Duke Energy Natural Gas Corporation - Page 5

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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.                            
               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