What do oil and gas income programs primarily pass through to investors?

Oil and gas income programs primarily pass through depletion allowances to investors because these allowances represent a tax deduction that reflects the reduction in the value of the mineral resource being extracted. Depletion allowances allow investors to recover their investment in the natural resources as these resources are depleted over time. This mechanism not only encourages investment in the industry but also provides a way for investors to offset income generated from these programs, making them more attractive.

While other aspects like tax credits, exploration risk, and royalty fees relate to oil and gas ventures, they do not primarily characterize what is passed through to investors in income programs. Tax credits and incentives can vary widely and are not a guaranteed part of income programs. Exploration risk is inherent to the sector but does not represent a tangible financial benefit passed through to investors. Royalty fees do provide income but are typically paid to landowners or mineral rights holders and do not directly translate to what income programs distribute to their investors.