Court Opinion

ID: 4331375
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:07:27.335016+00
Date Added: 2024-06-11T14:47:43.277324
License: Public Domain

109 T.C. No. 6

                UNITED STATES TAX COURT

      NIELSON-TRUE PARTNERSHIP, TRUE OIL COMPANY,
   TAX MATTERS PARTNER, Petitioner v. COMMISSIONER
            OF INTERNAL REVENUE, Respondent

Docket Nos. 12069-95, 3980-96.       Filed September 9, 1997.

     P owned an interest in two wells in the same tight
formation gas field. The field had been established
under statutory procedures as a tight formation field.
One well had been certified as producing tight
formation gas under the established Federal statutory
procedures, and the other had not. Congress provided a
tax credit incentive to develop, among other fuels,
tight formation gas. Sec. 29(c)(2)(A), I.R.C.,
requires that, as a prerequisite to the credit, "the
determination of whether any gas is produced from * * *
a tight formation shall be made in accordance with
section 503 of the Natural Gas Policy Act of 1978
[NGPA]", Pub. L. 95-621, 92 Stat. 3350, 3397, 15 U.S.C.
sec. 3413 (1988). NGPA sec. 503 was also the
procedural route to qualifying individual tight
formation gas wells for incentive (higher than ceiling)
price treatment administered by the Federal Energy
Regulatory Commission (FERC). Under NGPA sec. 503,
                               - 2 -

     related statutes, and FERC regulations, determinations
     concerning tight formation gas were required for both
     the field in which a well was situated and the
     individual well. R determined that sec. 29, through
     reference to NGPA sec. 503, required individual well-
     category determinations to qualify for the tax credit.
     P contends and R does not deny that but for the lack of
     a certification under NGPA sec. 503, the well in
     question would meet the qualifications for tight
     formation gas. P contends that meeting the
     qualification by definition (in substance) should
     suffice and that actual certification is unnecessary.
          Held: Sec. 29, I.R.C., when read in conjunction
     with the provisions of NGPA sec. 503 and related
     materials, requires an individual well tight formation
     gas determination under the procedures of NGPA sec. 503
     as prerequisite to tax credit eligibility.

     Douglas A. Pluss and Ronald M. Morris, for petitioner.

     Richard D. D'Estrada, for respondent.

     GERBER, Judge:   Respondent mailed to True Oil Co.

(petitioner), as tax matters partner, notices of final

partnership administrative adjustment with respect to Nielson-

True Partnership for the taxable years 1991 and 1992.     The sole

adjustment and issue concerns respondent's disallowance of

section 291 credits in the amounts of $10,170 and $4,394 for 1991

and 1992, respectively.2

     1
       Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the taxable years at issue,
and Rule references are to this Court's Rules of Practice and
Procedure.
     2
       These cases were consolidated for purposes of trial,
briefing, and opinion.
                               - 3 -

                         FINDINGS OF FACT3

     On October 14, 1983, True Oil Co., the tax matters partner,

and Nielson Enterprises, Inc., a Delaware corporation, formed the

Nielson-True partnership.   The partnership's principal place of

business was Casper, Wyoming, at the time the petition was filed.

The primary objective of the partnership was to drill two wells

in the "J" Sand formation in the Wattenberg Field in northern

Colorado, a gas field covering parts of several counties,

including Weld County, Colorado.   Wells were drilled in Weld

County, known as the Alvin Vonasek "B" well (the Vonasek well)

and the Castor Hanson True well (the Hanson well).   These wells

draw from the "J" Sand formation and produce only gas.

     The Federal Energy Regulatory Commission (FERC or the

Commission) made an administrative determination that the "J"

Sand formation in the Wattenberg Field was a tight formation and

that the gas produced from that formation was tight formation

natural gas.4   The Commission's determination was pursuant to the

     3
       The parties' stipulated facts and exhibits are
incorporated by this reference.
     4
        A "tight formation" is a sedimentary layer of rock
     cemented together in a manner that greatly hinders the
     flow of any gas through the rock. Because such a
     formation is characterized by low permeability, wells
     drilled into gas-bearing formations of this kind
     usually produce at very low rates. To stimulate
     production from these formations, producers must use
     expensive enhanced recovery techniques. [Citation
     omitted.]

