Amendments to the Natural Gas Act

AMENDMENTS TO THE NATURAL GAS ACT

MONDAY, APRIL 14, 1947

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The committee met in room 1334, New House Office Building at 10 a. m., pursuant to call, Hon. Charles A. Wolverton (chairman) presiding.

The CHAIRMAN. The committee will come to order. We will proceed with the hearings on H. R. 2185, introduced by Mr. Rizley, a bill to amend the Natural Gas Act approved January 21, 1931, as amended;

H. R. 2235, introduced by Mr. Carson, a bill to amend the Natural Gas Act, approved June 21, 1938, as amended;

H. R. 2292, introduced by Mr. Davis of Tennessee, a bill to amend the Natural Gas Act, approved June 21, 1938, as amended;

H. R. 2569, introduced by Mr. Dolliver, a bill to amend the Natural Gas Act, as amended by establishing a policy for the administration of such act; and

H. R. 2956, introduced by Mr. Schwabe of Oklahoma, a bill to amend the Natural Gas Act approved June 21, 1938, as amended. (The bills above referred to are as follows:)

[H. R. 2185, 80th Cong., 1st sess.]

A BILL To amend the Natural Gas Act approved June 21, 1938, as amended Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (b) of section 1 of the Natural Gas Act, approved June 21, 1938, is amended to read as follows:

"(b) The provisions of this chapter shall apply, to the extent hereafter provided, to the transportation of natural gas in interstate commerce, to the sale, after such transportation, in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural gas companies engaged in such transportation or sale but shall not apply to any other transportation or sale of natural gas or to its transportation between the well or wells where produced and the point of its delivery to or reception in the interstate trunk transmission facilities of a natural gas company or to any sale thereof at or prior to such point of delivery or reception or to the production or gathering of natural gas, or to the producing, gathering, treating, or processing facilities utilized or operations conducted in handling or preparing such gas for delivery or reception at such point, or to the local distribution of natural gas or to local distribution facilities; and nothing in this chapter shall be construed as authorizing the Commission to prohibit or restrict the transportation or sale in interstate commerce of gas for utilization for any purpose for which such gas may lawfully be used.

"(c) The jurisdiction of the Commission under this Act, including but not limited to rate regulatory authority and supervisory control, shall not extend to or over any transportation or sale or facility or operation to which, under the provisions of subdivision (b) of this section, the provisions of this chapter 1

shall not apply. This limitation of jurisdiction shall control all other provisions of this Act.'

SEC. 2. Subsection (5) of section 2 of said Natural Gas Act is amended to read as follows:

"(5) Natural gas' means either gas in its natural state as produced from the well, or residue gas from gas in its natural state, from casinghead gas or from other gaseous substance after extraction of hydrocarbon liquids, or any mixture of natural and artificial gas."

SEC. 3. Subsection (6) of section 2 of said Natural Gas Act is amended to read as follows:

"(6) 'Natural-gas company' means a person engaged in the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission as in this Act defined, or the sale in interstate commerce after the commencement of such transportation of natural gas for resale subject to the jurisdiction of the Commission, as in this Act defined, but to the extent only that such person is engaged in such transportation and sale."

SEC. 4. Section (2) of said Natural Gas Act is further amended by adding thereto the following definitions:

"(10) 'Production' means the recovery of natural gas from reservoirs where naturally found and also the recovery of residue gas from natural gas, casinghead gas, or other gaseous substance by any method or treatment or proceeding through removal of natural gasoline, butanes, and other hydrocarbons or other chemicals or substances of commercial value, whether such recovery be made prior to, during, or incident to the transportation of natural gas in interstate commerce, and includes the delivery and sale of natural gas from production facilities, at any point thereon, whether such delivery and sale be in interstate or intrastate commerce. 'Production facilities' means the land, leaseholds, .wells, separators, extraction plants, and other facilities used for or incident to such production.

