Nielson-True Partnership, True Oil Company, Tax Matters Partner - Page 6

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          For Producing Fuel From A Nonconventional Source", and it was               
          intended to encourage the development of alternative energy                 
          sources and to provide producers of alternative fuels with                  
          protection against significant decreases in the average wellhead            
          price for uncontrolled domestic oil.  See S. Rept. 96-394, at 87            
          (1979), 1980-3 C.B. 131, 205; H. Conf. Rept. 96-817, at 139                 
          (1980), 1980-3 C.B. 245, 299; see also Texaco Inc. v.                       
          Commissioner, 101 T.C. 571, 574-575 (1993).                                 
               Section 29(a) provides for a tax credit for qualified fuels            
          produced by a taxpayer and sold to an unrelated person.  Section            
          29(c)(1)(B)(i) lists gas produced from a tight formation as one             
          of the qualified fuels.  Section 29(c)(2)(A), in pertinent part,            
          states that "the determination of whether any gas is produced               
          from * * * a tight formation shall be made in accordance with               
          section 503 of the * * * [NGPA]."                                           
               The parties differ in their interpretations of the term                
          "determination".  Respondent contends that, as a prerequisite to            
          obtaining the credit, a tight formation well-category                       
          determination must be obtained by compliance with the application           
          and approval procedures of NGPA section 503.  Respondent concedes           
          that the local regulatory authority and the Commission provided             
          determinations that the Wattenberg Field "J" Sand formation                 
          contained tight formation gas.  Respondent also concedes that the           
          Hanson well was drilled in the Wattenberg Field "J" Sand                    
          formation and produced gas that would meet FERC's standards as              

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