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A gas processing contract is similar, except that Clajon and
the producer share revenues from Clajon’s sale of extracted NGLs
and residue gas.
Under a gas transportation contract, Clajon charges its
customers a fee to move gas through one of the Texas gathering
systems.
Depreciation Adjustments in Dispute
Respondent’s adjustments to “pipeline depreciation” consist
of separate adjustments with respect to “pipelines”, “compressor
stations” and “meter runs”. Clajon depreciated those assets
using a 7-year recovery period. Respondent determined that
Clajon should have used a 15-year recovery period. We shall
generally refer to the foregoing elements of Clajon’s gathering
system, collectively and without distinction, as “gathering
pipelines”.
OPINION
I. Introduction
This case involves a dispute as to the length (in years) of
the recovery period that Clajon must use in calculating its
annual depreciation deductions for the gathering pipelines. On
similar facts, we decided in the Commissioner’s favor in Duke
Energy Natural Gas Corp. v. Commissioner, 109 T.C. 416 (1997),
revd. 172 F.3d 1255 (10th Cir. 1999). Petitioner urges us not to
follow our decision in Duke Energy and to adopt the reasoning of
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