F I L E D

United States Court of Appeals

Tenth Circuit

MAR 23 1999

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

TRUE OIL COMPANY, Tax Matters

Partner for Neilson-True Partnership,

Petitioner, 

v.

COMMISSIONER OF INTERNAL

REVENUE,

Respondent,

 -----------------------

AMERICAN PETROLEUM

INSTITUTE, MID-CONTINENT OIL

AND GAS ASSOCIATION, THE

ASSOCIATION OF ENERGY

SERVICE COMPANIES, THE

CALIFORNIA INDEPENDENT

PETROLEUM ASSOCIATION, THE

DOMESTIC PETROLEUM

COUNCIL, THE ENERGY

CONSUMERS AND PRODUCERS 

ASSOCIATION, THE

INDEPENDENT OIL AND GAS

ASSOCIATION OF NEW YORK,

THE INDEPENDENT OIL AND GAS

No. 97-9029

No. 97-9030
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ASSOCIATION OF

PENNSYLVANIA, THE

INDEPENDENT OIL AND GAS

ASSOCIATION OF WEST

VIRGINIA, THE INDEPENDENT

PETROLEUM ASSOCIATION OF

AMERICA, THE INDEPENDENT

OIL AND GAS ASSOCIATION OF

THE MOUNTAIN STATES, THE

LOUISIANA INDEPENDENT OIL

AND GAS ASSOCIATION, THE

MICHIGAN OIL AND GAS

ASSOCIATION, THE OKLAHOMA

INDEPENDENT PETROLEUM

ASSOCIATION, THE PERMIAN

BASIN PETROLEUM

ASSOCIATION, THE ROCKY

MOUNTAIN OIL AND GAS

ASSOCIATION, AND THE TEXAS

INDEPENDENT PRODUCERS AND

ROYALTY OWNERS

ASSOCIATION, (“AESC”),

Amici Curiae.

Appeal from the Decision of the

 United States Tax Court

(No. 0090-1:3980-96)

(No. 00900-1:12069-95)

Douglas A. Pluss, of Hogan & Hartson, LLP, Denver, Colorado, (Ronald M.

Morris, True Oil Company, Casper, Wyoming, with him on the briefs) for

Petitioner-Appellant, Nielson-True Partnership, True Oil Company, Tax Matters

Partner.
1

“Tax matters partner” is defined at 26 U.S.C. § 6231(a)(7). The

designation of a tax matters partner is discussed at length at 26 C.F.R. §

301.6231(a)(7)-1 (1997).

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Richard Farber, of Tax Division, Department of Justice, Washington, D.C. (Sara

S. Holderness, Tax Division, Department of Justice, Washington, D.C., with him

on the brief), for Respondent-Appellee, Commissioner of Internal Revenue.

Stephan G. Dollinger, American Petroleum Institute, Washington, D.C. filed an

amici curiae brief for American Petroleum Institute and Mid-Continent Oil and

Gas Association.

Denton N. Thomas, Andrews & Kurth L.L.P., Houston, Texas, filed an amici

curiae brief for The Association of Energy Service Companies, The California

Independent Petroleum Association, The Domestic Petroleum Council, The

Energy Consumers and Producers, Association, The Independent Oil and Gas

Association of New York, The Independent Oil and Gas Association of

Pennsylvania, The Independent Oil and Gas Association of West Virginia, The

Independent Petroleum Association of America, The Independent Oil and Gas

Association of the Mountain States, The Louisiana Independent Oil and Gas

Association, The Michigan Oil and Gas Association, The Oklahoma Independent

Petroleum Association, The Permian Basin Petroleum Association, The Rocky

Mountain Oil and Gas Association, and The Texas Independent Producers and

Royalty Owners Association.

Before ANDERSON, HENRY, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

Appellant, True Oil Company, is the tax matters partner1 for the NielsonTrue Partnership, a Wyoming general partnership (the “Partnership”). On its

1991 and 1992 partnership tax returns, the Partnership claimed a credit under
2The sections of the NGPA discussed at length infra, were repealed by the

Natural Gas Wellhead Decontrol Act of 1989. These provisions are hereinafter

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Section 29 of the Internal Revenue Code for the sale of natural gas produced

from a well owned by the Partnership. The Commissioner of the Internal

Revenue Service (the “Commissioner”) denied the credits because the Partnership

had not obtained a formal well-category determination for the well from the

Colorado Oil and Gas Commission or the Federal Energy Regulatory

Commission. The Commissioner took the position that Section 29(c)(2)(A) of

the Internal Revenue Code required the Partnership to apply for and obtain a

well-category determination before claiming the tax credit. The Partnership

challenged the Commissioner’s disallowance of the 1991 and 1992 credits by

filing a petition with the United States Tax Court. A trial was held and the Tax

Court ruled in favor of the Commissioner. See Nielson-True Partnership v.

Comm’r, 109 T.C. 112 (1997). The Partnership subsequently brought this appeal.

We exercise jurisdiction pursuant to 26 U.S.C. § 7482(a)(1) and AFFIRM

the decision of the United States Tax Court. 

I. STATUTORY BACKGROUND

A. The Natural Gas Policy Act of 1978 

The Natural Gas Policy Act of 1978 (“NGPA”) was enacted, in part, to

establish price ceilings for wellhead sales of natural gas. See Pub. L. No. 95-

621, 92 Stat. 3350 (codified as amended at 15 U.S.C. §§ 3301-3432).2

 In an
cited to the appropriate section of the NGPA and not to the section of the United

States Code at which they were codified.