“(11) 'Gathering' means the operation of gathering facilities and includes the delivery and sale of natural gas from such facilities, at any point thereon, whether such delivery and sale be in interstate or intrastate commerce; and 'gathering facilities' means facilities used for or incident to moving, by natural or mechanical pressure, natural gas produced or purchased in the production and gathering area to the point or points of delivery into inlets of the trunk transmission facilities used for the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(12) "Transportation of natural gas in interstate commerce subject to the Jurisdiction of the Commission' means and is limited to the operation of moving natural gas in interstate commerce through the whole or a portion of the trunk transmission facilities of a natural-gas company (including facilities or properties for surface or underground storage) which commence at the trunk pipe-line compressor station or stations of such company or main receiving point or points established by such company for the purpose of receiving gas from gathering facilities or from processing plants for transportation, and extend therefrom to the point or points in the State of local distribution or on the boundary of such State, at which such natural gas moves from the trunk transmission facilities of a person into the local distribution or trunk transmission facilities of another person who sells such natural gas in local distribution. If, before local distribution occurs, natural gas is transported across a State boundary line in trunk transmission facilities of the person who sells such natural gas to consumers in local distribution, then the transportation of such natural gas by such person, up to, but not beyond, the point at which it enters the pressure reducing, or measuring station, or local distribution facilities of such person, shall be transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(13) 'Sale in interstate commerce of natural gas for resale subject to the jurisdiction of the Commission' means and is limited to such sale when made after the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(14) 'Local distribution' means the operation of local distribution facilities and includes the delivery or sale of gas therefrom; and 'local distribution facilities' means pipe lines and other facilities used for or incident to the distribution of natural gas to the general public within a community or distribution area for ultimate public consumption for domestic, commercial, industrial, and any other purpose."

SEO. 5. Said Natural Gas Act is amended by adding thereto the following section:

"SEC. 52. The Commission in its regulation of rates and charges of a naturalgas company for the transportation and sale of natural gas subject to its jurisdiction and in the exercise of all its other functions under this chapter shall be governed and controlled by the following provisions:

"(a) It shall allow to a natural-gas company as an operating expense an amount determined as follows: (1) the actual prices paid for gas purchased if the purchase is made by a natural-gas company from nonaffiliates and nonsubsidiaries; (2) if the gas is produced by a natural-gas company or purchased from a subsidiary or affiliate, the prevailing current market price in the field or fields where produced for natural gas of comparable quality, volume and pressure, delivered under similar conditions, if such market price exists in said field; or, if there is no prevailing current market price for such natural gas in said field or fields in which produced, the fair and reasonable value of such gas, taking into consideration prevailing current prices for natural gas of a comparable quality, volume and pressure delivered under similar conditions in the general vicinity, and other pertinent factors, provided such value shall exclude a calculated value for such gas based upon the producer's investment in and cost of the properties from which such gas is produced and shall be restricted to the purposes of this section; and (3) reasonable compensation for gathering all of such gas produced by such natural-gas company or purchased by a subsidiary or affiliate of such natural-gas company, and for delivering the same to the inlet or inlets of the transmission facilities of such natural-gas company: Provided, That a natural-gas company owning production facilities or gathering facilities, or both, upon the date when this subsection takes effect may elect, by filing a written statement with the Commission not later than ninety days after such date, that its production and gathering facilities then owned and thereafter acquired shall be included with its facilities used for the transportation of natural gas in interstate commerce in any determination by the Commission of the rates and charges of such company subject to the jurisdiction of the Commission; and after the exercise of such election, the provisions of clauses numbered (2) and (3) of this subsection shall not be applied by the Commission in determining such rates and charges.

