I make about $1000 per year for my oil lease. I am allowed to deduct 15%, or $150 that I don’t have to pay taxes on. I am taxed on the rest. The reason that I get this DEPLETION DEDUCTION, it is not a subsidy, is because my little one acre of land is now worth less because oil has been pumped out of it. The land owners are for the most part little guys (and gals). How does increasing taxes lower gas prices, anyway. (Taking away a tax deduction = increasing taxes.)
A tax deduction is one thing. An incentive is something else.
You are making the point that the mineral reserve is finite and like capital equipment (that is depreciated) is used up over time.
The problem is that the oil companies buying the oil leases get a depletion allowance for their portion of the cost as well. In the late 1920s as I understand the history, the IRS wanted to quit paying for the depletion allowance share of unproductive or dry leases the oil companies bought up. So they said to the oil companies, we only want this deduction (allowance) going on your expense side if it is a set amount per gallon produced — in other words, we don’t want to let you expense anticipated usage on something that is a loss or risk — charge that one time only.
Now, they think of that as too much money kept by producer and property owner.
Granted that a lot of this is to encourage of help a particular industry, but change should be careful reform and to quickly implemented so as to not harm peoples property and income.