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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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