3A tight formation has been defined by FERC as “a sedimentary layer of

rock cemented together in a manner that greatly hinders the flow of any gas

through the rock.” Regulations Covering High-Cost Natural Gas Produced From

Tight Formations, 45 Fed. Reg. 56,034, 56,034 (1980). 

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effort to provide producers with an incentive to produce fuels that had high

production costs, one provision of the NGPA authorized the Federal Energy

Regulatory Commission (“FERC”) to prescribe incentive price ceilings (i.e.,

prices higher than the otherwise applicable ceiling prices) for sales of certain

types of “high-cost natural gas.” See NGPA § 107. Section 107(c) of the NGPA

specifically identified four types of natural gas deemed to be “high-cost natural

gas.” See id. § 107(c)(1)-(4). In addition, Section 107(c)(5) of the NGPA gave

FERC the authority to include in the term “high-cost natural gas” any natural gas

“produced under such other conditions as [FERC] determines to present

extraordinary risks or costs.” Id. § 107(c)(5). Pursuant to the authority conferred

on it by Section 107(c)(5), FERC ruled that the term “high-cost natural gas”

should be extended to include natural gas produced from a tight formation.3 See

Regulations Covering High-Cost Natural Gas Produced From Tight Formations,

45 Fed. Reg. 56,034, 56,035 (1980) [hereinafter “Order No. 99"] (“These

regulations establish an incentive price ceiling for new and recompletion tight

formation gas produced from designated tight formations . . . .”).
4A jurisdictional agency is the federal or state agency “that governs the

drilling of wells on the particular site for which high-cost designation is

requested.” Williston Basin Interstate Pipeline Co. v. FERC, 816 F.2d 777, 780

(D.C. Cir. 1987).

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In Order No. 99, FERC promulgated rules delineating the requirements to

be met before gas produced from a tight formation qualified for the incentive

price. See id. at 56,044-46; see also Pennzoil Co. v. FERC, 671 F.2d 119, 123-

28 (5th Cir. Unit A 1982). A producer could not charge an incentive price for

any high-cost natural gas, including natural gas obtained from a tight formation,

until it first satisfied all the requirements established by FERC. See Oxy U.S.A.,

Inc. v. Seagull Natural Gas Co., 949 F.2d 799, 801 (5th Cir. 1992). One of these

requirements obligated the producer to obtain a tight formation designation for

the specific well producing the gas. See id. 

Section 503(a) of the NGPA authorized jurisdictional agencies4 to classify

tight formations by applying the definition of high-cost natural gas under Section

107(c) of the NGPA and the guidelines promulgated by FERC. See NGPA §

503(a)(1)(D); see also Marathon Oil Co. v. FERC, 68 F.3d 1376, 1377 (D.C. Cir.

1995) (“Section 503 of the NGPA establishes the procedures that govern the

determination of whether a particular type of natural gas is tight formation gas.”);

Williston Basin Interstate Pipeline Co. v. FERC, 816 F.2d 777, 780 (D.C. Cir.

1987). In Order No. 99, FERC set forth the guidelines to be applied by

jurisdictional agencies when designating tight formations. See 45 Fed. Reg. at
5This four-step process has been succinctly summarized as follows: “First,

the local regulatory authority . . . had to recommend that a field be designated a

tight formation. Second, the FERC had to designate the field as a tight formation. 

Third, the local regulatory authority had to recommend that a specific well be

classified as a tight formation well. Fourth, the FERC had to approve the

recommendation designating that well as producing tight formation gas.” Oxy

U.S.A., Inc. v. Seagull Natural Gas Co., 949 F.2d 799, 801 (5th Cir. 1992)

(footnotes omitted).

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56,035 (“The guidelines for identifying tight formations contain standards

regarding permeability, gas productivity, and production of associated oil.”). A

four-step process by which a producer obtained a tight formation designation was

set forth by FERC in Order No. 99.5

 See Oxy U.S.A., Inc., 949 F.2d at 801. Until

the producer obtained a determination from FERC that a specific well was

producing gas from a tight formation (commonly referred to as a “well-category

determination”), it could not charge the incentive price for the gas produced from

that well. See id.; see also 45 Fed. Reg. at 56,035 (“[T]he price incentives in the

final rule are available only for gas produced from tight formations that are

designated in accordance with the procedures set forth in the rule.”).

Sections 107 and 503 of the NGPA were repealed effective January 1,

1993, by the Natural Gas Wellhead Decontrol Act of 1989. See Pub. L. No. 101-

60, 103 Stat. 157 (1989). As a result, price controls on wellhead sales of natural

gas were eliminated and incentive prices for tight formation gas produced from
6FERC has held that a recompletion “occurs when the producer reenters a

well to complete (i.e., perforate) a new formation from that in which a well has

previously been completed.” Railroad Comm’n of Texas, 66 F.E.R.C. ¶ 61,130,

1994 WL 24276, at *4 (Jan. 28, 1994).

7Section 29 was originally designated as Section 44D by the Crude Oil

Windfall Profit Tax Act of 1980, Pub. L. 96-223, § 231(a), 94 Stat. 229, 97-98. 

Section 44D was redesignated as Section 29 by the Deficit Reduction Act of

1984, Pub. L. 98-369, § 471(c)(1), 98 Stat. 494, 771.

