ards of fire and of explosions caused by natural gas migrating or leaking into mine workings from a reservoir. It may well be that State law is adequate to cover that. I do not profess to be familiar with all the laws of all the States in which underground storage might be affected. So I do not feel that I am in a position to state as a matter of law that the States have adequate authority to control such a situation. It is always possible, of course, that when the Federal Government moves into a field, it may preempt it. In this particular case I am not at all sure that the States would be in a position to regulate or control the setting up of underground storage through the use of eminent domain. It may be that they can, but I am not at all sure. Senator PURTELL. Would not the court now refuse to allow the storage of gas if creditable testimony were presented to the effect that such storage were likely to result in hazard to men working in any active underground mine? Mr. WELSH. I assume that applies to condemnation as proposed in the bill under consideration here, without the amendment suggested by the Department. My knowledge and understanding of condemnation actions is that there are but two questions before the court. The first is: Does the moving party, the condemnor, have authority to condemn the particular property for the particular purpose? And second, having answered the first in the affirmative, what is the value of the property taken? A party injured otherwise than by the taking of property would have to go to court in a different action to secure redress. I do not think the existing law would take care of that situation. Senator PURTELL. Under the language of your amendment, how far do you think the court must go to ascertain that such storage is not likely to be hazardous! Mr WELSH. I do not believe that the proposed proviso imposes any duty on the court to make a special investigation. In this connection I think we would have to answer your third and fourth questions together, Mr. Chairman. Senator PURTELL. All right, does the court have to conduct an inquiry on its own! Mr. WELSH. I have answered that as a prerequisite to this. Mr. WELSH. The language merely requires that the court make a finding and in so doing the court would request the condemnor to present evidence, to show at least prima facie that there is no leakage in the area of the proposed storage reservoir, Senator PETEIL. Does the condemnor have to present evidence that it will not be hazardous! Mr. WELSH. That question depends again on what is the character of the area in the proposed storage reservoir. I think that the condemnor would have to present evidence as to the absence of possible hazards to persons working underground; if there were no active underground workings in the area, this fact would be sufficient. If there were active underground workings in the area, I think the amount of the proof and the character of it would vary with the cremstances. If there was only one small mine operating in one Eide corner of the region, and there is a question of whether or not it was included in the reservoir, actually I think that would be all that would have to be presented. But if the whole area were overlaid with mines, that would be something different. Senator PURTELL. Do you feel that the amendment would afford sufficient protection for men working in an underground active mine? Mr. WELSH. It should, because we assume that persons interested, whether they be coal-mining operators or metal-mine operators, would come in and oppose the condemnation. They would probably be one of the holdouts. I think it would afford the court an opportunity, and give that protection. Senator PURTELL. Have you any questions to ask, Senator Schoppel? Senator SCHOPPEL. No questions. Senator PURTELL. Senator Dirksen, do you have any questions? Senator DIRKSEN. No questions. Senator PURTELL. Senator Hunt? Senator HUNT. No questions. Senator PURTELL. Thank you very much, Mr. Welsh. At this point we will hear from Mr. Clayton E. Holmes, vice president of the Natural Gas Pipeline Co. of America. I believe they are located in Chicago. Mr. Holmes, please. STATEMENT OF CLAYTON E. HOLMES, VICE PRESIDENT, NATURAL GAS PIPELINE CO. OF AMERICA Mr. HOLMES. I have a statement which was originally prepared by Mr. J. J. Hedrick, president of the Natural Gas Pipeline Co. of America. Senator PURTELL. How do you wish to present your testimony? Mr. HOLMES. I wish the statement to appear as my testimony. Senator PURTELL. Do you wish to remark about it? Mr. HOLMES. I do not believe there is anything that needs to be stated in addition to that. (The statement referred to is as follows:) NATURAL GAS PIPELINE COMPANY OF AMERICA, In re S. 525, enlargement of section 7 (h) of the Natural Gas Act to permit condemnation for facilities for gas storage. Hon. WILLIAM A. PURTELL, Chairman, Subcommittee of Committee on Interstate and Foreign Commerce, United States Senate, Washington, D. C. MY DEAR SENATOR: We have just been informed that your subcommittee will on March 3, 1954, conduct hearings with reference to the above-proposed legislation. This bill, as introduced by Senators Douglas and Dirksen, is identical to S. 1000, introduced by Senators Douglas and Dirksen in the 1st session of the 82d Congress on March 1, 1951. The bill has been deemed by some to be too broad and insufficient protection to some of the interests involved. Consequently, a serious endeavor was made to prepare an amendment which would be as noncontroversial as possible and yet accomplish the necessary result of granting to natural gas companies the right of eminent domain for the acquisition of underground storage rights for natural gas. The proposed amendment to S. 525, it is believed, is sufficient to accomplish the purpose. The proposed