The proposed amendment to section 7 (h) of the Natural Gas Act would extend this power of eminent domain to cover the acquisition of a less than full title interest in land and the acquisition of land for the additional purpose of storage of gas. The extension of the power of eminent domain in these respects would appear to aid natural gas companies in meeting greater requirements during their peak load periods. The expansion of the productive capacity of natural gas companies would appear to be in the best interest of the public.

In view of the foregoing the Department of Defense favors the enactment of S. 525.

The Department of Defense is unable to estimate the effect of S. 525 upon the expenditure of public funds.

The Bureau of the Budget has advised that there is no objection to the submission of this report for the consideration of the Congress. Sincerely yours,

R. A. BUDDEKE,
For the Assistant Secretary.

GENERAL SERVICES ADMINISTRATION,
Washington, D. C., February 3, 1954.

Hon. JOHN W. BRICKER,

Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C.

DEAR SENATOR BRICKER: Receipt is acknowledged of your letter of January 19, 1953, enclosing a copy of S. 525, to amend section 7 (h) of the Natural Gas Act, and requesting the views of this Administration thereon.

This legislative proposal would amend the present law by extending the eminent-domain provisions for natural-gas companies which are holders of certificates of public convenience and necessity under said act, to include interest in land as well as land itself, and would also extend this authority to storage facilities in addition to the facilities now provided for.

Since enactment of this proposed legislation would not affect the operations of the General Services Administration, it is considered unnecessary to comment further thereon.

The Bureau of the Budget has advised that there is no objection to the submission of this report to your committee.

Sincerely yours,

This bill would amend section 7 Stat. 459, 15 U. S. C. 717 f. (h)). reads as follows:

EDMUND F. MANSURE, Administrator.

(h) of the Natural Gas Act (61 Section 7 (h), above referred to,

When any holder of a certificate of public convenience and necessity cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way to construct, operate, and maintain a pipeline or pipelines for the transportation of natural gas, and the necessary land or other property, in addition to right-of-way, for the location of compressor stations, pressure apparatus, or other stations or equipment necessary to the proper operation of such pipeline or pipelines, it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts. The practice and procedure in any action or proceeding for that purpose in the district court of the United States shall conform as nearly as may be with the practice and procedure in similar action or proceeding in the courts of the State where the property is situated: Provided, That the United States district courts shall only have jurisdiction of cases where the amount claimed by the owner of the property to be condemned exceeds $3,000.

S. 525 would authorize the holder of a certificate of public convenience and necessity to acquire "the necessary land or interest in land, or other property." So far, only the words "or interest in land" are additions to present law. Furthermore, such a holder of a certificate

would be given the authority to acquire the necessary right-of-way for the pipeline and other property necessary

for the storage of gas, or, for the location of compressor stations, pressure apparatus, or other stations or equipment necessary to the proper operations of such pipeline . . .

The only amendment to the present law in the last sentence would be the words "for the storage of gas."

It may well be that this bill, if enacted into law, would add no substance to the present law. In commenting upon an identical bill, S. 1000, in the last Congress, which was referred to this morning, the Federal Power Commission stated:

Although it can be argued that the act now confers the authority provided in S. 1000, the Commission nevertheless favors enactment of the bill so as to make the act specific on this point.

By considering S. 525, this subcommittee does not indicate that the authority contained in this bill does not already exist in the law, but we are simply holding hearings to determine whether the bill should be enacted into law to make the act specific upon this point, as we are urged to do by the Federal agencies and by the natural gas industry.

Because of geological factors, it is highly important that natural gas be stored. Due to the relationship of geological conditions among themselves and with economic factors, the number and location of suitable storage areas are quite limited. It is as logical for Congress to empower a natural gas company with the right to condemn for underground storage as to condemn for the taking of surface rights for pipe lines, as is now provided by law.

In laying a pipeline it is often practicable to find alternate routes for the line and thus avoid the use of condemnation proceedings. However, in storage fields, there is usually no alternate field available for use in the event the owner of the surface rights in a portion of the field denies the utility, its consumers and its lessors the use of the underground formations.

Since the close of World War II, long-distance pipelines have for the first time brought the advantages of natural gas to homes and industries of great communities. Long distance pipelines of sufficient capacity to meet heavy demand periods are out of the question because of the tremendous cost. The only solution is storage near the market during light demand seasons. For these reasons, importers and shippers of gas from the Southwest to the Appalachian area have turned to underground storage. Nearness of depleted gas fields to great domestic and industrial markets in the Appalachian area makes this the one practical and strategic way to meet the sharp variation in demand.