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wells spudded or recompleted6 after May 12, 1990 were abolished. See

Marathon Oil Co., 68 F.3d at 1377. Thereafter, FERC announced that it would

“not accept determinations where the well was spudded or recompletion

commenced on or after January 1, 1993.” Qualifying Certain Tight Formation

Gas for Tax Credit, 58 Fed. Reg. 38,528, 38,529 n.12 (1993). Further, FERC

stated that it would not review initial determinations made by a jurisdictional

agency unless the producer filed its application with the jurisdictional agency on

or before December 31, 1992, and the jurisdictional agency forwarded its initial

determination to FERC on or before April 30, 1994. See id. at 38,529-30.

B. Section 29 of the Internal Revenue Code 

Two years after the enactment of the NGPA, Congress enacted Section 29

of the Internal Revenue Code (“Section 29”)7 as part of the Crude Oil Windfall

Profit Tax Act of 1980. See Pub. L. No. 96-223, § 231(a), 94 Stat. 229, 97-98

(codified as amended at 26 U.S.C. § 29). Section 29 allowed taxpayers to claim a

credit for the production and sale of certain qualified fuels (the “Section 29
8Unless otherwise specified, all references are to the 1991 edition of the

Internal Revenue Code of 1986, as amended, and the treasury regulations

promulgated thereunder.

9The term “tight formation” appeared in only one other section of the 1991

edition of the Internal Revenue Code of 1986. That section, which dealt with

adjustments in computing alternative minimum taxable income, concluded with

the following language: “except that this clause shall not apply to a gas well if the

gas is produced (or to be produced) from Devonian shale, coal seams, or a tight

formation (determined in a manner similar to the manner under section 29(c)(2)).” 

26 U.S.C. § 56(h)(6)(B)(iii) (repealed 1992). 

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Credit”). See 26 U.S.C. § 29(a).8 A taxpayer, however, was precluded from

claiming the Section 29 Credit if it had charged the incentive price allowed under

the NGPA for the same gas. See 26 U.S.C. § 29(e). As a result of the

amendments made to Section 29 by the Revenue Reconciliation Act of 1990, the

Section 29 Credit became available only for qualified fuels produced from wells

drilled after December 31, 1979 and before January 1, 1993, and sold to an

unrelated third party before January 1, 2003. See 26 U.S.C. § 29(f); Omnibus

Budget Reconciliation Act of 1990, Pub. L. No. 101-508, § 11501, 104 Stat.

1388, 1330.

The term “qualified fuels” is defined in Section 29 to include gas produced

from “geopressured brine, Devonian shale, coal seams, or a tight formation.” 26

U.S.C. § 29(c)(1)(B)(i). The term “tight formation” is not defined anywhere in

Section 29 or in any other section of the Internal Revenue Code.9 Section 29,
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however, contains the following language: “the determination of whether any gas

is produced from geopressured brine, Devonian shale, coal seams, or a tight

formation shall be made in accordance with section 503 of the Natural Gas Policy

Act of 1978.” Id. at § 29(c)(2)(A). Although Section 29 has been amended more

than once since the repeal of Section 503 of the NGPA, Congress has never

deleted the reference to Section 503 from Section 29.

II. FACTUAL BACKGROUND

The parties stipulated to facts concerning the events which led to the

Commissioner’s disallowance of the Section 29 Credits claimed by the

Partnership. A summary of these facts follows. 

The Partnership was formed in 1983 to drill two wells in a natural gas field

located in northern Colorado and known as the Wattenberg Field. Amoco

Production Company (“Amoco”) was designated the operator of the Wattenberg

Field. Amoco entered into a drilling contract and drilling began on the wells in

1983. Both wells were completed by April 3, 1984. One well was known as the

Alvin Vonasek “B” well (the “Vonasek Well”) and the other was known as the

Castor Hanson True well (the “Hanson Well”). Both wells were drilled in the “J”

Sand formation of the Wattenberg Field and produce gas only from that

formation. FERC has determined that the “J” Sand formation is a tight

formation.
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Amoco prepared and submitted a well-determination application to the

Colorado Oil and Gas Commission (“COGC”) for the Vonasek Well. The COGC

subsequently issued a determination that the Vonasek Well was producing gas

from a tight formation. This determination was not reversed by FERC. No welldetermination application for the Hanson Well was prepared or submitted to the

COGC and, therefore, neither the COGC nor FERC ever determined that the

Hanson Well was producing gas from a tight formation. There was no

impediment to the filing of a well-determination application for the Hanson Well. 

In 1991 and again in 1992, the Partnership claimed the Section 29 Credit

on its partnership income tax return for gas produced from both the Vonasek

Well and the Hanson Well. The Commissioner disallowed the portion of the

Section 29 Credit claimed in both years which was attributable to sales of gas

produced from the Hanson Well. The Commissioner did not disallow the Section

29 Credits claimed for gas produced from the Vonasek Well. The 1991 and 1992

Section 29 Credits for the Hanson Well were disallowed on the grounds that no

determination had ever been made by COGC or FERC that the Hanson Well was

producing gas from a tight formation.

The Partnership filed a petition with the United States Tax Court

challenging the Commissioner’s disallowance of the 1991 and 1992 Section 29

Credits for the Hanson Well. The Tax Court held in favor of the Commissioner
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and ruled that “an individual well-category determination must be obtained in

order to qualify for the section 29 tax credit attributable to tight formation gas.” 

Nielson-True Partnership, 109 T.C. at 125.

