congressional objective.

The Commission is bound to obey the command of Congress to regulate these sales in interstate commerce for resale to the three pipe-line companies. Such is clearly the implication of the decision of the Circuit Court of Appeals in Peoples Natural Gas Co. v. Federal Power Commission (127 F(2d) 153, cert. den. 316 U. S. 700).

Remember that in the Columbian case the Commission at that time said, "No that does not come within the act. We cannot do that." But there was, as I said awhile ago, an omnious dissent. That omnious dissent has now become the law of the land.

It is important to note that here the Commission adopted the views expressed by its dissenting member in the Columbian case, to the effect that the exemption of production and gathering does not exempt the sales of gas by the producer and gatherer. The Commission grounded its acceptance of this theory on "the implication of the decision" in the Peoples case.

The Circuit Court of Appeals affirmed the Commission's decision in the Interstate case (156 Fed. 2d 949)-August 1946-and the Supreme Court has issued a writ of of certiorari. One of the circuit court judges dissented. The majority of the Court reasoned that the excllsion of production and gathering, as contained in the act, related only to the properties used in production and gathering and not to the sales made by the producer and gatherer to an interstate pipe-line company. It cited with approval the Peoples Natural Gas Co. case, to which I have already referred. And it concluded that the exemption of production and gathering as now contained in the act merely precludes the Commission from any control over the activity of producing and gathering, as distinguished from the sales of gas for resale by the producer and gatherer, and gentlemen, that is exactly what it does.

The dissenting opinion said that the majority opinion nullified the plain intent of Congress to except from the act the production and gathering of gas.

From what has been said, it must be clear to the gentlemen of the committee that the act has been construed to mean that only the properties and physical functions of producing and gathering are exluded therefrom, and that the sales of gas made by producers and gatherers to interstate pipe-line companies are sales for resale in interstate commerce subject to the jurisdiction of the Federal Power Commission.

This means that all producers and gatherers of gas who sell it to pipe-line companies for transportation and sale for resale in interstate commerce are threatened with regulation under the act. There are thousands of such producers. Many of them produce gas as an incident to the production of oil. These producers and gatherers are fearful that they will be given a public utility status under the act and subjected to the limitations and burdensome regulations which have been applied to natural-gas companies by the Federal Power Commission. They are unwilling to risk regulation which would limit them to a 62 percent return on the prediscovery cost of their leases and on the original cost, less depreciation, of their well equipment, gathering lines, and other similar property.

The report of the Federal Power Commission to which I have previously referred notes that—

The crux of all this disturbed feeling traces to language used in certain of the cases on this subject which seems to distinguish between price control over

production and gathering and the regulation of the physical facilities used in performing these functions (p. 30).

It is contended with much force that there is no basis in the act for any such distinction, for the reason that the exemption as to production or gathering is unqualified and plenary and cannot, therefore, be narrowly construed so as to assert authority to regulate the sale price received by producers or gatherers who do not engage in operations making them natural-gas companies (pp. 30 and 31).

I am quoting now from the Commission's report.

As a result of this feeling of uncertainty regarding the status of sales by producers and gatherers, there have been indications that producers of gas and associated oil may be unwilling in the present situation to contract for the sale of gas intended for interstate movement, for fear that they may thereby become subject to regulation as natural-gas companies under the act. The oil industry, which produces large amounts of natural gas, has been paritcularly apprehensive of this possibility (p. 35).

I am quoting now from the Commission.

Most important of all are the indicated effects of this situation on efforts to prevent gas wastage. State officials and others have warned that the reluctance of some gas producers to sell their gas for interstate marketing is interfering with the progress of conservation measures and is a contributing factor in the continued flaring of large volumes of casinghead-oil well-gas.

I am still quoting from the Commission.

Col. E. O. Thompson of the Texas Railroad Commisison testified that greater success in preventing waste would have been realized “had it not been for the fear of the producers of gas, this casinghead, that if they hooked onto a pipe line they would be declared a public utility and limited to 61⁄2 percent of the total earnings." He stated that certain desirable conservation projects had been held up among other possible reasons, because of this fear of producers that by selling their gas they might become subject to Federal regulation under the Natural Gas Act.

All those who have manifested concern

I am continuing to read the report from the Commission they put out upon statements in evidence that came in during the conduct of the hearing

with respect to this matter strongly urge the need for clarifying the situation and setting definitely at rest the doubts and uncertainty which now prevail. In view of the importance of this issue, it is said, the determination of this question should not be permitted to depend upon the outcome of closely contested administrative and legal proceedings which are concerned with the special circumstances of particular cases. In their view, the only satisfactory solution is considered to be specific amendatory legislation which would establish beyond doubt that producers and gatherers who sell their gas to interstate pipe-line companies are not subject to regulation under the Natural Gas Act by virtue of such sales (pp. 36 and 38).

That is exactly what we propose to do in this bill to cure the very things, the very evils that they complain about, but, how do they want it done? Not by a series of amendments to the law made by the Congress, but by administrative processes that they set up subject to the whims and changes as has been pointed out of the Commission as it changes from time to time.

PROVISIONS OF H. R. 2185 RELATING TO JURISDICTION OVER PRODUCTION AND GATHERING AND SALES INCIDENT THERETO

H. R. 2185 would make the act apply to: (1) the transportation of natural gas in interstate commerce, (2) the sale, after such transporta

tion, in interstate commerce of natural gas for resale, and (3) natural gas companies engaged in such transportation or sale.

That is as far as the Federal arm should reach, as was so intended by the Congress when the act was passed.

