Mr. MURRELL. Mr. Beckworth, I can go back to 1933. I do not know anything about the situation prior to 1933 except what people have told me.

Mr. BECKWORTH. The reason I asked that question is this: There is a great amount of sentiment being shown now in favor of legislation of the character being discussed here today.

Mr. MURRELL. That is right.

Mr. BECKWORTH. Obviously the situation must be getting worse or there would have been similar sentiment manifest 10 or 15 years ago. Mr. MURRELL. I would tell you

Mr. BECKWORTH (continuing). Because we had the flaring of gas going on, gas going to waste then, did we not?

Mr. MURRELL. Yes, sir.

Mr. BECKWORTH. Ány person who is familiar with oil fields knows this.

Mr. MURRELL. More so than now.

Mr. BECKWORTH. More so than now.

Mr. MURRELL. And great progress has been made.

Mr. BECKWORTH. In other words there is a tendency in the direction of more and more uncertainty, as you view it?

Mr. MURRELL. Yes, sir. It is being brought home to the operators and they are getting more uncertain, because our State agencies are now and have been for the last 15 years working on this problem of conservation. They have tried to persuade these operators to put their gas into the pipe lines.

The operators are doing their best to get the gas into the pipe lines, but the markets are not available to take care of all of the gas that is being flared and in the second place the operators are becoming uncertain and many of their law advisers are uncertain that if they do put this gas into the pipe lines and do put it to useful use, this gas which is being produced incidental to the production of oil, they are afraid their oil production operations will be placed under the jurisdiction of the Federal Power Commission instead of under our State agencies that have done such a grand job up to this time, and because of that situation and the State commissions forcing and making orders to make these operators use their gas, and the operators being more and more fearful that if they do follow the directions of the commissions and use this gas, that they are going to end up under the jurisdiction of the Federal Power Commission and under this six and onehalf rate base or profit base on only the successful wells.

If such things happen and if such things should happen, you are not going to see the money available to search for additional reserves. The CHAIRMAN. Are there any further questions, gentlemen? Mr. HINSHAW. Mr. Chairman.

The CHAIRMAN. Mr. Hinshaw.

Mr. HINSHAW. As a matter of fact, Mr. Chairman, I think in all probability the last statement made by the gentleman is the real basis of the oil and gas group's objection to the Federal Power Commission's control and the reason why they are advocating this bill. Is that not true?

Mr. MURRELL. They want to get it down in black and white as to what can be done; yes, sir.

Mr. HINSHAW. That is all, Mr. Chairman.

The CHAIRMAN. Thank you.

Mr. MURRELL. Thank you, gentlemen.

The CHAIRMAN. The next witnes will be Dr.. W. K. Lewis, dean of chemical engineering, Massachusetts Institute of Technology.

Mr. RIZLEY. Dr. Lewis will not be here until tomorrow, Mr. Chairman.

STATEMENT OF B. A. HARDEY, PRESIDENT OF THE INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, SHREVEPORT, LA.

The CHAIRMAN. The next witness will be Maj. B. A. Hardey, president of the Independent Petroleum Association of America, Shreveport, La. Mr. Hardey.

Mr. HARDEY. Mr. Chairman and gentlemen of the committee: My name is B. A. Hardey. I appear here today as president of the Independent Petroleum Association of America. I would like to read my written statement into the record and I would like for the members of the committee, if they wish, to feel free to stop me at any point in my reading to ask any questions, or ask questions subsequent to the reading.

The CHAIRMAN. It is not in accord with the practice of the committee, however, to interrupt a witness. We prefer that the witness first give his statement in full before there is any questioning.

May I again emphasize the necessity of conserving time? I appreciate the fact that a great deal of time and effort has entered into the preparation of the statements of the witnesses, and I can assure the witnesses that they will have the careful consideration of the committee in full, as their statements will appear in the record. So that you can conserve the time of the committee and help your own cause by emphasizing to the committee those portions of your prepared statement which you think should have special attention. Mr. HARDEY. Thank you, Mr. Chairman.

My name is B. A. Hardey, and I am at this time president of the Independent Petroleum Association of America. It is a national association of independent producers of crude petroleum and natural gas, refiners, transporters of crude and its products, or natural gas, through pipe lines, owners of oil or gas royalties, land owners, permit holders, drilling contractors, and independent distributors.

Every oil and gas-producing State of the Nation is represented in the membership of this association. I appear to reiterate the very definite policy deliberately considered and authorized by the association.

Its members on October 11, 1944, and again on October 17, 1945, made known by resolutions their views with respect to the amendment of the Natural Gas Act and the restoration of that act to the scope originally intended by Congress.