III. DISCUSSION

A. Standard of Review

This court reviews decisions of the United States Tax Court “in the same

manner and to the same extent as decisions of the district courts in civil actions

tried without a jury.” 26 U.S.C. § 7482(a)(1). The sole issue in this appeal is the

interpretation of Section 29(c)(2)(A) of the Internal Revenue Code. The

interpretation of a federal statute is a question of law which this court reviews de

novo. See Utah v. Babbitt, 53 F.3d 1145, 1148 (10th Cir. 1995).

B. Section 29 of the Internal Revenue Code

The specific language of the statute at issue reads as follows:

In general.–Except as provided in subparagraph (B), the

determination of whether any gas is produced from geopressured

brine, Devonian Shale, coal seams, or a tight formation shall be

made in accordance with section 503 of the Natural Gas Policy Act

of 1978.

26 U.S.C. § 29(c)(2)(A) (emphasis added). The sole issue before this court is the

interpretation of the word “determination” as used in Section 29(c)(2)(A). The

Commissioner argues that “determination,” as used in the statute, means a formal

well-category determination issued by a jurisdictional agency and reviewed by
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FERC pursuant to the procedures specifically set forth in Section 503 of the

NGPA and the regulations promulgated by FERC. Conversely, the Partnership

argues that “determination” does not mean a well-category determination issued

by a jurisdictional agency and reviewed by FERC. At the core of the

Partnership’s argument is its position that by referencing Section 503 of the

NGPA in Section 29(c)(2)(A), Congress merely intended to incorporate the

substantive definitions of tight formation gas promulgated by FERC in

connection with its implementation of Section 503 of the NGPA. The

Partnership asserts that, for purposes of Section 29(c)(2)(A), the initial

determination of whether a well is producing from a tight formation can be made

by a taxpayer by applying the definitions, guidelines, and standards promulgated

by FERC. 

“The starting point in any case involving statutory construction is the

language of the statute itself. When the terms of the statute are clear and

unambiguous, that language is controlling absent rare and exceptional

circumstances.” Ramah Navajo Chapter v. Lujan, 112 F.3d 1455, 1460 (10th Cir.

1997) (citation and quotation omitted). When interpreting statutory language,

however, appellate courts must examine the disputed language in context, not in

isolation. This court “must look to the particular statutory language at issue, as

well as the language and design of the statute as a whole.” K Mart Corp. v.
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Cartier, Inc., 486 U.S. 281, 291 (1988). The definition and usage of the word

“determination” must be reviewed within this framework.

The word “determination” is not defined in the Internal Revenue Code. 

“In interpreting the meaning of the words in a revenue Act, we look to the

ordinary, everyday senses of the words.” Comm’r v. Soliman, 506 U.S. 168, 174

(1993) (quotation omitted). When Congress does not define a word, its “common

and ordinary usage may be obtained by reference to a dictionary.” United States

v. Roberts, 88 F.3d 872, 877 (10th Cir.1996). “Determination” is defined in

Black’s Law Dictionary as “[t]he decision of a court or administrative agency.” 

Black’s Law Dictionary 450 (6th ed. 1990). The primary definition of

“determination” in Webster’s is “the settling and ending of a controversy

[especially] by judicial decision.” Webster’s Third New Int’l Dictionary 616

(1993). A secondary definition provided by Webster’s is “a fixing of the

position, magnitude, or character of something.” Id. 

Both the Partnership’s and the Commissioner’s interpretation of Section

29(c)(2)(A) are consistent with the definition of “determination” obtained by

dictionary reference. The only point on which the parties appear to agree is that

the Section 29 Credit cannot be claimed unless there is a determination that a

well is producing natural gas from a tight formation. They disagree, however, on

who has the authority to make that determination. The Partnership argues that
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the initial determination may be made by the taxpayer claiming the Section 29

Credit; the Commissioner argues that the determination must be made by FERC. 

The current controversy, therefore, cannot be conclusively resolved simply by

applying a dictionary definition of “determination.”

The statute, however, cannot be interpreted by looking solely at the word

“determination.” See K Mart Corp., 486 U.S. at 291 (noting that a court must

look to both the particular language at issue and the statute as a whole). The

word must be placed in context with the remaining language of the statute which

requires that the determination of whether a well is producing natural gas from a

tight formation be made “in accordance with section 503 of the Natural Gas

Policy Act of 1978.” 26 U.S.C. § 29(c)(2)(A).

The Partnership argues that Section 503 is implicated in the process of

making a determination under Section 29(c)(2)(A) only to the extent that it

directs the person or entity making the determination to apply the definitions and

other criteria promulgated by FERC. In essence, the Partnership argues that the

reference to Section 503 in Section 29(c)(2)(A) is substantive, not procedural,

and that Section 29(c)(2)(A) only states a requirement concerning the substance

of a determination, not the procedure to be followed when obtaining it. The

Partnership’s argument, however, misinterprets Section 503 which is wholly

procedural and neither contains nor refers to any definitions, guidelines, or other
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substantive criteria which would assist either a taxpayer or a jurisdictional agency

in determining whether gas is being produced from a tight formation.

Section 503 sets forth a detailed and inflexible procedure by which initial

well-category determinations made by jurisdictional agencies are reviewed by

FERC. See Marathon Oil Co., 68 F.3d at 1377; Williston Basin Interstate

Pipeline Co., 816 F.2d at 780. Section 503 confers the authority to make the

determination of whether gas is producing from a tight formation only on

jurisdictional agencies. See NGPA § 503(c)(1) (“A Federal or State agency

having regulatory jurisdiction with respect to the production of natural gas is

authorized to make determinations referred to in subsection (a).”). FERC has

interpreted the language of Section 503 to allow only jurisdictional agencies to

designate tight formations. See 45 Fed. Reg. at 56,035 (“The designation

procedure begins with the jurisdictional agency.”). The guidelines to be used by

a jurisdictional agency in making tight formation designations are set forth in

regulations promulgated by FERC. See id. at 56,034-46.