                                                     (continued...)
                                - 4 -

Natural Gas Policy Act of 1978 (NGPA), Pub. L. 95-621, sec. 503,

92 Stat. 3350, 3397, 15 U.S.C. sec. 3413 (1988).

     An unrelated corporation responsible for operating the wells

in the Wattenberg Field submitted a well-category determination

application to the local regulatory authority in Colorado for the

Vonasek well.    In response, the State agency determined that the

Vonasek well was producing gas from a tight formation.    This

determination became final and was not overturned or reversed by

FERC.    The Vonasek and Hanson wells were part of a group of over

300 wells managed by the same operator.    The individual wells in

the group were routinely submitted for a well determination by

the operator.    Due to an oversight, no well-category

determination application was filed with the Colorado local

regulatory authority with respect to the Hanson well.

     During 1991 and 1992, the partnership had a working interest

in the Vonasek and Hanson wells.    Respondent allowed the

nonconventional fuels tax credits under section 29 for the

Vonasek well for 1991 and 1992.    However, for the same tax years,

respondent disallowed the claimed tax credits for the Hanson well

     4
      (...continued)
Williams Natural Gas Co. v. FERC, 872 F.2d 438, 441 n.1 (D.C.
Cir. 1989) (quoting Order No. 99, Regulations Covering High-Cost
Natural Gas Produced From Tight Formations, 45 Fed. Reg. 56,034
(Apr. 22, 1980)); see also Midwest Gas Users Association v. FERC,
833 F.2d 341, 345 (D.C. Cir. 1987); Pennzoil Co. v. FERC, 671
F.2d 119, 120 (5th Cir. 1982).
                                - 5 -

on the grounds that no submission for a determination was made

for the Hanson well.

                               OPINION

     This is a case of first impression stemming from

respondent's disallowance of a section 29 nonconventional fuels

tax credit (credit).   The issue we consider is whether the Hanson

well qualifies for the credit even though it was not certified

under the procedures contained in NGPA sec. 503.   The parties

approach the solution to this issue from different perspectives.

Respondent contends that the statutes involved expressly and

unambiguously require that a well-category determination must be

obtained from the specified authorities for entitlement to the

credit.   Petitioner, contending that the statute is ambiguous,

construes the statute, when read in conjunction with the

legislative history and other indicators of congressional intent,

as permitting the credit without a formal procedural

determination if the well otherwise meets the definitional

requirements under the referenced statutory framework.

     Section 29, formerly section 44D,5 was enacted by the Crude

Oil Windfall Profit Tax Act of 1980 (COWPTA), Pub. L. 96-223,

sec. 231, 94 Stat. 229, 268.   This section was entitled "Credit

     5
       Congress enacted sec. 44D in 1980. See Crude Oil Windfall
Profit Tax Act of 1980, Pub. L. 96-223, sec. 231(a), 94 Stat.
268. In the Deficit Reduction Act of 1984, Pub. L. 98-369, sec.
471(c)(1), 98 Stat. 826, Congress redesignated sec. 44D as sec.
29.
                                 - 6 -

For Producing Fuel From A Nonconventional Source", and it was

intended to encourage the development of alternative energy

sources and to provide producers of alternative fuels with

protection against significant decreases in the average wellhead

price for uncontrolled domestic oil.     See S. Rept. 96-394, at 87

(1979), 1980-3 C.B. 131, 205; H. Conf. Rept. 96-817, at 139

(1980), 1980-3 C.B. 245, 299; see also Texaco Inc. v.

Commissioner, 101 T.C. 571, 574-575 (1993).

     Section 29(a) provides for a tax credit for qualified fuels

produced by a taxpayer and sold to an unrelated person.    Section

29(c)(1)(B)(i) lists gas produced from a tight formation as one

of the qualified fuels.   Section 29(c)(2)(A), in pertinent part,

states that "the determination of whether any gas is produced

from * * * a tight formation shall be made in accordance with

section 503 of the * * * [NGPA]."

     The parties differ in their interpretations of the term

"determination".   Respondent contends that, as a prerequisite to

obtaining the credit, a tight formation well-category

determination must be obtained by compliance with the application

and approval procedures of NGPA section 503.    Respondent concedes

that the local regulatory authority and the Commission provided

determinations that the Wattenberg Field "J" Sand formation

contained tight formation gas.    Respondent also concedes that the

Hanson well was drilled in the Wattenberg Field "J" Sand

formation and produced gas that would meet FERC's standards as
                               - 7 -

tight formation gas.   Respondent's position relies solely on the

absence of a well-category determination under NGPA section 503

for the Hanson well.

