SECTION 4. DEFINITIONS

The following definitions apply solely for purposes of this revenue procedure (including its appendices):

.01 Natural gas transmission and dis- tribution property safe harbor method of accounting . “Natural gas transmission and distribution property safe harbor method of accounting” or “NGSH Method” means the safe harbor method for linear property, the safe harbor method for non-linear property, and the other applicable rules set out in this revenue procedure, collectively, regardless of whether the taxpayer chooses to use both methods, or uses only the safe harbor method for linear property.

.02 Safe harbor method for linear property . “Safe harbor method for linear property” means the method of accounting

described in sections 5.02, 5.03, and 5.07 of this revenue procedure in conjunction with the other applicable rules set forth in this revenue procedure.

.03 Safe harbor method for non-lin- ear property . “Safe harbor method for non-linear property” means the method of accounting described in section 5.04 of this revenue procedure in conjunction with the other applicable rules set forth in this revenue procedure.

.04 Natural gas transmission prop- erty . “Natural gas transmission property” means real and personal property that is used to transport, control, and store natural gas at any point between (1) a gas processing plant or custody transfer point and (2) a city gate station or other delivery point, generally connecting to a natural gas distribution system. Gas production wells, gathering lines, and processing plants are not included in this definition.

.05 Natural gas distribution property . “Natural gas distribution property” means real and personal property that is used to transport, control, and store natural gas at any point between (1) a city gate station or other custody transfer point generally connecting to a transmission system, and (2) the customer gas meter or other delivery point to the customer. For this purpose, “natural gas distribution property” includes both (1) the city gate station or other custody transfer point and (2) the customer gas meter or other delivery point to the customer.

.06 Linear property . “Linear property” means all natural gas transmission and distribution property except non-linear property. Examples of linear property include pipes, valves, tunnels, casing, and fittings.

.07 Non-linear property . “Non-linear property” means all natural gas transmission and distribution property that is compressor station property, gas storage facility property, measuring and regulating station property, or meters or regulators, wherever located. Examples of non-linear property include compressors, tanks, liquefaction equipment, and structures.

.08 Work order . “Work order” means a written document that identifies and defines the scope of a specific project. A work order may include repairs, maintenance, replacements, and/or improvements

to natural gas transmission or distribution property.

.09 Blanket work order . “Blanket work order” means a written document that authorizes a project or projects over a specific period of time, generally not exceeding one year. A blanket work order may include repairs, maintenance, replacements, and/or improvements to natural gas transmission or distribution property.

.10 Replacement . “Replacement” means the installation of property so that existing property can be removed from service, whether or not the existing property is physically removed. Generally, a replacement made pursuant to a work order is a single replacement for purposes of this revenue procedure, regardless of whether (1) the work is performed at the same or different times, and (2) in the case of linear property, the property that is replaced is contiguous or noncontiguous. Multiple replacements made under separate work orders or made pursuant to a blanket work order may be aggregated for purposes of applying the NGSH Method. See section 5.06 of this revenue procedure for the rules for aggregating costs related to linear and non-linear transmission and distribution property.

.11 City gate station . “City gate station” means a measuring and regulating station at which a distribution system receives natural gas, generally from a transmission system.

.12 Hydraulic subsystem . “Hydraulic subsystem” means all linear transmission property used to direct the flow of natural gas that is maintained within the same operating pressure range in the shortest section between any two of the following points:

(1) a gas processing plant; (2) a compressor station at a storage facility;

(3) a compressor station not described in section 4.12(2) of this revenue procedure (including between two compressor stations described in this section 4.12(3));

(4) a regulator (including between two regulators);

(5) the point where the taxpayer’s distribution system begins; or

(6) a custody transfer point where the gas is delivered to or from another party. For example, a regulator located between

Bulletin No. 2023–18 809 May 1, 2023

another regulator and a compressor station divides that section of linear transmission property into two separate hydraulic subsystems, even if both subsystems are maintained within the same operating pressure range.

.13 Compressor station property . “Compressor station property” means property that supplies the energy to move natural gas at increased pressure at storage facilities or in transmission lines, including but not limited to compressors, instrumentation and controls, meters, regulators, measuring equipment, odorizing equipment, gas detection equipment, electric supply equipment, equipment to maintain pipeline quality gas, mounting pads, buildings, and fencing or walls.