Section 29(c)(2)(A) specifically refers only to Section 503 of the NGPA

and not to the regulations, definitions, guidelines or standards promulgated by

FERC in connection with its implementation of that section. Like Section 29,

Section 503 does not contain any definition of the term “tight formation.” 

Section 503 refers only to the definition of “high-cost natural gas” in Section
10Section 29(c)(2)(B)(i) identifies Section 2(18) of the NGPA as the source

for the definition of the phrase “committed or dedicated to interstate commerce,”

and reads as follows: “which, as of April 20, 1977, was committed or dedicated to

interstate commerce (as defined in section 2(18) of the Natural Gas Policy Act of

1978, as in effect on the date of the enactment of this clause).” 26 U.S.C. §

29(c)(2)(B)(i) (emphasis added). 

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107(c) of the NGPA. See NGPA § 503(a)(1)(D). That definition, in turn, does

not define or offer standards to determine what is a “tight formation.” The

remainder of Section 503 only details the process by which these initial

determinations are subsequently reviewed by FERC and, in some instances, a

United States Court of Appeals. 

Section 29(c)(2)(B)(i), the statutory provision which immediately follows

the portion of Section 29 in dispute, explicitly refers to definitions contained in

the NGPA.10 This illustrates that Congress knew the difference between

incorporating substantive provisions like those referenced in Section

29(c)(2)(B)(i), and incorporating the purely procedural provisions of Section 503. 

Therefore, the plain language of Section 29(c)(2)(A) provides no support for the

Partnership’s argument that Congress intended to incorporate substantive

provisions in Section 29(c)(2)(A), including the definitions set forth in either the

NGPA or regulations promulgated by FERC. The most rational explanation for

the reference to Section 503 found in Section 29(c)(2)(A) is that Congress

intended a taxpayer to follow the procedures set forth in Section 503 before the

Section 29 Credit could be claimed.
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C. The Natural Gas Policy Act

1. Section 107(b)

When interpreting statutory language, this court looks not only at the

specific statute at issue, but also examines that statute in context with related

statutes. See ABC Rentals of San Antonio, Inc. v. Comm’r, 142 F.3d 1200, 1207

(10th Cir. 1998). Because the Section 29 Credit and the pricing incentives

allowed by Section 107(b) of the NGPA are so closely interrelated, our

interpretation of Section 29(c)(2)(A) must include an analysis of the interplay

between the two statutes. 

Section 29 provides that a producer who charged an incentive price for

natural gas may not claim the Section 29 Credit for the same gas. See 26 U.S.C.

§ 29(e). A similar provision in Section 107(d) of the NGPA requires a producer

to choose between claiming the incentive price allowed by Section 107(b) or a

tax credit, exemption, or deduction for the natural gas. See NGPA § 107(d).

The Partnership’s interpretation of Section 29(c)(2)(A), taken to its logical

extreme, would allow a producer to claim the Section 29 Credit even though

either a jurisdictional agency or FERC had ruled that the same gas was not being

produced from a tight formation. Thus, a producer who had received an adverse

ruling from a jurisdictional agency or from FERC could retain its own expert to

opine that the well was producing gas from a tight formation. Based on the
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expert’s analysis, the taxpayer could claim the Section 29 Credit notwithstanding

that FERC had determined the same well was not producing gas from a tight

formation. In light of the statutory requirement in both Section 29(e) of the

Internal Revenue Code and Section 107(d) of the NGPA that producers must

choose between claiming the Section 29 Credit or charging the incentive price for

the same gas, Congress could not have intended a tax credit inconsistent with a

FERC determination. Interpreting Section 29(c)(2)(A) to require a producer to

obtain a well-category determination from a jurisdictional agency or FERC,

therefore, is consistent with the restriction imposed on a producer by both

Section 107(b) of the NGPA and Section 29(e) of the Internal Revenue Code.

2. Section 107(c)

The Partnership concedes that a producer could not claim the incentive

price allowed by the NGPA unless it first obtained a well-category determination

in accordance with the procedures set forth in Section 503 and the regulations

promulgated by FERC. This requirement was imposed on a producer by Section

107(c) of the NGPA which defined “high-cost natural gas” as “natural gas

determined in accordance with section 503” to be produced from geopressured

brine, Devonian shale, coal seams, or a tight formation. See NGPA § 107(c). 

The language of Section 107(c) of the NGPA which references Section 503 is

strikingly similar to the language of Section 29(c)(2)(A) referencing Section 503. 
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The two statutes should thus be construed harmoniously. See Negonsott v.

Samuels, 933 F.2d 818, 819 (10th Cir. 1991).

Section 107(c) has been consistently interpreted by FERC and by the courts

to require a producer to obtain a formal well-category determination from FERC

for a specific well before charging an incentive price for the gas produced from

that well. See 45 Fed. Reg. at 56,035; Oxy U.S.A., Inc., 949 F.2d at 801. This

court can only conclude that Congress intended the language it used in Section

29(c)(2)(A) to have the same meaning as the almost identical language it used in

Section 107(c).

