[sammyg2]

Many moons ago, the gubmint wanted to sell some deep water leases so tey couldf get the $$$ and also the huge royalties from the oil they produced, if they produced at all.

The oil companies checked out the leases and saaid no thank you. they were too deep, to expensive, and too risky. Not worth the huge inventment.

The gubmint said please.... pretty please... .with sugar on top. We need your money.
the oil companies said nope, too much $$$ and too much risk.

The gubmint said, how about if we let you write off the cost of a bad well at a faster rate, and how about if we promise to only take 10% of the oil it produces if it comes in instead of 14 or 15%?
They took a product that they could not sell and they marked it down, put it on sale.

The oil companies said hmmmmm, maybe.

But them the gubmint turned around and said wait, we're not gonna give any of those incentives to the big guys like BP, exxonmobil, etc.

Only the small independent oil companies can get the incentives.
So the independent companies, mom and pops basically, bought the undesirable leases and drilled.

If they hit oil the gubmint get's their share. Regardless the gubmint gets the $$$ for the leases.
And if the oil company spent a whole bunch of millions to drill and it turned out dry, they could write off the loss in fewer years than normal.

That's the "subsidy".
All it means is that the gubmint doesn't take as much money as usual. They don't GIVE the oil companies anything.

Besides that, the gubmint entered into a legal binding contract for those leases, kinda hard to change their mind and change the contract now.