The Memphis case was corrected by the Commission itself but the language of the Commission indicates its desire to control end use if it had the authority. The Boone, Iowa, case, in which the use of gas for producing electricity was prohibited because coal was available for that purpose, is still pending on the docket on rehearing and has not yet been finally determined. The doctrine of end use control is in violation of the letter and spirit of our Constitution upon which our social and economic system is based. It is the right of every American citizen to sell his personal property on the market and the right of every citizen to purchase that property on his own volition. Now, there has been considerable talk that we had better control in many ways or we are going to be out of gas in a little while. The reserves of natural gas, known and potential, in the United States are enormous. The testimony of Dr. DeGolyer in docket G580, and the testimony of John Murrell before the House committee, show that, exclusive of fields of 20 billion cubic feet or less, we have estimated known reserves of about 151 trillion cubic feet. Dr. DeGolyer stated that taken all in all, our actual known reserves are on the order of 200 trillion cubic feet, and based on past experience he would hesitate to predict how far our potential reserves would extend. The development of our known reserve of natural gas is an interesting phenomena. The chronology is as follows: 1919, 15 trillion cubic feet, estimated by Shaw. 1926, 23 trillion cubic feet, estimated by source unknown. October 1, 1942, 85 trillion cubic feet, estimated by Ralph E. Davis. 1942, 113.8 trillion cubic feet, estimated by PAW. 1943, 110 trillion cubic feet, estimated by PAW. 1944, 90 trillion cubic feet, estimated by Ralph E. Davis. 1944, 100 to 300 trillion cubic feet, estimated by Lyon F. Terry. 1944, 110 trillion cubic feet, estimated by PAW. 1944, 130 trillion cubic feet, estimated by Alex M. Crowell. 1945, 133.5 trillion cubic feet, estimated by PAW. 1945, 135 trillion cubic feet, estimated by Alec M. Crowell. 1945, 140.85 trillion cubic feet, estimated by DeGolyer and MacNaughton. 1946, 144.29 trillion cubic feet, estimated by DeGolyer and MacNaughton. 1946, 147.78 trillion cubic feet, estimated by American Gas Association. 1947, 160.57 trillion cubic feet, estimated by American Gas Association. 1947, 151 trillion 260 billion cubic feet, estimated by DeGolyer and MacNaughton. Thus, the known reserves of gas have steadily increased, notwithstanding annual production approximating 4 trillion cubic feet. The annual increases in known reserves are approximately twice the rate of production. James Pursglove, Jr., vice president of the Pittsburgh Consolidated Coal Co., was listed as a witness before the House committee but has not testified. It is assumed that the subject of his paper related to the gasification of coal in the big plant planned by his company and Standard Oil Co. of New Jersey at Pittsburgh. An interview by him appeared in Platt's Oilgram News on April 19, 1947, in which he stated that this plant will be capable of producing 14,000 barrels daily of high octane gasoline, or high heat gas equal to the carrying capacity of Big and Little Inch pipe lines-400 million cubic feet per day. There was one witness who testified about gasification but Mr. Pursglove was not able to be there. It will be interesting to know then whether the coal interests will want end use of coal when that comes about. If coal can be gasified to that huge extent, in the first plant to put the gasification of coal into practical application, we may anticipate for the future that many coal areas will produce their own gas from coal. Dr. W. K. Lewis, professor of chemical engineering of Massachusetts Institute of Technology, an expert and consultant on coal gasification said: It is today technically feasible to manufacture methane from coal and, if desired, a gas with a heating value considerably higher than that of methane can be made. Even by present processes, the cost of manufacture of gas from coal need not be prohibitive and, with certain contemplated improvements now actually the subject of advanced research, the cost of synthetic gas might easily be brought below the delivered cost of natural gas in many areas of this country. I have given this subject some study myself, and I may say for the benefit of this subcommittee that I have watched these hearings from the time that docket G-580 was commenced, and for some time previous to that. I testified at Oklahoma City in the hearings there before the Federal Power Commission, by reason of the fact that numerous pipe lines from my own section of the country have been making a fight for years to try to bring some of the gas out, and I have tried to follow the hearings and the testimony given by the coal interests at those hearings to try to block the granting of these certificates of convenience and necessity. In my personal opinion, I do not think it unreasonable to look for considerable commercial development of these synthetic processes within, say, 10 years. Such a development would obviously mean that natural gas would lose some of its present markets. It would, in effect, be backed up into the producing areas. In view of the 50 years or more supply of natural gas now known, and the rapid rate of new discoveries, his backing up might in fact create a problem of surplus in the gas-producing regions. Adding to this the outlook for atomic power conceivably might mean that, far from concern over future shortage of gas, we will never actually