.14 Gas storage facility property . “Gas storage facility property” means property at an above ground or underground gas storage facility, including a compressed or liquefied natural gas storage facility, and an underground storage facility in a salt formation or a depleted well or well field. Gas storage facility property does not include property at a liquefied natural gas marine terminal capable of shipping or receiving liquefied natural gas for import or export.

.15 Measuring and regulating sta- tion property . “Measuring and regulating station property” means property at a location that measures or regulates natural gas, including but not limited to meters, regulators, and gauges.

.16 Measuring equipment . “Measuring equipment” means equipment used to measure the pressure or temperature of the gas. As used in this revenue procedure, the term does not include a meter that measures gas flow, as defined in section 4.23 of this revenue procedure.

.17 Instrumentation and controls . “Instrumentation and controls” means the analog and digital devices that measure, monitor, or control the equipment at storage facilities, compressor stations, and measuring and regulating stations (including city gate stations). Instrumentation and controls include SCADA (supervisory control and data acquisition) equipment and measuring and regulating equipment. As used in this revenue procedure, however, instrumentation and controls do not include assets that are treated as separate units of property (for example, meters or regulators).

.18 Distribution main . “Distribution main” means a distribution line that serves as a common source of supply for more than one distribution service line. “Distribution mains” means more than one section of distribution main in a natural gas distribution system.

.19 Distribution service line . “Distribution service line” means a line that carries natural gas from the distribution main to the customer gas meter.

.20 Distribution service line costs . “Distribution service line costs” means direct and indirect costs paid or incurred to repair, maintain, replace, or improve distribution service lines.

.21 Lateral line . “Lateral line” means a line in a natural gas distribution or transmission system that branches away from the central and primary part of the system.

.22 Compressor . “Compressor” means a mechanical device for increasing the pressure of gas.

.23 Meter . “Meter” means an instrument for measuring and indicating or recording the flow of gas that has passed through it.

.24 Regulator . “Regulator” means a device that reduces the pressure in a gas line and maintains the pressure within a constant band.

.25 Well . “Well” means a cased bore hole used for gas input or output for an underground storage reservoir, including a storage well.

.26 Equipment to maintain pipeline quality gas . “Equipment to maintain pipeline quality gas,” also known as “purification equipment,” means equipment used to ensure that the gas moving through a line is maintained within certain parameter. This term includes, but is not limited to, the equipment used to remove liquids and impurities from the gas, and the equipment used to heat or cool the gas to make it suitable for movement through the line.

.27 Smart pipeline inspection gauges . “Smart pipeline inspection gauges,” also known as “smart pigs,” are devices that are equipped with sensors that gauge the thickness of pipes they are traveling through and detect cracks, fissures, erosion and other problems that may affect the integrity of the pipeline. Smart pipeline inspection gauges are not included within the definition of natural gas transmission

or distribution property for purposes of this revenue procedure.

.28 Cleaning pipeline inspection gauges . “Cleaning pipeline inspection gauges,” also known as “cleaning pigs,” are devices that have brushes, scrapers, or similar tools and are used for cleaning pipelines by removing sedimentation and build-up that can impede the flow of gas. Cleaning pipeline inspection gauges are not included within the definition of natural gas transmission or distribution property for purposes of this revenue procedure.

.29 Odorizing equipment . “Odorizing equipment” means equipment that injects an odorant or other additive into the gas so that leaks can be detected by the sense of smell.

.30 Gas detection equipment . “Gas detection equipment” means equipment that indicates the existence of natural gas in a specific area.

.31 Electric supply equipment . “Electric supply equipment” means equipment that supplies electricity to equipment at a compressor station or gas storage facility, including but not limited to generators, batteries and chargers, and transformers.

.32 Liquefaction equipment . “Liquefaction equipment” means equipment that is used in connection with the liquefaction of natural gas, including but not limited to cold boxes, heat exchangers, condensers, and vaporizing units.

.33 Cathodic protection . “Cathodic protection” means a technique to prevent the corrosion of a metal surface by making that surface the cathode of an electrochemical cell.