In connection with that, Mr. Chairman, I would like to offer for the records of this hearing a copy of the resolution adopted by this association on October 17, 1945.

The CHAIRMAN. It will be received and made a part of the record, and included in your statement.

(The resolution referred to is as follows:)

RESOLUTION ADOPTED AT THE SIXTEENTH ANNUAL MEETING OF THE INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, TULSA, OKLA., OCTOBER 17, 1945 Whereas the Independent Petroleum Association of America, at the request of the Federal Power Commission, authorized the filing of suggestions and recommendations with the Federal Power Commission relating to and covering the subjects of investigation proposed by said Commission in ts scheduled hearings for investigation of the natural gas industry in Docket G-580; and Whereas thereafter on April 2, 1945, as a result of the court review of orders of the Federal Power Commission (Panhandle Eastern Pipe Line et al. v. Federal Power Commission; Colorado Interstate Gas Company v. Federal Power Commission; Colorado-Wyoming Gas Company v. Federal Power Commission, 323 U. S. —), it became known (1) that the Federal Power Commission under its claimed rate-making power governing natural gas transmission had entered upon the regulation and control of natural gas production and gathering, including (2) the valuation of gas producing and gathering properties, (3) valuation of gas in the field, and (4) has under its certificate authority otherwise invaded the business of producing and gathering gas; and

Whereas thereafter on June 27, 1945, the Federal Power Commission has enumerated the principal topics with which its proposed natural gas investigation (G-580) will be concerned including (1) natural gas reserves, (2) practice and problems relating to production of gas, (3) the extent and control of waste, (4) state laws governing production, waste and conservation, (5) interstate pipe line, (6) utilization of natural gas, and (7) the potentialities of synthetic production; and

Whereas the Federal Power Commission has now specified a partial list of dates and places for regional hearings for its said natural gas investigation, and the Independent Petroleum Association of America desires to make certain suggestions and recommendations in view of the foregoing developments: Now, therefore, be it

Resolved, by the Independent Petroleum Association of America in meeting assembled at Tulsa, Okla., the 17th day of October 1945, That this Association assert, maintain and insist, among other things, upon the following principles: 1. The regulation and jurisdiction over the production and conservation of natural gas, including gathering, compressing, recycling operations, gasoline plants, sale and delivery of natural gas at the point where interstate commerce commences, is the vested and constitutional right and power of the State and State regulatory bodies in which such is produced, and no jurisdiction in that respect should be conferred upon the Federal Power Commission or other federal agencies. Nor should the Federal Power Commission, or other federal agencies, seek either to exert or exercise any power or jurisdiction not specifically conferred by law under the Constitution.

2. The power and jurisdiction over the end use of gas should not be conferred upon a federal bureau. Competition between fuels should be left to the determination and decision of free competition stripped of the influence of special groups and advantages resulting from attempted administrative control. The policy of the United States in respect to interstate commerce is freedom in competition, and such policy should be maintained and continued.

3. The authority for adequate regulations in the public interest governing the production, storage, gathering, and handling of natural gas now rests with the States and no Federal laws are now either justified, demanded, or needed in this respect.

4. The function of the Federal Government under the constitution is to regulate interstate commerce. Federal agencies should no more assert jurisdiction over oil or gas operations within a State than the State should interfere with the transmission and transportation of natural gas in interstate commerce.

5. If and should the Federal Power Commission persist in its attempted control, either directly or indirectly, of the production, processing, gathering, and compressing, or the price of gas prior to its sale for resale from the main transportation line in interstate commerce, or in incorporating producing and gathering properties in the rate base for determining rates for transmission in interstate commerce, then either the functions of the Federal Power Commission in respect to the interstate transmission of natural gas should be transferred to the Interstate Commerce Commission now having control of the transportation of other commodities in interstate commerce or otherwise the jurisdiction of the Federal Power Commission should be, by additional legislation, clearly limited to the

interstate transportation of gas and the sale of gas in interstate commerce for resale.

6. The policy of the Federal Power Commission in attempting to give gasproducing and gathering properties a utility status and the valuation of gasproducing properties and natural gas on a cost formula is without and beyond the jurisdiction of the Federal Power Commission. The utility principle of regulation is not and cannot be adapted to the gas-producing and gathering business and at the same time maintain a healthy industry. The devaluation of gas-producing and gathering properties and natural gas in low-cost gas-producing areas based upon cost directly tends to encourage waste, destroys the inducement to save gas, and is a positive deterrent and obstacle to gas conservation and good gas-producing and gathering practices.

