Clajon Gas Co., L.P. v. Comm'r
United States Tax Court
Partnership C owned and operated natural gas gathering systems to transport gas purchased from natural gas producers. C treated certain pipeline and related components of the gathering systems as natural gas production assets within asset class 13.2 of Rev. Proc. 87-56, 1987-2 C.B. 674, with a 7-year recovery period.
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Partnership C owned and operated natural gas gathering systems to transport gas purchased from natural gas producers. C treated certain pipeline and related components of the gathering systems as natural gas production assets within asset class 13.2 of Rev. Proc. 87-56, 1987-2 C.B. 674, with a 7-year recovery period. Held: Because C's use of its gathering systems determines the proper asset class, and because C was not a "natural gas producer", the components in question are not within asset class 13.2; rather, they are used by C to transport gas and are, therefore, within asset class 46.0,…
1DissentFoley, J.
I. The Texas Gathering Systems (TGS) Were Production
Assets
Revenue Procedure 87-56, 1987-2 C.B. 674, 678, states that asset class 13.2 includes “assets used by * * * natural gas producers for * * * production of * * * natural gas, including gathering pipelines”. As the trial Judge I concluded, after analyzing all of the relevant evidence and testimony, that Clajon’s pipelines were gathering systems “used by” producers in the production of natural gas. Gathering systems are essential to the production process because they treat unprocessed natural gas by removing water, hydrogen sulfide, and…
2Cases cited2 opinions
- Duke Energy Natural Gas Corp. v. CommissionerCourt of Appeals for the Tenth Circuit · 1999
- Duke Energy Natural Gas Corp. v. CommissionerUnited States Tax Court · 1997