I have spent my whole career in oil and gas. OF COURSE depletion is a valid business expense - it is the equivalent for the reserves being produced, that depreciation is for machinery in a factory. It is the recognition of the cost of a wasting asset. Some might not like revenue-based percentage-based depletion, as opposed to cost-of-the-asset based depletion, however. But, that is the law that Congress, in its wisdom, has enacted.
What most people outside industry don’t know, is that any mineral owner under production, ie farmers, ranchers, regular landowners, etc., ALL get to take advantage of the depletion allowance.
Are they going to take away depreciation write offs for homeowners next?
Also being discussed is the elimination of tangible and intangible write-offs-—something that EVERY MANUFACTURING INDUSTRY gets as a write off. Try telling a builder or developer he can no longer write off the cost of materials, etc.
The industry depends on large amounts of investment capital that is, in part, drawn by the tax write offs. Lose that and we’ll see a 20-30% immediate drop in wells drilled. Wait till the price increases from that hit home.