S/V Drilling Partners, Snyder Armclar Gas Company, Tax Matters Partners - Page 9

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          oil equivalent of fuels produced.                                           
               2.   Petitioner’s Argument                                             
               Petitioner contends that, under a literal reading of section           
          29, S/V is entitled to a double credit for the 16,927 BOE’s of              
          natural gas it produced from a tight formation and from Devonian            
          shale.  Petitioner acknowledges that the legislative history                
          indicates that section 29 provides a fixed credit amount                    
          (initially $3) per 5.8 million Btu’s of energy produced, but                
          contends that section 29, as enacted, does not.  Petitioner                 
          contends that neither section 29 nor any other authority                    
          prohibits a double credit.  We disagree.                                    
               The credit under section 29(a) is $3 times the BOE of                  
          “qualified fuels”. (Emphasis added.)  Section 29(c)(1) provides             
          that three fuels, i.e., oil, gas, and synthetic fuels, may                  
          qualify for the credit.  Gas qualifies for the credit if it is              
          produced from geopressurized brine, Devonian shale, coal seams,             
          tight formation, or biomass.  See sec. 29(c)(1)(B).  Section 29             
          does not create a separate tight formation credit and Devonian              
          shale credit.  The definition of BOE in section 29(d)(5) provides           
          a uniform means of calculating the quantity of each qualified               
          fuel produced and sold.  S/V produced and sold a total of 32,410            
          BOE’s of qualifying natural gas in the tax years at issue.  Of              
          this total, S/V produced and sold 16,927 BOE’s of gas from both a           
          tight formation and Devonian shale.  Since gas produced from                

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