amendment would grant the power of eminent domain to those natural gas companies holding a certificate of public convenience and necessity under the Natural Gas Act for the storage of gas, the same as is already granted in subsection 7 for the acquisition of the necessary right-of-way on which to construct, operate and maintain a pipeline for the transportation of natural gas. There have been added provisos, protective or other interests, allowing the court to decree certain conditions and restrictions to reasonably and fully protect the rights of owners lying with the boundaries of the proposed storage area, or of owners of minerals thereunder to explore for and produce oil and/or gas, and to conduct their operations as well as the protection of the public waters and geological stratum. The amendment further provides that the right shall not be exercised to acquire an interest in a stratum containing oil or gas in commercial quantities producible through primary production methods either with or without pressure maintenance, or secondary recovery methods of any type, or an interest in a geological stratum owned by another natural-gas company or a local distributor of natural gas. We have been informed that other interests, such as those mining coal, desire further and additional protection, but we are not informed as to their desires nor what protection is needed. It is our understanding that possibly amendments to that effect may be suggested. It has also come to our attention that, while the right of eminent domain for gas storage purposes may be necessary, some believe the granting of such right should be a State function rather than a Federal function, and it is to this question that I wish to address myself to you and your subcommittee. My own experience in the industry over a period of more than 20 years has convinced me that state legislation is not adequate to solve the problem. Prior to the enactment in 1947 of section 7 (h) of the Natural Gas Act, all natural gas companies were subject to the vagaries of State condemnation laws where they existed, and were subject to negotiation with the landowner where they did not exist. At the time the initial transportation system of our company was constructed, no eminent domain laws were available to it on its route through Nebraska, Iowa, and Illinois. Although it was constructed during a period of depression, improvident prices were exacted in certain instances; and the line contains deviations in its course because landowners on the direct route arbitrarily refused to grant an easement at any price. In 1947 the Congress, conscious of the inconsistency between the declaration of the Federal Power Commission created by Congress that a given project was necessary in the public interest, and the fact that the pipeline company had no Federal power to satisfy such necessity, enacted section 7 (h) of the Act which granted eminent domain for right-of-way and compressor station sites. This enactment made consistent the Federal declaration of public need and the authority in the pipeline company to implement it. At the time of this amendment, the impetus for the storage of natural gas had not attained its present momentum, and, unfortunately, the language of section 7 (h) failed to provide for this developing incident of pipeline operation, as it consistently should have. As long as the authority to authorize and regulate pipelines is vested in and exercised by a Federal commission created by Congress, we think it inappropriate to leave to the State legislatures responsibility for the implementation of the national policy. As was stated in Senator Douglas' statement of the purpose of Senate bill No. 1000, introduced during the 82d Congress: "It is inevitable concomitant of Federal regulation of the industry that a Federal right to condemn for storage purposes be granted to all projects nationally authorized." Because of the omission in the Natural Gas Act of the right to condemn for storage purposes, a few States have been stimulated to pass statutes authorizing such condemnation. Presently, statutes exist at least in the States of Michigan, Kentucky, West Virginia, Kansas, and Illinois. These statutes are in varying form, contain a variety of restrictions, and are usually designed to satisfy a local situation. For example: the Michigan statute is restricted to a named geological underground formation and requires consent of 90 percent of the owners before condemnation may be had against the rest. The Kentucky statute covers only recognized gas storage fields. Such State statutes are intended to meet local needs. Indeed there is authority in the law books to the effect that the State may not authorize condemnation except where pointed to the public benefit of citizens of that State. In Illinois the local condemnation act allows condemnation for gas storage only where gas storage is intended in whole or in part for ultimate distribution in the State of Illinois, and where the public convenience and necessity of a substantial portion of the gas-consuming public in the State will be served by the acquisition of the storage facilities. While the passage of local acts are helpful in the absence of congressional action on the subject, it is clear to the industry that the problem cannot be solved on a local scale, or adequately solved by means other than a grant of eminent domain under Federal law, such as the present grant under Federal law of a right to condemn for rights-of-way and compressor stations. As the subject matter is regulated nationally, it is inappropriate to shift the responsibility to the States to pass adequate laws permitting condemnation for gas storage. The public, of which the industry is merely an agency charged with the duty of satisfying the public need for conservation of natural gas for