     Petitioner proposes several arguments, the main thrust of

which is that the use of the term "determination" in the statute

does not result in the requirement of a well-category

determination from FERC or under NGPA section 503.   Petitioner

contends that the NGPA section 503 reference in section 29

provides a means to a substantive definition for tight formation

gas and was not intended to require an actual certification under

the NGPA.   We agree with respondent.

      Section 29 does not literally support the result petitioner

seeks.   The use of the term "determination" and the reference in

section 29(c)(2) to NGPA section 503 would require a reading of

both sections to fully understand the requirements and meaning of

section 29.   In construing a statute, courts seek the plain and

literal meaning of the language.   United States v. Locke, 471

U.S. 84, 95-96 (1985); United States v. American Trucking

Associations, Inc., 310 U.S. 534, 543 (1940).   In that regard,

words in revenue acts are generally interpreted in their

"ordinary, everyday senses".   Commissioner v. Soliman, 506 U.S.

168, 174 (1993) (quoting Malat v. Riddell, 383 U.S. 569, 571

(1966) (quoting Crane v. Commissioner, 331 U.S. 1, 6 (1947))).

     On the other hand, words with a recognized legal or

judicially settled meaning are generally presumed to have been so
                                 - 8 -

utilized, unless such an interpretation will lead to absurd

results.   See United States v. Locke, supra at 93, 95-96; United

States v. Merriam, 263 U.S. 179, 187 (1923); Lenz v.

Commissioner, 101 T.C. 260, 265 (1993) (citing United States v.

American Trucking Associations, Inc., supra at 542-543).

     Our principal objective in interpreting any statute is to

determine Congress' intent in using the statutory language being

construed.   United States v. American Trucking Associations,

Inc., supra at 542; Helvering v. Stockholms Enskilda Bank, 293

U.S. 84, 93-94 (1934); General Signal Corp. v. Commissioner, 103

T.C. 216, 240 (1994).    In order to interpret Congress' intent

here, we must analyze section 29 and the NGPA section referenced

in section 29.

     With these general principles in mind, we consider the

phrase "the determination of whether any gas is produced from

* * * a tight formation shall be made in accordance with section

503 of the Natural Gas Policy Act of 1978."6    Section 29 does not

     6
       This phrase appears in section 29(c) in the following
manner:

       SEC. 29(c). Definition of Qualified Fuels.--For
     purposes of this section--

          (1)    In general.--The term "qualified fuels"
     means--

                 (A)   oil produced from shale and tar sands,

                 (B)   gas produced from--

                                                      (continued...)
                                   - 9 -

contain a definition of tight formation gas for purposes of the

nonconventional fuels tax credit.      Section 29 simply provides

that the "determination" of "whether any gas is produced from

* * * a tight formation shall be made in accordance with [NGPA]

section 503".      By way of contrast, another part of section 29

references NGPA section 2(18), 92 Stat. 3354, 15 U.S.C. sec. 3301

(1988), as providing the definition of the phrase "committed or

dedicated to interstate commerce".         See sec. 29(c)(2)(B)(i).

         NGPA section 5037 contains procedures by which particular

types of natural gas may qualify for certain price incentives

     6
      (...continued)
                        (i) geopressured brine, Devonian shale,
                   coal seams, or a tight formation, or

                        (ii)   biomass, and

                   (C) liquid, gaseous, or solid synthetic fuels
                   produced from coal (including lignite), including
                   such fuels when used as feedstocks.

             (2)   Gas from geopressured brine, etc.--

                  (A) 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.   [Emphasis added.]

     7
       We note that the Natural Gas Wellhead Decontrol Act of
1989 (Decontrol Act), Pub. L. 101-60, sec. 3(b)(5), 103 Stat.
157, 159, eliminated wellhead and nonprice controls on the first
sale of natural gas. Sec. (3)(b)(5) of the Decontrol Act
repealed the Natural Gas Policy Act of 1978 (NGPA), Pub. L. 95-
621, sec. 503, 92 Stat. 3350, 3397, 15 U.S.C. sec. 3413 (1988),
effective Jan. 1, 1993.
                              - 10 -

regulated by FERC.   NGPA section 503, however, does not contain a

specific reference to or definition of "tight formation gas".

NGPA section 503 does contain reference to several categories of

natural gas which are covered under its procedures, including

"high-cost natural gas".   See 15 U.S.C. sec. 3413(a)(1)(D).

