The biggest is what's called the Domestic Manufacturing Deduction. It's a 2004 tax change meant to encourage companies to manufacture in the U.S. It allows companies of almost any type to deduct from their taxable income up to 9 percent of profits from domestic manufacturing. Under the rule, oil and gas companies were classified as manufacturers, but their deduction was capped at 6 percent.
This provision alone is expected to save the oil and gas industry $18.2 billion over the next ten years, or 42 percent of the $44 billion total.
The oil industry feels unfairly singled out. "It can't be good for some and not for others or it is just a punishment," says Stephen Comstock, the tax policy manager at the American Petroleum Institute, an oil industry lobbying group.
Another subsidy, established in 1913 to encourage domestic drilling, allows oil companies to deduct more quickly all of the so-called intangible costs of preparing a site for drilling.
To accountants, intangible costs are costs for things that have no salvage value when the well runs dry, including clearing land and pouring concrete. Ordinarily, a business would have to deduct these costs over the life of the drilling site. Instead, small, independent drillers are allowed to deduct all of these expenses in the first year; major, so-called integrated companies like ExxonMobil can deduct 70 percent in the first year.
The break is worth $12.5 billion over the next ten years.
Comstock compares the oil industry's ability to write off the cost of preparing a well to other companies' ability to write off research and development costs. Other tax experts say this is clearly a subsidy.
A rule dating from 1926 that establishes how oil companies can depreciate the value of their wells allows drillers to deduct 15 percent of the well's revenue from its taxable income per year. This is instead of a more traditional depreciation scheme in which the cost of the well is depreciated over the well's life. The tax break was created in part to simplify accounting, so companies wouldn't have to guess how long an oil or gas field would produce in order to calculate how to depreciate it. It can be a boon: The total of the deductions over the life of the well can sometimes be bigger than what the company actually spent on the well.
This provision was eliminated for major oil companies in 1975, but it continues for independent producers. The break is worth $11 billion over 10 years.
Royalties that companies pay foreign governments for the oil they extract are not deductible from U.S taxes. But often the industry is allowed to claim royalties as foreign taxes, which are deductible. Obama and Senate Democrats call this a loophole, and want to close it. Obama doesn't include this in his $44 billion proposal, but Whitney Stanco, an analyst at MF Global, calculates that removing this benefit could cost the industry $8.5 billion over ten years.