Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 28

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          us that the class life of 22 years assigned to 46.0 is                      
          inappropriate for gathering pipelines.  The class life of 22                
          years assigned to 46.0 is a composite life, and petitioner has              
          made no showing that, on a composite basis, that life does not              
          fairly balance the relatively short life of gathering pipelines             
          against the relatively long lives of transmission or distribution           
               B.  Conclusion                                                         
               Because Clajon is not a “producer” of natural gas, and                 
          because it is Clajon’s use of its gathering pipelines that is               

          See Williams & Meyers, Manual of Oil and Gas Terms 290-291 (11th            
          ed. 2000).                                                                  
               16  There is nothing in the record to indicate that the                
          useful life of gathering pipelines is so short that placing them            
          in the same asset class as transmission and distribution                    
          pipelines would be somehow inappropriate.  Respondent’s principal           
          expert did not disagree with the statement by petitioner’s expert           
          that the life of a natural gas gathering system cannot exceed the           
          life of the gas field or fields that it serves.  Respondent’s               
          expert stated, however, that gas gathering areas are extended and           
          gathering pipelines are added to the system as new wells are                
          developed within the field, a process that “may continue for                
          * * * 50 years or more.”  He also noted that “new technology or             
          enhanced recovery can extend the life of an oil or gas field,               
          which will extend the life of a gathering system.”  Such                    
          longevity is exemplified by Clajon’s Southeast Texas Pipeline               
          System, which has been in operation since the late 1970s.  It is            
          also a fact that gathering pipelines transporting lean gas                  
          directly to customer transmission lines (such as those                      
          constituting Clajon’s five smaller gathering systems) are not               
          subject to the corrosive elements that tend to shorten pipeline             
          useful life.  Moreover, the experts appeared to agree that even             
          pipelines carrying raw gas remain in service throughout the life            
          of the gas field or fields that they serve.                                 

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