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have helped producers produce and sell their gas in the market
does not mean that the systems are exploration or production
assets within * * * asset class 13.2.” Id.
In reversing our decision in Duke Energy, the Court of
Appeals for the Tenth Circuit reasoned that “the plain language
of Asset Class 13.2 leads most logically to a reading that
includes Duke’s gathering systems even though they are ‘used by’
producers through contractual arrangements with Duke.” Duke
Energy Natural Gas Corp. v. Commissioner, 172 F.3d at 1259. The
Court of Appeals stated that “Duke’s gathering systems are
literally used by producers for gas production in a number of
different ways”, id. at 1258, noting the parties’ agreement that
“producers would not be able to produce natural gas in the
absence of an adequately designed gathering system”, id. After
reviewing the overall function and usage of gathering systems,
the Court of Appeals stated that “the economic character of
Duke’s gathering activities is more akin to production than
pipeline operation.” Id. at 1259. The Court of Appeals rejected
the Government’s argument that the words “used by” in 13.2
incorporate an ownership requirement, reasoning: “‘Use’ does not
mean ‘own’ in either the legal dictionary definition of the word
use * * * nor in everyday parlance.” Id. Ultimately, the Court
concluded as follows:
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