     NGPA section 503 was enacted in 1978 and did not

specifically mention tight formation gas.   The introduction of

tight formation gas to the price incentive provisions, including

NGPA section 503, did not occur until some later time.    The

introduction of tight formation gas into this scenario occurred

as described in Williams Natural Gas Co. v. FERC, 872 F.2d 438,

441 (D.C. Cir. 1989), as follows:

     NGPA section 107(c)(5) gives the * * * [FERC] the power
     to prescribe an incentive price for high-cost natural
     gas which does not fit within the categories enumerated
     in section 107(c)(1)-(4). On July 16, 1979, President
     Carter recommended the establishment of incentives for
     the production of "tight formation" natural gas. After
     conducting a rulemaking, * * * [FERC] promulgated
     regulations establishing incentive prices for tight
     formation gas. [Fn. ref. omitted.]

The courts thereafter held that NGPA section 503 is the

procedural mechanism for the determination of whether a

particular well's production qualifies for the price incentive as

tight formation gas vis-a-vis the NGPA section 503 category

"high-cost natural gas".   See, e.g., Williston Basin Interstate

Pipeline Co. v. FERC, 816 F.2d 777, 780 (D.C. Cir. 1987).

     NGPA section 503 contains a four-step process by which

determinations may be obtained.   First, the local regulatory
                              - 11 -

authority (local authority) recommended that a field be

designated as a tight formation.8   Second, FERC could affirm,

reverse, remand, issue a preliminary finding, or take no action

on the local authority's recommendation.   If no action was taken

by FERC, the local authority's recommendation became final 45

days after receipt of the recommendation by FERC.   If FERC issued

preliminary findings but failed to take further action, the local

authority's recommendation became final 120 days after the date

FERC's preliminary finding was issued.   The third procedural step

permitted an interested producer to petition the local authority

for its recommendation that a particular well within the

designated tight formation field should be classified as a tight

formation well.   Fourth, FERC could affirm, reverse, remand,

issue a preliminary finding, or take no action on the local

authority's recommendation with respect to a specific well.      As

in step 2, the local authority's individual tight formation well

recommendation became final 45 days from the date FERC received

the recommendation unless FERC issued a preliminary finding.     In

the event that FERC issued a preliminary finding, FERC had 120

days from the preliminary finding to take further action or the

     8
       NGPA sec. 503, 15 U.S.C. sec. 3413(c)(1), defines the
local regulatory authority as the "Federal or State agency having
regulatory jurisdiction with respect to the production of natural
gas."
                                - 12 -

local authority's recommendation became final.9    Finally,

judicial review was available under NGPA section 503, but only in

the event that FERC remanded or reversed the local authority's

recommendation.    15 U.S.C. sec. 3413(b)(4).

     For purposes of obtaining the gas price incentives, the

four-step process outlined above is mandatory and not severable

or elective.   A well owner may not qualify merely by producing

from a well located in a field that has been determined to be a

tight formation.    In addition to a field determination, the well

owner must obtain a determination that each well produces tight

formation gas.    See, e.g., Enserch Exploration, Inc. v. FERC, 887

F.2d 81, 82 (5th Cir. 1989); FERC Order No. 479, issued July 29,

1987, 52 Fed. Reg. 29003 (Aug. 5, 1987).

     Regulations under the NGPA indicate that the Wattenberg "J"

Sand formation had been finally determined to contain tight

formation gas.     See 18 C.F.R. sec. 271.703(d)(11) (1988).   The

Wattenberg "J" field is located north and east of Denver and

underlies approximately 703,000 acres situated within four

different counties.      See 18 C.F.R. sec. 271.703(d)(11)(i).

Accordingly, it is a relatively large area within which many

wells may be situated.     The parties do not dispute and the case

law supports the principle that to be entitled to the price

     9
       See Ecee, Inc. v. FERC, 645 F.2d 339, 345-353 (5th Cir.
1981), for a discussion of the statutory division of
responsibilities between the Commission and the local authority.
                              - 13 -

incentives administered by FERC under NGPA section 107(c)(5), 92

Stat. 3366, 15 U.S.C. sec. 3317 (1988), a well owner would be

required to obtain a determination, under the NGPA section 503

procedures with respect to each individual well, that it produced

"tight formation gas".   The question is whether that same

requirement ensues for the tax credit from the section 29

reference to a determination under NGPA section 503.

