Nielson-True Partnership, True Oil Company, Tax Matters Partner - Page 19

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             the effective date of the repeal of the NGPA, so that the                                            
             processing of well-category determinations could be continued.                                       
             Consequently, respondent argues this leads to the conclusion that                                    
             FERC and other local regulatory agencies were authorized to make                                     
             well-category determinations.11                                                                      

                    11 These circumstances were described in Marathon Oil Co. v.                                  
             FERC, 68 F.3d 1376, 1377-1378 (D.C. Cir. 1995), as follows:                                          
                          Effective January 1, 1993, the Natural Gas                                              
                    Wellhead Decontrol Act of 1989 repealed NGPA price                                            
                    controls on wellhead sales of natural gas.  As a result                                       
                    of the Decontrol Act, the Commission eliminated                                               
                    incentive prices for tight formation gas produced from                                        
                    wells "spudded" * * * or "recompleted" after May 12,                                          
                    1990.  A year later, however, the Omnibus Budget                                              
                    Revenue Reconciliation Act of 1990 instituted a tax                                           
                    credit for natural gas from newly drilled wells in                                            
                    tight formations.  In order to be eligible for the tax                                        
                    credit, the natural gas must (1) be produced from a                                           
                    well drilled or a facility placed in service after                                            
                    December 31, 1979 and before January 1, 1993 and (2) be                                       
                    sold before January 1, 2003.  The Budget Act further                                          
                    provides that "the determination of whether any gas is                                        
                    produced from * * * a tight formation shall be made in                                        
                    accordance with section 503 * * * [NGPA]."  Thereafter,                                       
                    the Commission [FERC] announced its intention to                                              
                    continue to process the initial determinations of                                             
                    agencies despite their loss of regulatory significance,                                       
                    until January 1, 1993.  The Commission later extended                                         
                    this deadline to April 30, 1994 so long as the                                                
                    application for an initial determination was filed with                                       
                    the agency by December 31, 1992.  However, the                                                
                    Commission said that it "will not accept determinations                                       
                    where the well was spudded or recompletion commenced on                                       
                    or after January 1, 1993."  Explaining the reason for                                         
                    continuing to review agency determinations for a                                              
                    transition period, the Commission stated that "while                                          
                    NGPA Section 107 well category determinations have no                                         
                    price consequence, they are necessary to obtain the                                           
                    Section 29 tax credit."  [Citations omitted.]                                                 

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