Construing Section 29 of the Internal Revenue Code and Sections 107 and

503 of the NGPA in harmony leads to the conclusion that Section 29(c)(2)(A)

requires a producer to obtain a formal well-category determination before it can

claim the Section 29 Credit. 

D. Legislative History

The Partnership contends that the legislative history of Section 29 suggests

a well-category determination is not a prerequisite to claiming the Section 29

Credit. Once this court has determined that the language of a statute is clear and

unambiguous, it will review legislative history only for the narrow and limited

purpose of ascertaining whether it contains “a clearly expressed legislative intent

to the contrary.” See Miller v. Comm’r, 836 F.2d 1274, 1283 (10th Cir. 1988)
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(quotation omitted). “Legislative history should be used to resolve ambiguity,

not create it.” Id. 

In its brief, the Partnership specifically argues that reports prepared by

both the Senate Finance Committee and the House Ways and Means Committee

are “replete with references to the definition of tight formation gas as determined

by FERC.” The Partnership asserts that the only reasonable conclusion to be

drawn from the recurring use of this term is that Congress intended to incorporate

in Section 29(c)(2)(A) only the substantive definition of tight formation gas and

not the procedural formalities of Section 503 of the NGPA. While the term

“definition” does appear with regularity in the legislative history, it is more

significant that the word is conspicuously absent from Section 29(c)(2)(A), itself,

the final word from Congress. Our review of the legislative history reveals

nothing that could be construed as a clearly expressed congressional intent that is

contrary to the plain language of the statute. 

E. Prior Interpretations 

This court is bound to give effect to unambiguous statutory language

unless to do so would lead to absurd results. See United States v. Reider, 103

F.3d 99, 103 (10th Cir. 1996). Contrary to arguments made by the Partnership,

an interpretation of Section 29(c)(2)(A) to require a formal well-category
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determination does not result in an absurd result or one that is contrary to

existing case law or prior rulings issued by the Commissioner or FERC. 

1. Existing Case Law

The Partnership cites two cases in support of its position that a taxpayer is

entitled to claim the Section 29 Credit without first obtaining a formal wellcategory determination. Neither case, however, involved the interpretation of

Section 29(c)(2)(A) and, therefore, the Partnership’s reliance on the cases is

misplaced. In both cases, the Section 29(c)(2)(A) issue arose in the context of a

jurisdictional question. 

The first case involved a refusal by FERC to review a jurisdictional

agency’s determination that a well was producing tight formation gas. See

Marathon Oil Co., 68 F.3d at 1377. FERC refused to review the determination

because, at the time the request was made, Section 503 of the NGPA had been

repealed and FERC was no longer issuing well-category determinations. See id.

at 1378. The producer argued that FERC’s refusal to review the determination

would jeopardize its ability to claim the Section 29 Credit. See id. at 1378. The

court noted that the producer had received a positive determination from a

jurisdictional agency and was only seeking FERC approval of that determination. 

The court refused to exercise jurisdiction, holding that, until the IRS disallowed

the Section 29 Credit, the producer had not suffered any injury and, therefore,
-23-

lacked standing. See id. at 1378-79. The court suggested that the positive

determination received from the jurisdictional agency determination could be

used to substantiate the producer’s claim that it was entitled to the Section 29

Credit. See id. at 1379. The Partnership argues that interpreting Section

29(c)(2)(A) to require a well-category determination would be directly contrary

to the holding in Marathon Oil. 

In the second case cited by the Partnership, FERC reversed a jurisdictional

agency’s determination that a well was producing gas from geopressured brine,

another fuel which qualifies for the Section 29 Credit. See WRT Energy Corp. v.

FERC, 107 F.3d 314, 315 (5th Cir. 1997). Because the NGPA had been repealed,

FERC’s action had no effect on the price at which the producer could sell the

gas. See id. at 317. The producer requested the court to reverse FERC’s ruling

and argued that, although FERC’s ruling had no pricing consequence, it

jeopardized the producer’s ability to claim the Section 29 Credit. See id. at 317-

18. The court concluded that it had jurisdiction to review FERC’s reversal of the

jurisdictional agency’s determination because the ruling by FERC had the

potential to adversely affect the producer’s ability to claim the Section 29 Credit.

See id. The court, however, made it clear that Section 29 was not at issue in the

case. See id. at 316 (“But, remaining is the potential tax benefit, which is not

directly at issue in this proceeding . . . .”).
-24-

While these courts concluded that a determination by FERC is not

dispositive as to the Section 29 Credit, neither court cited any authority or

provided any analysis to substantiate this conclusion. The provisions of Section

29 were not analyzed or even discussed in either opinion. Neither case directly

addressed the issue currently before this court but discussed the Section 29 Credit

only in the context of resolving a jurisdictional issue. Accordingly, this court

declines to give any authoritative weight to the dicta in either Marathon Oil or

WRT. 