     Petitioner argues that the statutory ambiguity permits its

use of the legislative history and other pertinent material to

interpret the intent of the statute.   Although we agree that in

this instance we must look beyond the statutory language, it is

difficult to reach the conclusion proposed by petitioner,

considering the statutory language and case precedent concerning

NGPA section 503.   For example, could Congress, by incorporating

the reference to NGPA section 503 in section 29, have intended

that one procedural standard would be applied to determine

whether a well is a tight formation well for price incentives and

that a different approach and procedural standard would apply for

income tax credits where both programs are to be governed

procedurally pursuant to NGPA section 503?   This must be the case

for petitioner to prevail.

     A statutory term should be given its common and ordinary

meaning, unless persuasive evidence or context indicates

otherwise.   Commissioner v. Soliman, 506 U.S. at 174;

Commissioner v. Brown, 380 U.S. 563, 570-571 (1965).     The word
                               - 14 -

"determination" has been generally defined to mean the act of

settling a dispute, suit, or other question by an authoritative

decision, or the ascertainment or establishment of the extent,

quality, position, or character of something.    Webster's II New

Riverside University Dictionary 369 (1984).    In the legal sense,

a "determination" is a "decision of a court or administrative

agency" and, also, a "judgment and decision after weighing [all]

the [relevant] facts."    Black’s Law Dictionary 450 (6th ed.

1990).    Consequently, we do not find the term "determination"

made in accordance with NGPA section 503 to be ambiguous.

Section 29(c)(2) cannot be literally interpreted in a manner

other than that it requires a determination under the procedures

of NGPA section 503.

     Petitioner's contention that a well-category determination

is not a prerequisite for eligibility for the tax credit is not a

plausible literal interpretation of section 29.    That is

especially so when NGPA section 503 is considered in tandem with

section 29, wherein it is referenced.    Certainly, section 29 does

not mean that respondent possessed the expertise or statutory

authority to make determinations of whether gas was from a tight

formation for tax credit purposes.10    Petitioner's approach does

     10
       Congress considered granting but did not grant authority
to the U.S. Department of the Treasury to make determinations
under NGPA sec. 503 in the Tax Simplification Act of 1993. See
infra note 12. These determinations by the U.S. Department of
the Treasury were to be made consistent with NGPA sec. 503.
                                - 15 -

not comport with the overall statutory design for obtaining the

benefit of the tax credit.

     Petitioner relied heavily on the legislative history to

present its position.   Petitioner contends that the legislative

history reveals Congress' intent that section 29 required that a

well meet the definition of a tight formation as utilized by FERC

in the NGPA section 503 administrative process.   Although the

legislative history does contain some references to possibilities

for employing definitions established by FERC, those references

do not provide a basis for holding that the term "determination"

should be interpreted differently from its usual and established

meaning.   Our examination of petitioner's argument leads us to

the same conclusion whether or not we consider the statute to be

ambiguous.   In addition, we may seek out any reliable evidence as

to the legislative purpose even where the statute is clear.

United States v. American Trucking Associations, Inc., 310 U.S.

at 543-544; Centel Communications Co. v. Commissioner, 92 T.C.

612, 628 (1989), affd. 920 F.2d 1335 (7th Cir. 1990).

     Congress enacted the NGPA in response to a generally growing

demand for natural gas and rising prices for energy in the late

seventies and early eighties.    Williams Natural Gas Co. v. FERC,

872 F.2d at 440; ANR Pipeline Co. v. FERC, 870 F.2d 717, 719

(D.C. Cir. 1989).   Producers of gas from tight formations could

qualify for incentive gas prices higher than the ceiling.     These

incentive prices were valuable when uncontrolled gas prices were
                             - 16 -

high but did little to encourage development of high-cost tight

formation gas when prices were low.   See Texaco Inc. v.

Commissioner, 101 T.C. 571 (1993).    Consequently, in enacting the

nonconventional energy production tax credit under section 29

(formerly section 44D), Congress provided an additional incentive

to compensate for the extra costs and risks of producing high-

cost fuel, including tight formation gas.     See S. Rept. 96-394,

at 87 (1979), 1980-3 C.B. 131, 205.

