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me, dispositive) economic sense in which any such producer firm
uses a gathering system; this is irrespective of whether the
producer owns and operates the system itself, or instead, as in
the case at hand, sells its gas to petitioner at a fixed price at
the wellhead, enters into any one of the various ultimate sale
proceeds sharing arrangements with petitioner (also described in
Duke Energy Natural Gas Corp. v. Commissioner, 172 F.3d 1255
(10th Cir. 1999), revg. 109 T.C. 416 (1997)), or has its gas
processed through petitioner’s system for a fee and then sold for
the producer’s account from the processing plant after the last
stage of the productive process has been completed.
As shown by the opinion of the Court of Appeals for the
Tenth Circuit in Duke Energy Natural Gas Corp., with which Judge
Foley and I agree, the question under Rev. Proc. 87-56, supra, of
who a gathering system is “used by” turns neither on who owns the
producers or the system, nor on who owns the gas processed
through the system. The gathering system is “used by * * *
producers for * * * production of * * * natural gas”, id.,
irrespective of the effects on legal ownership and refinements of
title of the terms of the contracts they use to have the gas from
their wells processed through the system.
FOLEY and VASQUEZ, JJ., agree with this dissenting opinion.
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