7. The Congress of the United States has the sole and exclusive function of legislation with respect to the factors and principles controlling the granting or withholding of certificates. The Federal Power Commission is without power to legislate in these respects by the attempted promulgation of rules, legislative in nature, not prescribed by Congress, for adjudicating the granting or withholding of certificates of convenience and necessity.

8. Efforts of the Federal Power Commission to extend, by means of its power to regulate sales of gas for resale in interstate commerce, its jurisdiction to the gasproducing and gathering properties of a producer who is not a natural-gas company exceed the power vested in the Commission. The conservation, marketing, and the prevention of waste of gas will be substantially aided by the removal of such unauthorized threats and attempts either by abandonment of such efforts or by legislative mandate.

9. That the exercise by the Federal Power Commission, or other Federal agencies of an overlapping or concurrent jurisdiction with that properly vested in the States under their power of sovereignty, results and will result in chaos, confusion, and contradictions which are and will be injurious to the industry, the public, and tend to make inert the effectiveness of both the Federal and State agencies;

That both Federal and State agencies should have their respective power or jurisdiction clearly defined so that there will be no interference of the one with the proper functioning of the other; be it further

Resolved, That copies of this resolution be transmitted to the governor and regulatory bodies of each and every oil- and gas-producing State for the use and consideration of each in connection with the above-mentioned Federal Power Commission hearings.

Mr. HARDEY. Our views as expressed in 1944 and 1945 have not changed because of the hearing before the Federal Power Commission in docket No. G-580 nor as a result of the recommendations made in the recent staff reports to the Federal Power Commission.

I believe that I know the views and objectives of the vast majority of independent oil and gas producers. It must be remembered that they are the men who throughout the years have spent their lives and fortunes in helping to develop the great oil and gas resources of this Nation.

It must also be remembered in this connection that these great developments have occurred because the independent producer has had the necessary latitude within which to apply his initiative.

The independent producer expects adequate financial rewards when he succeeds and he is willing to assume the consequences of failure when he does not succeed. He knows that he cannot operate successfully when he is shackled with rigid and unrealistic regulatory formulas that are properly related only to purely public utility operations.

He realizes the need for and responds readily to proper conservation practices, but he believes that these practices can best be adopted and applied by the States in the light of varied local conditions.

I. FEAR AND UNEASINESS OF OIL AND GAS PRODUCERS

Until recent occurrences we believed that the Congress, by the Natural Gas Act, did not give the Federal Power Commission any direct or indirect power over production and gathering. The oil and gas producers considered that production and gathering and sales incident thereto had been exempted from the act as a part of the well-defined national policy not to interfere in purely local activities.

That the Congress has traditionally left the regulation of production and gathering of oil and gas to State authorities is exemplified by the Connally Hot Oil Act and the Interstate Oil Compact Act, that created the Commission. Notwithstanding this wholesome congressional policy, fear, distrust, and confusion have steadily increased among oil and gas producers because of the manner in which the Federal Power Commission has administered the Natural Gas Act.

In my opinion there are several reasons for this distrust and fear which need to be set at rest. In the first place there have been those in Government who openly advocate Federal control and regulation of oil and gas production as a public utility. Then too, the Federal Power Commission has administered the Natural Gas Act so that the result has been definite regulation and control of producing and gathering.

It is true that the Federal Power Commission has insisted that its control of production and gathering was only indirect. But the truth is that the fixing of values on producing and gathering properties and the regulation of end uses of natural gas by the Federal Power Commission for any purpose is the regulation of oil and gas production.

More recently, the staff reports to the Federal Power Commission in docket No. G-580 indicate that the Commission is holding the oil industry as well as the gas industry "on trial within the next few years." And that is quoted from their report.

The intimidating tone of two statements in the conclusions of the staff report on conservation makes them so pronounced that they cannot be passed without specific comment.'

The first statement is as follows:

There would appear to be no need at this juncture, therefore, to disturb the existing situation under which the States bear the responsibility for necessary controls effecting the conservation and equitable production of natural gasand of oil.

Aside from the inappropriateness of this statement insofar as it pertains to natural gas-on what authority does the Commission concern itself with "oil"? And on what facts in the record, in docket No. G-580, is this allusion to "oil" predicated. The answer is obvious. There is none.

The second statement is as follows, and I quote from the staff report of the Federal Power Commission:

It should be the determination of the producing States within the early future-3 years at most-to eradicate every significant instance of gas wastage to the air.

Again the question is appropriate: On what authority does the Commission's staff rely in setting the Commission up as the deter