The truth is that the oil and gas industry receives the same kinds of tax treatments that every other manufacturing or extractive industry receives in the federal tax code. There is nothing uncommon or out of the mainstream of tax treatments about any of the provisions that have been repeatedly proposed for repeal.On the day the bill was introduced into the Senate that would eliminate oil subsidies, Mitch McConnell's campaign fund received over $131,00.00 in donations from the oil industry. Three days later the bill had been killed through a filibuster.
So how did all of this misinformation get started? It all began in 2009. Within days of being sworn in as the nation’s 44th President, Barack Obama ordered his staff to scour the tax code for any provision that was relevant to the oil and gas industry, and promptly began proposing them for repeal. The oil and gas industry has always been an easy target for political demagoguery, and that dynamic has played out repeatedly and consistently in this Administration.
Unfortunately, most media outlets and reporters have chosen to basically repeat the Administration’s mantra that these tax treatments – several of which have been in the tax code for almost a century – are somehow unique, specific to the oil and gas industry, and are “subsidies” for “big oil”. A great example of just how inaccurate this depiction is applies to Percentage Depletion, which has been a feature of the tax code since 1913, meaning it will be a full century old this year.
Basically, Percentage Depletion is the oil and gas industry’s version of a depreciation deduction for its main asset, which is the oil and natural gas in the ground, commonly known as its reserves. Every industry of any kind is allowed a depreciation deduction on its assets under the U.S. Tax Code, but, far from being a “subsidy” for “big oil”, this tax treatment was in fact repealed for all integrated oil companies, i.e., ExxonMobil, Shell, BP, etc., in 1975, and is today available only to independent producers and royalty owners. So repeal of this extremely long-standing, completely common tax treatment would have no effect on “big oil” at all, and would in fact hit small producers and royalty owners harder than anyone else.