"(b) If a natural gas company is engaged in operations and activities which are not within the Commission's jurisdiction, the Commission, prior to the fixation and determination of the rate base and the rates subject to the jurisdiction of the Commission, shall (1) segregate from all the property and facilities of such natural gas company the property and facilities used in the operations and activities subject to the Commission's jurisdiction under this Act by proper allocation made in accordance with the use to which the property and facilities are devoted; (2) segregate from all the revenues of such natural gas company the revenues` received from its operations and activities subject to the Commission's jurisdiction under this Act; (3) segregate from all the expenses of such natural gas company the expenses incurred or expended in the operations and activities subject to the Commission's jurisdiction under this Act by proper allocation made in accordance with the use to which the property and facilities of such natural gas company are devoted; and (4) in making such segregations and allocations of property, revenues, and expenses; the Commission shall not assign to the jurisdictional class of property, operations, and activities any of the properties, revenues, or expenses of a nonjurisdictional class of properties, operations, and activities." SEC. 6. Subsection (c) of section 7 of the Natural Gas Act approved June 21, 1938, as amended February 7, 1942, is amended by striking out the words "in all other cases the Commission shall set the matter for hearing" and substituting in lieu thereof the words: "promptly following the filing of each application for a certificate, the Commission shall give public notice thereof, and if no protest against such certificate is filed within thirty days following the giving of such notice, the Commission may at the expiration of said thirty-day period issue such certificate without hearing upon such application. In any case when protest against such certificate is filed within such thirty-day period or if, in the absence of such protest, the Commission fails so to issue the certificate applied for, the Commission shall set the matter for hearing upon a day certain within thirty days following the expiration of such notice period, and" and by adding at the end of said subsection (c) the following: "Provided further, That any natural-gas company may, without obtaining such certificate, maintain, extend, or enlarge those facilities for any transportation or sale of natural gas for which a certificate has been issued, for the purpose of maintaining continuity of service, or of supplying increased demands in its existing markets."

[H. R. 2235, 80th Cong., 1st sess.]

A BILL To amend the Natural Gas Act, approved June 21, 1938, as amended Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (b) of section 1 of the Natural Gas Act, approved June 21, 1938, is amended to read as follows:

"(b) The provisions of this chapter shall apply, to the extent hereafter provided, to the transportation of natural gas in interstate commerce, to the sale, after such transportation, in interstate commerce of natural gas for resale for ultimate public consumption for domestic commercial, industrial, or any other use, and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas or to its transportation between the well or wells where produced and the point of its delivery to or reception in the interstate trunk transmission facilities of a natural-gas company or to any sale thereof at or prior to such point of delivery or reception or to the production or gathering of natural gas, or to the producing, gathering, treating, or processing facilities utilized or operations conducted in handling or preparing such gas for delivery or reception at such point, or to the local distribution of natural gas or to local distribution facilities; and nothing in this chapter shall be construed as authorizing the Commission to prohibit or restrict the transportation or sale in interstate commerce of gas for utilization for any purpose for which such gas may lawfully be used.

"(c) The jurisdiction of the Commission under this Act, including but not limited to rate regulatory authority and supervisory control, shall not extend to or over any transportation or sale or facility or operation to which, under the provisions of subdivisions (b) of this section, the provisions of this chapter shall not apply. This limitation of jurisdiction shall control all other provisions of this Act.'

SEC. 2. Subsection (5) of section 2 of said Natural Gas Act is amended to read as follows:

"Natural gas' means either gas in its natural state as produced from the well, or residue gas from gas in its natural state, from casinghead gas or from any other gaseous substance after extraction of hydrocarbon liquids, or any mixture of natural and artificial gas."

SEC. 3. Subsection (6) of section 2 of said Natural Gas Act is amended to read as follows:

SEC. 4. Section (2) of said Natural Gas Act is further amended by adding thereto the following definitions:

"(10) Production' means the recovery of natural gas from reservoirs where naturally found and also the recovery of residue gas from natural gas, casinghead gas, or other gaseous substance by any method or treatment or processing through removal of natural gasoline, butanes and other hydrocarbons, or other chemicals or substances of commercial value, whether such recovery be made prior to, during, or incident to the transportation of natural gas in interstate commerce, and includes the delivery and sale of natural gas from production facilities, at any point thereon, whether such delivery and sale be in interstate or interstate commerce. 'Production facilities' means the land, leaseholds, wells, separators, extraction plants, and other facilities used for or incident to such production.

