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First, we cannot agree that Company’s arrangement to receive
and to dispose of wastewater represents a private business use of
the financed pipeline. It is respondent’s position in the
context of the output facility regulations that the pipeline’s
purpose is the disposal of wastewater, that it is an integral
part of petitioner’s sewage facilities, and that it is not a
facility which distributes water. Indeed, in respondent’s reply
brief at 32, he states that “the Contract with the Company is not
an arrangement for the purchase of output, but rather was entered
for the purpose of disposing of the Wastewater.” Also, in his
reply brief at 35 n.12, he states that “Rather than meeting the
definition of an output facility, the Pipeline Project may meet
the definition of a sewage facility [in section 142(a)(5) and
section 1.142(a)(5)-1(a)(iv), Income Tax Regs.] in that it is
property used for the collection, storage, use, processing, or
final disposal of wastewater.” If the purpose of the pipeline is
waste removal and if it is a sewage facility that is used for the
disposal of wastewater, Company’s use of the wastewater would
begin after the pipeline’s sewage disposal purpose was completed.
The only use involved in Company’s arrangement with
petitioner is the use of a set amount of wastewater from the
pipeline. However, the wastewater is not financed property, and
respondent agrees that the wastewater is merely a waste byproduct
of petitioner’s sewage facilities. Company’s use of the
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