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Issue Summaries

 Depreciation 

Background

The Energy Policy Act of 2005 reduced the depreciation period for natural gas distribution pipelines from 20 to 15 years to encourage the expansion and revitalization of the natural gas utility infrastructure.

In order to satisfy the projected demand, the natural gas industry must substantially expand its existing infrastructure. Shortening the tax life of natural gas utility distribution pipelines from 20 years to 15 years will encourage the construction of the pipeline infrastructure.

More rapid depreciation decreases near-term tax liability and provides enhanced cash flows during the early years. This helps construction proposals that expand or revitalize the system achieve minimum internal rates of return (hurdle rates) required by most state regulators.

Natural gas transmission pipelines are depreciated over 15 years. This Energy Policy Act brought natural gas distribution lines into parity with transmission lines.

AGA Viewpoint

Due to revenue constraints, this provision had to have a sunset date of December 31, 2010. AGA supports making this 15-year depreciation period permanent.

AGA Contact: Charles Fritts, (202) 824-7220, cfritts@aga.org

 
 

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