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facilities equates with a use of 27 to 100 percent of the
pipeline facility which disposes of such waste.22
Given the circumstances of this case and the arguments of
the parties, the more appropriate view is that Company does not
use the financed pipeline in any quantifiable amount, and,
certainly, not in an amount in excess of 10 percent of the bond
proceeds. In support of this view, we note that Company pays
nothing to petitioner for its purported use of the financed
pipeline, or, for that matter, the wastewater. Company simply
agrees to dispose of the wastewater that it receives, and in
exchange it is given rights to use the water in its electricity
operations. The sewage ratepayers, on the other hand, will pay
fees for the disposal of their sewage which will amount to at
least 95 percent of the debt service on the bonds used to finance
the pipeline. This, in our view, indicates that at least 95
percent of the financed pipeline will be used for sewage
disposal. This represents a more accurate reflection of the use
of the pipeline than respondent’s determination that more than 10
percent of the pipeline will be used by Company.
22Also, we note that sec. 1.141-3(d)(5), Income Tax Regs.,
excepts incidental uses of a financed facility which do not
exceed 2.5 percent of the proceeds used to finance the facility.
In responding to the potential application of that provision,
respondent states without explanation that the latter provision
does not apply “in light of the extensive rights the Company has
with respect to the capacity of the Pipeline Project.”
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