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after the gas and NGL's leave the processing plants. A second
type of contract is a "keep whole" contract that provides for the
redelivery to the producer of a volume of dry gas; in this case,
the producer receives 100 percent of the dry gas and petitioner
receives 100 percent of the proceeds from the sale of the NGL's
(and sometimes a processing fee). A third type of contract is a
"wellhead purchase" contract under which the producer receives a
stated price for the gas that is delivered, and petitioner
receives payment when the gas or NGL's are sold.
Discussion
In a case of first impression in this Court, we must
determine the appropriate class life over which petitioner may
depreciate its gathering systems. The issue is purely one of
timing in that the parties agree that petitioner may depreciate
the assets, but disagree over the period of time that the
depreciation must be taken into account for Federal income tax
purposes. Respondent determined that petitioner must depreciate
the assets over 15 years because the assets are within asset
class 46.0, and respondent's primary position in this proceeding
is the same. Petitioner argues primarily for a 7-year recovery
period, asserting that the assets are within asset class 13.2.
Petitioner argues alternatively that the assets are either within
asset class 49.23, or not within any class; either classification
would let petitioner depreciate the assets over 7 years.
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Last modified: May 25, 2011