Duke Energy Natural Gas Corporation - Page 8

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          producer to drill wells or produce gas.  See Williams & Meyers,             
          Manual of Oil & Gas Terms, 866 (9th ed. 1994)("production of gas"           
          means "bringing forth gas from the earth"); see also sec.                   
          1.167(a)-11(b)(4)(iii)(b), Income Tax Regs.  Given this                     
          conclusion, the gathering systems fall squarely within the                  
          language of asset class 46.0.  Although asset class 13.2 includes           
          "gathering pipelines and related storage facilities", those                 
          pipelines and facilities must be used by a producer to fall                 
          within that class.                                                          
               Petitioner argues that its gathering systems are outside               
          asset class 46.0 because they do not carry gas within the meaning           
          of that class.  According to petitioner, asset class 46.0                   
          includes only pipelines that move natural gas from a production             
          plant to an end user such as a distribution facility.  Petitioner           
          asserts that its gathering systems do not transport gas, but                
          gather and/or process it.  We disagree.  We decline to conclude             
          that a pipeline company is carrying gas within the meaning of               
          asset class 46.0 when it pipes the gas from a production plant to           
          an end user, but not when it pipes the gas from the well to the             
          production plant.  Although petitioner invites us to draw a                 
          distinction in this case, arguing that its pipelines are                    
          fundamentally different from the transmission systems of other              
          nonproducers, we decline to do so.  Any difference between                  
          petitioner's pipelines and the transmission pipelines of other              

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Last modified: May 25, 2011