preferred uses, should not be required to await the possibility of State legislation, or be subjected to the varying conditions and restrictions which the local interests of the State may deem to be expedient. There are at present approximately 150 naturalgas storage fields operating in the United States, the primary purpose of which is to store natural gas in underground strata near the markets of the interstate transmission systems during the summertime when the demand for natural gas is not as great as it is in the colder months, producing the natural gas from the storage reservoir to accommodate the increased marked demand during the heating season. The consuming area which does not have the benefit of a storage reservoir is placed at a great disadvantage for the reason that it rapidly becomes uneconomic to build pipeline transmission systems to satisfy the heating load. With a large portion of the pipelines' capacity idle in the summertime, unless tremendous quantities of gas can be sold for industrial and other uses, such storage reservoirs promote the conservation of our natural resources for a higher utilization. Some opponents of natural gas, competitive therewith, have seriously urged that some of the uses of natural gas during the offpeak season in the summer for some industrial uses is an economic waste of this depletable resource. It does not seem necessary to argue that point at this time, except to say that certainly the natural gas placed in these storage reservoirs in the summertime is utilized primarily for househeating-one of the very highest uses that could be made thereof. We therefore urge your committee's most favorable consideration of the legislation. I attach hereto draft of the suggested amendment to S. 525 which I have referred to above. Respectfully submitted, J. J. HEDRICK. Senator PURTELL. Do you have any questions, Senator Schoeppel? Senator SCHOEPPEL. My question may not appear very logical. I have just skimmed through this letter hurriedly. There has been a feeling that these rights in this field should not encroach upon those who might have some property rights or interest in property in minerals in those areas. Do you generally agree that that interest should be protected without any question of doubt! Mr. HOLMES. I do, and we are suggesting amendments and additions to S. 525 to do just exactly that. Senator SCHOEPPEL. I am glad to hear you say that because that is my suggestion to the bill as I read it. It does not at this instant time have that degree of protection which I think is most important to be covered. Mr. HOLMES. We agree with you. Senator PURTELL. I think perhaps we can point up some of the questions, that are felt by our staff and our chairman, you might answer, since you do not intend, and I am grateful from the angle of time, to read the letter. We might ask some questions, and the first is to what extent does this amendment represent general accord with the views covered by the amendment? Mr. HOLMES. We think that it does represent accord with them. Senator PURTELL. Are there any questions about that? Another question that arises is what is your opinion of the amendments of the Federal Power Commission? You have heard them or read them perhaps, or do you wish to remark about them. Mr. HOLMES. We do not differ with them. Senator PURTELL. What do you think of the amendment of the Bureau of Mines? Mr. HOLMES. I think the amendments as suggested by the Bureau of Mines are quite a bit along the line of some of the amendments we have suggested, and we are certainly in full accord that the mines, coal mines, or otherwise should be protected against any storage activities. Senator PURTELL. Is there anything else that you wish to add to the testimony presented here, other than what you have already stated? Mr. HOLMES. No, sir. Senator PURTELL. Thank you very much for appearing. The next gentleman will be a spokesman for the Independent Petroleum Association of America. Mr. Frank Eckert. Mr. ECKERT. Mr. Chairman, Mr. Clarence T. Smith will appear first. Senator PURTELL. You are speaking for the Independent Petroleum Association of America, is that correct, as counsel or as spokesman? STATEMENT OF CLARENCE T. SMITH, INDEPENDENT Mr. SMITH. I am a member of the board of directors and a member of the Natural Gas Committee of the Independent Petroleum Association of America. I am also a member of the board of directors and counsel of the Illinois Oil & Gas Association which has been very much interested in the subject now under consideration by your committee. Senator PURTELL. Sit down, sir: we are glad to have you. Mr. SMITH. I am a lawyer by profession interested in the production of oil. Senator SCHOEPPEL. And might I say, Mr. Chairman, a gentleman who takes a very active part in the Interstate Oil Compact and at the time the Senator from Kansas headed that, and Mr. Smith is also a firm believer in the conservation practices. Mr. SMITH. Thank you. I mention particularly the interest of the Illinois Oil & Gas Association because at approximately the same time that S. 1000 was introduced in a former Congress, a comparable or similar bill was introduced in the Legislature of the State of Illinois. The Illinois Oil & Gas Association was interested in it for the same reason that it is interested in this bill, and for the same reason that the Independent Petroleum Association of America is interested in S. 525, that was that the membership of both associations felt that the interest of the oil and gas producers was not protected by the bills in the general language in which they were drawn; and at certain places provisos should be included in the bill as amendments before passage. I am happy to say that the sponsors of S. 1000 and of this bill were also the sponsors in the Illinois Legislature, and I want to say that |