     Turning to the legislative history, the nonconventional

fuels tax credit first appeared in COWPTA.    The conference

committee report states:

        For purposes of the credit, the definition of
     natural gas from geopressured brine, coal seams, and
     Devonian shale is the same as that determined by the
     Federal Energy Regulatory Commission (FERC) under the
     Natural Gas Policy Act of 1978 (NGPA). Until FERC
     defines the term "tight formation" under section
     107(c)(5) of the NGPA, tight sands gas is defined in
     terms of average matrix permeability to gas. [H. Conf.
     Rept. 96-817, at 138 (1980), 1980-3 C.B. 245, 298.]

In addition, the conference report for the COWPTA stated:

          Conference agreement.--The conference agreement
     adopts a modified version of the Senate amendment.
     This provision is intended to provide producers of
     alternative fuels with protection against significant
     decreases in the average wellhead price for the
     uncontrolled domestic oil, with which alternative fuels
     frequently compete. * * *

     *        *        *        *         *         *          *

          Sources eligible for the credit, and the
     definitions of those sources, generally are the same as
     those in the Senate amendment. Natural gas produced
     from a tight formation, however, has the same
                                - 17 -

    definition as that determined by the FERC under the
    NGPA * * *   [Id. at 139-140, 1980-3 C.B. at 299-300.]

Finally, the staff of the Joint Committee's General Explanation

of COWPTA contains the statement that

          For purposes of the credit, the definition of
     natural gas from geopressured brine, Devonian shale,
     coal seams, or a tight formation is that determined by
     the Federal Energy Regulatory Commission in accordance
     with section 503 of the Natural Gas Policy Act of 1978
     (NGPA). * * *

Staff of Joint Comm. on Taxation, General Explanation of the

Crude Oil Windfall Profit Tax Act of 1980, at 81 (J. Comm. Print

1981).

     Accordingly, portions of the legislative history contain the

expectation that FERC would create a definition of tight

formation gas to be utilized for purposes of obtaining the tax

credit.   Petitioner contends that, by use of the term

"determination", Congress intended to incorporate the definition

to be promulgated by FERC, rather than to require a well-category

determination for each specific well under NGPA section 503.    We

could agree that Congress expected that FERC would ultimately

define "tight formation" gas.    But Congress' choice of the term

"determination", rather than "definition", in section 29 leaves

petitioner's contentions without statutory support or substance.

     Petitioner also argues that Congress retained the

"determined in accordance with section 503" language of section

29(c)(2)(A) even though the statutory authority under the NGPA to

make determinations under section 503 for most new tight
                              - 18 -

formation gas was revoked by the Natural Gas Wellhead Decontrol

Act of 1989 (Decontrol Act), Pub. L. 101-60, sec. 3(b)(5), 103

Stat. 157, 159, effective January 1, 1993.    In other words,

petitioner argues that FERC and the relevant local regulatory

agencies did not have the authority to issue well-category

determinations after that date.   Petitioner also argues that, as

a general matter, the Omnibus Budget Reconciliation Act of 1990,

Pub. L. 101-508, sec. 11501, 104 Stat. 1388-479, extended and

liberalized the availability of the tax credit for tight

formation gas for wells drilled before January 1, 1993.    In that

regard, the section 29 credit for tight formation gas is

allowable beyond January 1, 1993.

     Conversely, respondent points out that FERC announced that

it would continue processing well-category determinations until

January 1, 1993, in order for producers to qualify for

nonconventional fuels tax credits.     FERC Order No. 523, 55 Fed.

Reg. 17425 (Apr. 25, 1990).   Respondent also relies on

legislative history in connection with the repeal of the

incentive-pricing provisions of the NGPA containing the statement

that the repeal was not intended to affect the availability of

the nonconventional fuels tax credit.    See S. Rept. 101-39, at 9

(1989).   Finally, respondent points out that Congress considered

making the nonconventional fuels tax credit permanent but

extended for only 2 years the time within which a well had to be

drilled to qualify.   This extension was intended to coincide with
                              - 19 -

the effective date of the repeal of the NGPA, so that the

processing of well-category determinations could be continued.