"(11) 'Gathering means the operation of gathering facilities and includes the delivery and sale of natural gas from such facilities, at any point thereon, whether such delivery and sale be in interstate or intrastate commerce; and 'gathering facilities' means facilities used for or incident to moving, by natural or mechanical pressure, natural gas produced or purchased in the production and gathering area to the point or points of delivery into inlets of the trunk transmission facilities used for the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(12) "Transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission' means and is limited to the operation of moving natural gas in interstate commerce through the whole or a portion of the trunk

transmission facilities of a natural-gas company (including facilities or properties for surface or underground storage) which commence at the trunk pipeline compressor station or stations of such company or main receiving point or points established by such company for the purpose of receiving gas from gathering facilities or from processing plants for transportation, and extend therefrom to the point or points in the State of local distribution or on the boundary of such State, at which such natural gas moves from the trunk transmission facilities of a person into the local distribution or trunk transmission facilities of another person who sells such natural gas in local distribution. If, before local distribution occurs, natural gas is transported across a State boundary line in trunk transmission facilities of the person who sells such natural gas to consumers in local distribution, then the transportation of such natural gas by such person up to, but not beyond, the point at which it enters the pressure reducing, or measuring station or local distribution facilities of such person, shall be transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(14) Local distribution' means the operation of local distribution facilities and includes the delivery or sale of gas therefrom; and 'local distribution facilities' means pipe lines and other facilities used for or incident to the distribution of natural gas to the general public within a community or distribution area for ultimate public consumption for domestic, commercial, industrial, and any other purpose."

SEC. 5. Said Natural Gas Act is amended by adding thereto the following section:

"SEC. 52. The commission in its regulation of rates and charges of a naturalgas company for the transportation and sale of natural gas subject to its jurisdiction and in the exercise of all its other functions under this chapter shall be governed and controlled by the following provisions:

"(a) It shall allow to a natural-gas company as an operating expense an amount determined as follows: (1) The actual prices paid for gas purchased if the purchase is made by a natural-gas company from nonaffiliates and nonsubsidiaries; (2) if the gas is produced by a natural-gas company or purchased from a subsidiary or affiliate, the prevailing current market price in the field or fields where produced for natural gas of comparable quality, volume, and pressure, delivered under similar conditions, if such market price exists in said field; or, if there is no prevailing current market price for such natural gas in said field or fields in which produced, the fair and reasonable value of such gas, taking into consideration prevailing current prices for natural gas of a comparable quality, volume, and pressure delivered under similar conditions in the general vicinity, and other pertinent factors: Provided, That such value shall exclude a calculated value for such gas based upon the producer's investment in and cost of the properties from which such gas is produced and shall be restricted to the purposes of this section; and (3) reasonable compensation for gathering all of such gas produced by such natural-gas company or purchased by a subsidiary or affiliate of such natural-gas company, and for delivering the same to the inlet or inlets of the transmission facilities of such natural-gas company: Provided, That a natural-gas company owning production facilities or gathering facilities, or both, upon the date when this subsection takes effect may elect, by filing a written statement with the Commission not later than ninety days after such date, that its production and gathering facilities then owned and thereafter acquired shall be included with its facilities used for the transportation of natural gas in interstate commerce in any determination by the Commission of the rates and charges of such company subject to the jurisdiction of the Commission and after the exercise of such election, the provisions of the clauses numbered (2) and (3) of this subsection shall not be applied by the Commission in determining such rates and charges.

"(b) If a natural-gas company is engaged in operations and activities which are not within the Commission's jurisdiction, the Commission, prior to the fixation and determination of the rate base and the rates subject to the jurisdiction of the Commission, shall (1) segregate from all the property and facilities of such natural-gas company the property and facilities used in the operations and activities subject to the Commission's jurisdiction under this Act by proper

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