use up all we have. Since, at present rates of consumption, we have coal supplies adequate for 3,000 years, and have large reserves of oil including 90 billion barrels of oil in the oil shales of the Western States, and coal and oil are readily convertible to gas, there is no likelihood that we will at any early date be without an adequate supply of fuel. Another provision of these bills deals with amended procedures in connection with obtaining certificates of convenience and necessity. The testimony before the House committee illustrates that unusual and unreasonable delays have ensued in the hearings on certificate cases. These delays have been costly to the industry and detrimental to the public interest in delaying deliveries of gas. While certificate cases have been pending, cost of facilities, especially pipe, has skyrocketed. Some hearings comprised as many as several thousand pages and consumed many months of the time of the Commission, its staff, and the industry. (See exhibit on the administration of the act offered at the hearing before the House committee in connection with the testimony of Witness Buddrus.) The amendment in the resolution is a reasonable one, providing that if no protest is filed against the certificate within 30 days, the Commission may issue a certificate without a hearing. It is not compelled to do so. When a protest is filed within a 30-day period or if, in the absence of a protest, the Commission fails to issue a certificate, the Commission shall set the matter for hearing on a day certain within 30 days following the expiration of the notice. This would appear to obviate the unnecessary delays and large expense that has occurred in certificate hearings in the past. The bill further provides that where an already existing certificate is in force, the company may maintain, extend, or enlarge its facilities, for the purpose of maintaining continuity of service or of supplying increased demands in its existing markets, without applying for new or additional certificates. As you now know, the least little extension requires a new application or new hearing, even to extend a facility in a community. The reasonableness of the last two suggestions should be the only argument needed in their favor. This provision is comparable to a similar authorization in the Motor Carrier Act. In this discussion I will refer to direct sales to factories near the pipe line as "nonjurisdictional" and to sales to distributing companies for resale as "jurisdictional." Serious complaints have been lodged against the acts of the Federal Power Commission in unfairly allocating the costs of operation against the nonjurisdictional direct sales and in favor of the jurisdictional sales for resale. In the recent Cities Service case, all of the Federal income taxes were charged against the nonjurisdictional sales. Many other instances of unfairness could be cited. The amendment in the resolution provides, in substance, that before the rates are fixed the Commission segregate by proper allocation, the properties, revenues, and expenses of the company's operations and activities subject to the Commission's jurisdiction, from the properties, revenues, and expenses not so subject, and shall not assign to one class the properties, revenues, and expenses belonging to the other class. In conclusion, the amendments in the bill are designed to confine the jurisdiction of the Federal Power Commission to that authority which I believe, from a reading of the history of the act in the Congressional Record, Congress intended the Commission to exercise-that is, the transportation and sale in interstate commerce of gas for resale for public consumption, beginning at the inlet reception and ending at the outlet after transportation. The bill specifically excludes any Federal Power Commission jurisdiction over local functions at either end of the line, confining its jurisdiction to the trunk transmission line. Local distribution is a local function, properly and successfully controlled by the States. Only confusion can result from Federal interference therewith. Production and gathering and conservation are local functions, also properly controllable by the States. We cannot afford to have Federal jurisdiction absorb the rights and activities of the States. The amendments adhere to that principle, and go into detail to make certain that, when this matter is concluded, no member of the Federal Power Commission and no judge of any court can misconstrue the obvious intent and language of the Congress in this bill. 64758-47- -3 With respect to the subject of production and gathering, which is inseparably related to "field price" under this bill, section 1 (b) of the Natural Gas Act expressly excludes production and gathering of natural gas from Federal Power Commission jurisdiction. No distinction was made between parties owning gas. Congress did not attempt to exclude one owner from such jurisdiction and leave another owner of gas under that jurisdiction. The language of the act is clear but shall not apply * * to the production or gathering of natural gas. That is in the original act itself. At the outset of its administration of the Natural Gas Act, the Federal Power Commission correctly interpreted and administered the act as it was written. In the Columbian case-with one dissenting opinion-the Commission held that the act meant what it said that production and gathering is excluded from its jurisdiction. Later, in the Peoples case, it reversed this position and held that as to the production and gathering facilities of an interstate