Consequently, respondent argues this leads to the conclusion that

FERC and other local regulatory agencies were authorized to make

well-category determinations.11

     11
       These circumstances were described in Marathon Oil Co. v.
FERC, 68 F.3d 1376, 1377-1378 (D.C. Cir. 1995), as follows:

          Effective January 1, 1993, the Natural Gas
     Wellhead Decontrol Act of 1989 repealed NGPA price
     controls on wellhead sales of natural gas. As a result
     of the Decontrol Act, the Commission eliminated
     incentive prices for tight formation gas produced from
     wells "spudded" * * * or "recompleted" after May 12,
     1990. A year later, however, the Omnibus Budget
     Revenue Reconciliation Act of 1990 instituted a tax
     credit for natural gas from newly drilled wells in
     tight formations. In order to be eligible for the tax
     credit, the natural gas must (1) be produced from a
     well drilled or a facility placed in service after
     December 31, 1979 and before January 1, 1993 and (2) be
     sold before January 1, 2003. The Budget Act further
     provides that "the determination of whether any gas is
     produced from * * * a tight formation shall be made in
     accordance with section 503 * * * [NGPA]." Thereafter,
     the Commission [FERC] announced its intention to
     continue to process the initial determinations of
     agencies despite their loss of regulatory significance,
     until January 1, 1993. The Commission later extended
     this deadline to April 30, 1994 so long as the
     application for an initial determination was filed with
     the agency by December 31, 1992. However, the
     Commission said that it "will not accept determinations
     where the well was spudded or recompletion commenced on
     or after January 1, 1993." Explaining the reason for
     continuing to review agency determinations for a
     transition period, the Commission stated that "while
     NGPA Section 107 well category determinations have no
     price consequence, they are necessary to obtain the
     Section 29 tax credit." [Citations omitted.]
                             - 20 -

     We are persuaded that Congress intended to couple the

eligibility for the section 29 credit with the obtaining of well-

category determinations under NGPA section 503.    In particular,

the legislative history of the Decontrol Act indicates that the

repeal of FERC's determination review providing for incentive

pricing in NGPA section 503 was not intended to affect the

availability of the nonconventional fuels tax credit.   S. Rept.

101-39, supra at 9.12

     Equally significant, the aforementioned congressional action

illustrates an understanding that section 29 was linked with a

procedural determination under NGPA section 503.   Petitioner's

perspective is that the FERC determination process was left in

place to continue the process of defining tight formation gas.

Even if that was the basic reason for extension, the section 29

statutory language plainly requires a "determination" under NGPA

section 503.

     12
       See also Staff of Joint Comm. on Taxation, Technical
Explanation of the Tax Simplification Act of 1993, at 204 (J.
Comm. Print 1993). (The Tax Simplification Act of 1993 was not
enacted.) That report contains the statement that

     In order to ensure that qualifying gas production
     from such wells in fact will receive the credit, it is
     believed necessary to continue the well and formation
     determination process for periods after * * * [the
     Commission] discontinues its role in this process. [Id.
     at 205; emphasis added.]
                              - 21 -

      Petitioner also relies on Rev. Rul. 93-54, 1993-2 C.B. 3,13

for the proposition that a well-category determination is not

necessary to qualify for the tax credit.   In Rev. Rul. 93-54,

supra, the Commissioner held that if a well is drilled after

December 31, 1979, and prior to January 1, 1993, but is

"recompleted" after January 1, 1993, and if the "recompletion"

does not involve additional drilling to deepen or extend the

well, the production qualifies for the tax credit.14   Rev. Rul.

93-54, supra, however, does not concern the question of whether a

determination must be obtained under NGPA section 503 in order to

be entitled to the tax credit.   The ruling assumes prior

qualification, and under the circumstances described, holds that

further qualification is unnecessary.   It should also be noted

that petitioner's argument is also undermined by timing, because

the Commissioner issued this ruling after the repeal of section

29.   Petitioner references other weaker arguments (analogous and

tangential materials) in support of its position that section 29

should not be read as requiring an individual well-category

determination by FERC.   Petitioner's arguments individually or

      13
       It is noted that we treat the Commissioner's rulings as
having no more authority than that of the position of a party.
See Gordon v. Commissioner, 88 T.C. 630, 635 (1987); Estate of
Lang v. Commissioner, 64 T.C. 404, 407 (1975), affd. in part and
revd. in part 613 F.2d 770 (9th Cir. 1980).
      14
       Petitioner defines "recompletion" by means of the
example: "the well was later completed into a different,
shallower reservoir".
                             - 22 -

collectively are insufficient to overcome the use of the term

"determination" and the requirement of a specific well-category

determination under NGPA section 503.

     Accordingly, we hold that an individual well-category

determination must be obtained in order to qualify for the

section 29 tax credit attributable to tight formation gas.

     To reflect the foregoing,

                                      Decisions will be entered

                                 for respondent.