2. Prior Rulings Issued by the Commissioner

The Partnership’s argument that Private Letter Rulings, Technical Advice

Memoranda, and Revenue Rulings previously issued by the Commissioner

support its position is similarly misplaced. Both parties concede that because the

private letter rulings and technical advice memoranda were not issued specifically

to the Partnership, they cannot be used or cited as precedent. See 26 U.S.C. §

6110(k)(3) (1998). Nevertheless, “[w]hile private letter rulings are not binding

authority, they may be cited as evidence of administrative interpretation.” ABC

Rentals of San Antonio, Inc., 142 F.3d at 1207 n.5. This court, however, will

not defer to an agency’s interpretation of a statute if that interpretation conflicts

with the plain language of the statute. See Sundance Assocs., Inc. v. Reno, 139

F.3d 804, 807 (10th Cir. 1998). 
11Private letter ruling 88-29-066 was issued to a taxpayer who represented

that it did not intend to charge an incentive price for coal seam methane it

produced and requested a ruling that it would not be precluded by Section

29(e)(1) from claiming the Section 29 Credit. See Priv. Ltr. Rul. 88-29-066

(July 22, 1988). The Internal Revenue Service ruled that the producer could

claim the tax credit because the gas would not be sold at an incentive price. The

ruling contains a vague reference to the fact that the producer did not intend to

file a determination application but, contrary to the other rulings cited by the

Partnership, does not directly address any of the requirements of Section 29

including Section 29(c)(2)(A) or the drilling date requirements of Section 29(f).

-25-

With the exception of Private Letter Ruling 88-29-066, the fact situation in

each unpublished ruling cited by the Partnership is essentially the same:11 a

producer who sought to claim the Section 29 Credit had not yet obtained a formal

well-category determination from FERC although it had filed a determination

application with a jurisdictional agency and was awaiting action by FERC. See

Priv. Ltr. Rul. 92-34-015 (Aug. 21, 1992) (“Thus, the Taxpayer awaits only the

formality of a determination under section 503 of the NGPA from the FERC. 

The Taxpayer expects that the FERC will make such a determination in the near

future.”); Priv. Ltr. Rul. 91-35-028 (Aug. 30, 1991); Priv. Ltr. Rul. 93-27-061

(July 9, 1993); Priv. Ltr. Rul. 91-28-022 (July 12, 1991); Priv. Ltr. Rul. 89-34-

067 (Aug. 25, 1989); Tech. Adv. Mem. 88-48-001 (Dec. 2, 1988). In each ruling,

the Commissioner concluded that the temporary lack of a formal well-category

determination did not bar the producer from claiming the Section 29 Credit for

fuel sold during the year in question. See, e.g., Priv. Ltr. Rul. 93-27-061 (“The

temporary lack of a determination by the FERC . . . does not cause the production
-26-

from such wells to fail to qualify for the section 29 credit.”). Each of these

rulings clearly and unambiguously stated that the ruling was contingent on the

taxpayer’s eventual receipt of a well-category determination. Three of the rulings

cited by the Partnership conclude with the following language: “The above

rulings are predicated upon [your] receipt of favorable determinations from the

appropriate agencies that production from each well is obtained from . . . tight

formations.” Priv. Ltr. Rul. 92-34-015 (Aug. 21, 1992); see also Priv. Ltr. Rul.

91-28-022 (July 12, 1991); Priv. Ltr. Rul. 91-35-028 (Aug. 30, 1991). 

Thus, the Partnership’s assertion, taken on its face, that these rulings stand

for the proposition that a formal well-category determination is not a prerequisite

to claiming the Section 29 Credit is literally correct. The rulings, however, do

not stand for the proposition advanced by the Partnership that a well-category

determination is not eventually required before gas qualifies for the Section 29

Credit. Each unpublished ruling contemplated that a well-category determination

would eventually be forthcoming from FERC; the taxpayer was allowed to claim

the Section 29 Credit with the understanding that the credit would be disallowed

if the taxpayer received an adverse ruling from FERC. Therefore, the

Commissioner’s interpretation of Section 29(c)(2)(A), as expressed in all the

relevant unpublished rulings cited by the Partnership, is consistent with the

interpretation reached by this court. 
-27-

The Partnership also argues that requiring a formal well-category

determination would directly conflict with the holding in a recently issued

revenue ruling. See Rev. Rul. 93-54, 1993-2 C.B. 3. The holding of the revenue

ruling was as follows:

If a well that is drilled after December 31, 1979, and before January

1, 1993, is recompleted after January 1, 1993, to produce fuel that is

a qualified fuel under section 29(c) of the Code and if the

recompletion does not involve additional drilling to deepen or

extend the well, the fuel produced from the recompletion qualifies

for the section 29 credit.

Id. Only one month before the revenue ruling was published, however, FERC

announced that it would not review determination applications “where the well

was spudded or recompletion commenced on or after January 1, 1993.” 58 Fed.

Reg. at 38,529 n.12. Therefore, it would have been impossible for a producer

who recompleted a well after January 1, 1993, in accord with revenue ruling 93-

54, to file a determination application and obtain a well-category determination

from FERC. 

The Partnership argues that, because it is impossible to obtain a wellcategory determination for a well recompleted after January 1, 1993 (because

FERC will no longer issue one), the only conclusion that can be drawn from the

revenue ruling is that a well-category determination is not necessary to qualify

for the Section 29 Credit. The Partnership contends that the revenue ruling

would otherwise be meaningless. 
-28-

Revenue ruling 93-54, like the cases cited by the Partnership, did not deal

directly with the issue of the well-category determination. The revenue ruling

addressed only the drilling date requirement of Section 29(f) of the Internal

Revenue Code that the qualified fuels must be produced from a well drilled after

December 31, 1979, and before January 1, 1993. The revenue ruling does not

expressly discuss Section 29(c)(2)(A)’s requirement of a well-category

determination. See American Stores Co. v. Comm’r, 1999 WL 122996, at *12

(10th Cir. 1999) (commenting that a taxpayer’s slanted interpretation of a

revenue ruling that does not otherwise state a clear standard cannot be used as

support for the taxpayer’s position).