On this point, the Federal Power Commission wrote to the chairman of this committee on May 15, 1952:

The vital advantage arising from the development of underground storage, in close proximity to large consuming markets, arises from the fact that natural gas not required for essential domestic, commercial, and industrial uses during off-peak periods may be placed in underground storage for use during critical winter demands. When underground storage of this character is not available or is not developed, the pipeline company may choose one of two courses of operations: (1) excess volumes of natural gas not required to meet essential

demands may be sold for boiler fuel or other inferior uses, or (2) available capacity in the pipeline may be permitted to remain idle. It has not been the experience of the Federal Power Commission that the second course is followed, but rather the first, since the pipeline company can readily realize a price for natural gas substantially above cost, even though the gas is "dumped" during the off-peak periods for such inferior uses as boiler fuel in electric generating or industrial plants. The effect of such use is accelerated depletion of naturalgas reserves, supplanting in such plants coal or oil, which are the normal fuels. In any event, the volume of gas produced and transported from the southwestern producing States would not be conserved by restricting volumes of gas which may be put into underground storage. The same volumes would be produced and transported regardless. The advantage of underground storage arises from the fact that more gas is made available near consuming markets during critical periods for essential domestic, commercial, and industrial use. To put it another way, the development of underground storage may well make an additional volume of gas available in such consuming markets equal to the volume which might be provided by an additional pipeline.

From the experience of the Federal Power Commission, it would seem that storage of natural gas constitutes an important conservation measure. The Interior Department adds that the storage of natural gas is "particularly important as a measure of security in the defense program." This is corroborated by the support of this measure by the Department of Defense.

Therefore, it would seem that the storage of natural gas is a necessity today to supply the domestic consumer of natural gas during those periods of the year when his demand and his need are the greatest, i. e., the coldest days in winter.

Furthermore, a utility or other company producing natural gas is greatly benefited by the use of underground storage in that a stable market is provided for gas produced during the summer months when distribution demand is light.

In 1942, Congress amended section 7 of the Natural Gas Act to require certificates of public convenience and necessity from the Federal Power Commission for the acquisition of all interstate pipeline facilities. In 1947, Congress, recognizing that natural gas companies should be fully empowered to construct the facilities which its Commission had authorized, amended the act to grant eminent domain to natural gas companies for the acquisition of rights in land for the construction of pipelines and compressor stations.

It was recognized at that time that reliance could not be placed upon the eminent domain laws of the States, because many States cannot under their constitutions and laws grant eminent domain rights except for State purposes as distinguished from purposes of benefiting consumers of other States. For instance, with respect to the storage of natural gas, storage areas developed in a particular State are often for the use and benefit of consumers located in other States. The common underground storage reservoir is a depleted oil or gas field. Those which are available and best suited are utilized even though in an adjoining State. As pointed out by the Federal Power Commission on May 15, 1952:

The development of underground storage for natural gas in a majority of cases is not so closely associated with local operations as to justify control by the States where the storage areas may be located. The utilization of such storage areas on a national scale rather than on a State basis seems justified in the public interest.

However, this bill would not give a public utility, which would exercise the power of eminent domain under it, any immunity from

applicable State laws and regulations concerning the safety, health, and protection of property of the citizens of that State. The public utility would still be subject to all applicable State laws and regulations respecting the use of its property. The Natural Gas Act has been so interpreted by the Federal Power Commission and this bill would not change anything in this respect.

That about sums up the main problem before this subcommittee for solution.

I shall first call the agency witnesses, then the proponents of S. 525, and, finally, those who oppose this measure or who which to propose amendments to the bill.

I shall now call as a witness Mr. Jerome K. Kuykendall, the Chairman of the Federal Power Commission.

STATEMENT OF JEROME K. KUYKENDALL, CHAIRMAN, FEDERAL POWER COMMISSION

Mr. KUYKENDALL. We are prepared with the answers to some questions which were propounded to us.

Senator PURTELL. Have you a general statement you wish to make before proceeding to answer questions?

Mr. KUYKENDALL. No, I have not.

Senator PURTELL. The Federal Power Commission sent over a report which wil be included in the record at this point. (The report referred to is as follows:)

REPORT OF THE FEDERAL POWER COMMISSION ON S. 525, 83D CONGRESS, 1ST SESSION S. 525 is a bill to amend section 7 (h) of the Natural Gas Act (61 Stat. 459, 15 U. S. C. 717f (h)), which in its present form provides:

"(h) When any holder of a certificate of public convenience and necessity cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way to construct, operate, and maintain a pipeline or pipelines for the transportation of natural gas, and the necessary land or other property, in addition to right-of-way, for the location of compressor stations, pressure apparatus, or other stations or equipment necessary to the proper operation of such pipeline or pipelines, it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts. The practice and procedure in any action or proceeding for that purpose in the district court of the United States shall conform as nearly as may be with the practice and procedure in similar action or proceeding in the courts of the State where the property is situated: Provided, That the United States district courts shall only have jurisdiction of cases when the amount claimed by the owner of the property to be condemned exceeds $3,000."

