Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 26

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          language of 46.0 supports the inclusion of Clajon’s gathering               
          pipelines within that asset class.                                          
               Secondly, we do not agree with the conclusion of the Tenth             
          Circuit Court of Appeals that FERC’s distinction between                    
          gathering and transmission lines necessarily establishes that               
          FERC considers gathering systems as related to production.14  See           
          Duke Energy Natural Gas Corp. v. Commissioner, supra at 1262.  In           
          section 1(b) of the Natural Gas Act of 1938, Pub. L. 688, 52                
          Stat. 821, currently codified at 15 U.S.C. sec. 717(b) (2000)               
          (NGA), it is provided that the NGA “shall apply to the                      
          transportation of natural gas in interstate commerce * * * but              
          shall not apply to  * * * the production or gathering of natural            
          gas.”  The quoted language indicates that Congress considered               
          “gathering” to be separate and distinct from “production”.                  
          Indeed, had it considered “gathering” to be included within the             
          term “production”, Congress would not have found it necessary to            
          separately exclude both from Federal regulation.  Moreover, that            
          FERC does not consider gathering and transportation (of gas) to             
          be mutually exclusive terms is illustrated by another decision of           

               14  Although we have found that petitioner’s gathering                 
          pipelines are ineligible for inclusion within 13.2, a finding               
          that such pipelines are primarily production related might                  
          justify their classification (in the hands of a nonproducer) as             
          “Personal Property With No Class Life” entitled to the same                 
          7-year recovery period.  See Rev. Proc. 87-56, 1987-2 C.B. 674,             
          687.  Petitioner has not on brief argued for such classification.           

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