Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 6

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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              
          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                 
          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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