Depletion allowances let oil companies treat the oil in the ground as capital equipment, and they can write off a certain percentage for each barrel that comes out.
The petroleum industry also has depletion allowances, royalty tax credits, off-shore drilling credits and the ability to finance development with flow-through shares.
Government should not use tax incentives to induce behavior (purchase of medical insurance); government should use tax incentives to induce behavior (oil depletion allowance).
It also establishes a new tax credit for retrofitting existing oil wells to boost production, expands the tax credit for unconventional oil production, and loosens the depletion allowance.