pipe line or its subsidiary, the doctrine of original cost depreciated should apply to the whole of the company's properties and thus by indirection the Commission took jurisdiction of the production and gathering properties of the pipe-line companies and affiliates. Although the industry has been fearful of the assertion of Federal Power Commission jurisdiction over independent producers, when the Interstate case arose, and the Commission had an opportunity to disclaim and disavow any intention to assert jurisdiction over the production and gathering of such producers of gas or oil, and refused to make such a disavowal in open court and in its briefs, the industry then became convinced that the Commission was on its way to claim such jurisdiction. Several important cases were litigated in the courts, with final decisions in the Supreme Court. The Supreme Court, while sustaining the Federal Power Commission in its assumption of jurisdiction, always by a sharply divided opinion, never approved the Commission's economic policy. Certain members of the Court, however, took occasion to criticize the rate-making policy of the Federal Power Commission, in which it asserted jurisdiction over production and gathering by pipe lines and affiliates. The courts have pointed out that they are required to sustain, not any one specific rate-making policy of the Federal Power Commission, but any policy which does not amount to confiscation, and further that if the procedure for determining rates is incorrect, then it is the duty of the Congress to correct that policy. I have discussed these decisions in detail in my presentation to the House committee. There can be no reasonable contention that the confining of the Commission to its appropriate field of regulation would result in any unreasonable price for those purchasing gas for use at the burner tip. If the interstate pipe-line company should receive credit for the market price for its gas in the field and is allowed the prices paid by it to other producers, the effect on the consumer of gas will be negligible. In the first place, much of the cost of increase, if any, will be absorbed by the pipe-line company and the distributors, according to the testimony. Some of it will be absorbed in the direct sales of the interstate carrier, over which the Federal Power Commission has no jurisdiction. Not a distributor has appeared to complain against this amendment on the ground that the increased price will adversely affect their consumers. J. French Robinson, representing a distribution company, testified: I feel sure that a few cents increase in the cost of the gas at the well in Texas or elsewhere will not be reflected to the ultimate cost. It can be more than offset by additional sales of gas- and called attention to the fact that in West Virginia and Ohio gas is bringing 15 cents to 25 cents per thousand cubic feet at the well. Speaking of the Chicago area, Witness Wagner testified: The field price is a negligible portion of the total cost to the ultimate household consumer. State officials, State regulatory bodies, distribution companies, municipally owned plants, mayors, and consumers from producing and consuming areas have presented evidence in support of the bill. This legislation is supported by the entire oil and gas industry without a dissent. Appended to this statement are resolutions of the Independent Natural Gas Association of America, Independent Petroleum Association of America, and the Mid-Continent Oil and Gas Association, and the American Petroleum Institute. Found in the record of the hearings before the House committee will be many resolutions from chambers of commerce, manufacturers, associations, State resources commissions, and organizations of like character, to which I respectfully refer you, evidencing the need of this legislation. I am attaching, and would like to have included as part of my statement, the appendix which sets out the letters and telegrams and the names of persons who appeared before the House committee either by letter or otherwise in favor of this legislation. Senator MOORE. They will be admitted. (The appendix is as follows:) APPENDIX This proposed legislation received the wholehearted support of the oil and gas industry. While the subject of these amendments has to do with natural gas, the entire matter is of such vital concern to the producers of oil, inasmuch as the production of gas is so inseparably connected with the production of oil. As evidence of the united support of the oil and gas industry, it is important to note that none of the amendments were opposed by any segment of the industry or any witness from the industry. Resolutions of the Independent Natural Gas Association of America, the Independent Petroleum Association of America, the American Petroleum Institute, and the Mid-Continent Oil and Gas Association, adopted prior to the introduction of S. 734, endorse the principles and objects of this bill Attached hereto is: 1. List of witnesses who testified before the House Interstate and Foreign Commerce Committee in favor of H. R. 2185. 2. List of industrial users of gas from all parts of the country who presented. statements favoring H. R. 2185. 3. List of city officials, State regulatory officials, chambers of commerce, etc., who submitted letters to the House Interstate and Foreign Commerce Committee supporting H. R. 2185. WITNESSES, H. R. 2185 (PRESENTED STATEMENTS ORALLY) Congressman Ross Rizley, House of Representatives, Washington, D. C. Maston Nixon, vice president, Southern Minerals Corp., Corpus Christi, Tex. |