Revenue rulings issued by the Commissioner do not have the same force

and effect as treasury regulations and are not binding on this court. See ABC

Rentals of San Antonio, Inc., 142 F.3d at 1205. “Revenue rulings do not have the

force and effect of law, but rather are offered for the guidance of taxpayers, IRS

officials, and others concerned; although they are entitled to some consideration,

they do not control when contrary to statute or the expressed intention of

Congress.” Storm Plastics, Inc. v. United States, 770 F.2d 148, 154 (10th Cir.

1985). Consequently, to the extent that revenue ruling 93-54 could be interpreted

to directly conflict with the plain language of Section 29(c)(2)(A), it has no

precedential value to this court. Therefore, this court declines to give revenue
-29-

ruling 93-54 any weight for the proposition that a producer does not have to

obtain a formal well-category determination before claiming the Section 29

Credit.

While it is apparently true that a well recompleted after January 1, 1993

will not qualify for the Section 29 Credit because it is no longer possible to

obtain a well-category determination, this court is not at liberty to ignore the

plain language of the statute and hold that a well-category determination is not

required to claim the Section 29 Credit. It is the responsibility of this court to

interpret statutes, not rewrite them. See Badaracco v. Comm’r, 464 U.S. 386,

398 (1984) (“Courts are not authorized to rewrite a statute because they might

deem its effects susceptible of improvement.”). It is within the prerogative of

Congress to amend Section 29 to eliminate the requirement of a formal wellcategory determination for wells recompleted after January 1, 1993. 

3. FERC Rulings

The Partnership argues that a statement made by FERC in 1994 signifies

FERC’s position that Section 29(c)(2)(A) does not require a producer to obtain a

formal well-category determination. In a ruling wherein FERC refused to issue a

well-category determination, FERC stated in a footnote, “[t]he IRS has the

responsibility to determine whether production from a well that has not received

a determination under NGPA section 503 is eligible for a tax credit.” Railroad
-30-

Comm’n of Texas, 66 F.E.R.C. ¶ 61130 n.12, 1994 WL 24276, at *5 (Jan. 28,

1994). The Partnership interprets this statement as a pronouncement by FERC

that a well-category determination is not necessary to qualify for the Section 29

Credit. Arguably, however, this statement only acknowledges the undeniable fact

that the Commissioner, and not FERC, has the authority to interpret Section

29(c)(2)(A). The Partnership concedes in its brief, moreover, that FERC has also

issued several orders in which it expressly stated that a well-category

determination was necessary to qualify for the Section 29 Credit. See, e.g., 58

Fed. Reg. at 38,528 (“[W]hile NGPA Section 107 well category determinations

have no price consequence, they are necessary to obtain the Section 29 tax

credit.”). The Partnership contends that FERC has taken an inconsistent position

with respect to the well-category determinations but argues that its earlier

pronouncements requiring well-category determinations for the Section 29 Credit

were erroneous. 

Even assuming that the statement appearing in Railroad Comm’n of Texas

represents FERC’s departure from its earlier position that a well-category

determination was necessary to obtain the Section 29 Credit, this court declines

to give any weight to FERC’s articulated positions on the Section 29 issue. 

FERC has no Congressional authority to interpret any provision of the Internal
-31-

Revenue Code; its interpretation of Section 29(c)(2)(A) is irrelevant to our

analysis. 

4. Self-Assessment of Federal Taxes

The Partnership also argues that the tax system is one of self-assessment

and, therefore, it should be up to the taxpayer to determine, subject to audit,

whether it is entitled to claim a credit or deduction allowed by the Internal

Revenue Code. The Partnership repeatedly argues that obtaining a well-category

determination is just one way a taxpayer, if audited, can substantiate its position

that it is entitled to the Section 29 Credit. While it is true that the federal income

tax system is one of self-assessment, any requirements imposed by the Internal

Revenue Code must be followed before credits or deductions can be claimed by a

taxpayer. Other provisions of the Internal Revenue Code require a taxpayer to

obtain supplemental documentation before claiming a credit or deduction. See,

e.g., 26 U.S.C. § 170(a)(1); 26 C.F.R. § 1.170A-13(c) (requiring a taxpayer to

obtain an appraisal from a “qualified appraiser” before a charitable deduction can

be claimed for gifts of certain property.). Therefore, our interpretation of Section

29(c)(2)(A) to require a well-category determination before the Section 29 Credit

can be claimed is not absurd or unreasonable in light of other provisions of the

Internal Revenue Code which require credits or deductions to be substantiated

before they can be claimed.
-32-

V. CONCLUSION

 Our analysis of Section 29(c)(2)(A) leads to the conclusion that the

language used therein is clear and unambiguous. A producer must obtain a

formal well-category determination before it can claim the Section 29 Credit. 

Nothing in the legislative history of the statute indicates a clear congressional

intent to the contrary. Additionally, this interpretation of Section 29(c)(2)(A)

does not lead to absurd or unreasonable results. Although the result of our

holding may appear unfair to producers who failed to obtain well-category

determinations while they were being issued by FERC or to those producers who

recomplete their wells after January 1, 1993, the judiciary is not “licensed to

attempt to soften the clear import of Congress’ chosen words whenever a court

believes those words lead to a harsh result.” United States v. Locke, 471 U.S. 84,

95 (1985).

This court, therefore, AFFIRMS the decision of the United States Tax

Court.