S. 525 would amend the foregoing section in two particulars:

(1) Any holder of a certificate of public convenience and necessity would have the authority to acquire "the necessary land or interest in land, or other property." The italic phrase would be added by S. 525.

(2) Any holder of a certificate of public convenience and necessity would have the authority to acquire the necessary right-of-way for the pipeline and other property necessary "for the storage of gas, or for the location of compressor stations, pressure apparatus, or other stations or equipment necessary to the proper operations of such pipeline ***.". The italicized provision would be added by the proposed amendment.

The first change, the addition to the property subject to acquisition of the necessary "interest in land," would give the holder of a certificate the explicit power under section 7 (h) to acquire interest in land through the exercise of the right of eminent domain. This would presumably include the right to acquire subsurface interest in land in addition to, or apart from, surface rights.

The second change, the addition of "the storage of gas" to the purposes upon which acquisition would be based, would provide that "interest in land" or other property could be acquired by the holder of a certificate.

The reasons underlying enactment of section 7 (h) are set forth in Senate Report 429, 80th Congress, 1st session, accompanying S. 1028, which later became section 7 (h) of the Natural Gas Act. As there pointed out, under the law of several States, the right of eminent domain is generally limited to use for the public of the particular State conferring the right. Thus, the right of eminent domain as to the property for use in interstate commerce-not a use solely for the public of a particular State-would not be available to natural gas companies in some States. This reason is likewise applicable to the changes proposed by S. 525.

However, the Commission recommends, consistent with the apparent purpose of the bill, three modifications in S. 525. First, S. 525 in the form proposed would provide the right to acquire property "for the storage of gas", not limiting this purpose to underground storage. It has been the Commission's general experience that the operations of natural gas companies do not entail the use of surface storage, but that underground storage is becoming increasingly important to insure a more efficient use of pipeline systems as well as of natural gas itself. Second, it would be in conformity with the apparent purpose and with other provisions of the Natural Gas Act to limit the amendment to the storage of natural gas.

The third recommended modification of S. 525 requires more explanation. Section 7 (h) as it is now constituted grants the right of eminent domain to holders of certificates of public convenience and necessity which have been granted under section 7 (c). After the Commission has issued such a certificate, the holder may under section 7 (h) exercise the right of eminent domain to acquire "necessary right-of-way *** or other property necessary to the proper operation" of the pipeline.

With the addition of "underground storage" to the State purposes for which the foregoing right of eminent domain may be exercised, the Commission believes it desirable that the proposed legislation make it expressly clear that such right be exercised only with respect to matters covered by a certificate of public convenience and necessity issued by the Commission pursuant to section 7 of the act. In other words, no possible basis should be left for a contention that the right of eminent domain may be exercised in acquiring property for the stated purposes, such as underground storage, when not covered by a certificate of public convenience and necessity issued by the Commission, even though it is "necessary to the proper operation" of the pipeline as now provided in section 7 (h).

In summary, the Commission recommends that S. 525 be amended to read as follows, and that it be enacted as so amended:

"Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the first sentence of subsection (h) of section 7 of the Natural Gas Act, as amended (15 U. S. C. 717 f (h)), is amended by striking out "and the necessary land or other property" and inserting in lieu thereof "and the necessary land or interest in land, or other property", and by striking out "for the location of compressor stations, pressure apparatus, or other stations or equipment" and inserting in lieu thereof "for the underground storage of natural gas for the location of compressor stations, pressure apparatus or other stations or equipment which is covered by a certificate issued by the Commission and which is". [Excepting the preamble, the underscored portions are those suggested by the Commission.] Respectfully submitted.

FEDERAL POWER COMMISSION,
By JEROME K. KUYKENDALL,

Chairman.

Senator PURTELL. We did ask that you answer some questions which we thought would throw light on the bill itself. We had prepared those in written form. Do you wish to answer them one at a time? Mr. KUYKENDALL. All right, Mr. Chairman.

Senator PURTELL. Does the Commission still feel, as it did in the last Congress, that the Natural Gas Act now confers the authority provided in S. 525?