independent producers. Integrated oil companies such as Exxon, BP etc. are not allowed the exemption. Companies across the US are allowed a depreciation deduction for taxation purposes. The oil & gas industry should not be an exception.
That is complete nonsense. In other industries the asset is built up by investment, and then allowed depreciation. That causes expenses to be deferred for tax purposes.
Here we have the investment treated as expense, the asset ia magically acquired with no tax implication, and then the loss from its depreciation is suddenly deductible. It's a crying-out-loud subsidy and let no one be suckered.
Example:
I build a factory, with $1B cost. Building expenses are not deductible, but the asset depreciates over a number of years.
I drill an oil field for $1B. The expense is deductible. I then claim the field is worth $1B based on its reserves, and expense its depreciation although I have never bought it, accounting-wise.
Domestic Manufacturing Deduction ($1.7 billion per year – low estimate is $574 million) – Congress passed the tax break in 2004 to encourage manufacturing companies to maintain their operations in the US. The tax break has been extended to oil & gas companies and allows them to deduct 9% of their income from operations. Critics charge that companies would not leave for a lower tax rate. Ever looked at how much cheaper it would be to operate a refinery in another country? Furthermore, the tax break extends to companies across multiple business segments – not just the oil & gas sector.
The refinery is a misleading argument. We are talking about domestic drilling operations, which you can't operate elsewhere. Such a tax break should only be given (if at all) to companies actually choosing their manufacturing location.
Besides, oil&gas is not manufacturing, it's extraction.
Total sham, a pure tax gift to such companies.