H. R. 2185 makes it clear that the act shall not apply to: (1) any other transportation or sale, (2) the transportation between the well or wells where produced and the point of delivery to or reception in the interstate trunk transmission facilities of a natural gas company, (3) any sale at or prior to such point of delivery or reception, (4) the production or gathering of natural gas, (5) the producing, gathering, treating, or processing facilities utilized or operations conducted in handling or preparing the gas for delivery or reception into the interstate trunk transmission lines, and (6) local distribution of natural gas or local distribution facilities.

That is very important to these municipalities throughout the country, that they have something to say about the transportation of this gas and as to the handling of it when it reaches the municipality. These provisions are contained in the proposed subsection (b) lines 2 to 12, page 2 of my bill.

In subparagraph (c) of section 1, lines 17 to 23, page 2, it is made clear that the jurisdiction of the Federal Power Commission will be coextensive with the jurisdictional provisions contained in subparagraph (b).

In section 2 of the amendments the definition of "natural gas" contained in subdivision (5) of section 2 of the Natural Gas Act is amended. And, that is very vital and necessary. The present act defines "natural gas" as being "either natural gas unmixed, or any mixture of natural and artificial gas."

This definition is wholly inaccurate when applied to most of the gas now transported to interstate markets even if it had been adequate at that time, which I doubt, it still is inadequate now. As already pointed out, the greater portion of such gas is residue gas from which the liquid hydrocarbons, consisting of gasoline and LPG, have been extracted. Much of that which is transported from the Gulf coast and other fields is residue from gas which has been recovered in recycling operations or residue from casinghead gas.

In order that the act may classify as natural gas the product actually being transported, it has been thought advisable to define "natural gas" as meaning either gas in its naural state as produced from the well, or residue gas from gas in its natural state, from cashinghead gas, or from other gaseous substances after extraction of hydrocarbon liquids, or any mixture of natural and artificial gas.

The definition of "natural gas company" in section 3, lines 8 to 15. page 3, conforms such definition to the jurisdictional provisions of the act by providing that

"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."

Production and gathering are not defined in the existing act. It is important that these terms be defined so that the regulatory body.

the producers and gatherers, and the natural gas companies may know definitely what activities and sales are under the act and what activities and sales are not under the act.

H. R. 2185 contains these necessary definitions in section 4, pages 3 and 4. These definitions have been framed with regard to the usual and normal practices in the oil and gas industry. When taken in connection with the jurisdictional provisions in section 1 (b), they have the effect of excluding from the act operations incident to the recovery of natural gas from the reservoirs, the recovery of residue gas from natural gas, casinghead gas or other gaseous substance, by treating or processing, and the delivery and sale of natural gas from production facilities. "Production facilities" are defined as the land, leaseholds, wells, separators, extraction plants and other facilities used for, or incident to, such production.

Under the definition of "gathering" there would be excluded from regulation under the act the facilities used for moving natural gas produced or purchased in the producing and gathering area to the point of delivery into inlets of the trunk transmission facilities used for the transportation of natural gas in interstate commerce, and the sales and deliveries of gas from such gathering facilities would be excluded.

The term "transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission" is also defined as that the interstate transportation which is subject to regulation under the act may be definitely determined. In this respect the definition of "transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission" is an aid and auxiliary to the definition of "production" and "gathering." By this definition the interstate transportation which is subject to regulation under the act commences at the trunk line compressor station or main receiving point of a natural gas company. The definition covers every phase of the handling of gas as long as it is in interstate commerce, but when it leaves the State and goes into the trunk line, surely, the jurisdiction will extend until it is put into the operating lines of the distributing companies in the various municipalities and other places throughout the country. It extends therefrom to the point in the State of local distribution, or on the boundary of such State, at which the gas moves from the trunk transmission facilities of the interstate carrier into the local distribution or trunk transmission facilities of the person who sells such natural gas in local distribution.

If the gas is transported across the State line in the trunk transmission facilities of the person who sells it to consumers in local distribution, then the terminus of the interstate transportation is at the point where the gas enters the pressure reducing or measuring station or local distribution facilities for local distribution.

The term "sale in interstate commerce of natural gas for resale subject to the jurisdiction of the Commission" is defined as the sale which is made after the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"Local distribution" is defined as the operation of local distribution facilities and the delivery or sale of gas therefrom. "Local distribution facilities" means the 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, or any other purpose.

All of these definitions have been framed with regard to the limits of jurisdiction embraced in sections 1 (b) and 1 (c), and I consider them essential if the confusions and misunderstandings of the past are to be avoided in the future.

In its report on production and gathering in docket G-580, to which I have previously referred, the staff of the Federal Power Commission pointed out that

With particular reference to the present problem, it would not be practicable for the Federal Government to attempt to regulate sales of natural gas by the producers and gatherers thereof, unless it also took over from the States essential functions now performed by them relatives to oil and gas conservation and the protection of correlative property rights in these resources (pp. 39 and 40).

This report also says that

In view of the widespread uncertainty which has been manifested regarding the Commission's view of its jurisdiction over production and gathering sales, it is important that the Commission take appropriate action to relieve the doubts and fears now prevailing in this regard (p. 40).

It suggests that this action may be accomplished through Commission rules or by an amendment to the act. The report, recommends, however, the administrative rule method instead of amending the act. And that has been the trouble all along.

In addition to the reasons I have previously given, the Congress should be unwilling to leave this important matter to be settled by administrative rules because such rules can be changed from time to time and at any time. There is another cogent reason which is revealed by the report to which I have made reference.

The Commission's staff does not propose to define production or gathering in the administrative rule which it recommends. After referring to the "significant distinction between the functions of production and gathering and the functions of interstate transportation and sale" the Commission's staff proposes to leave these definitions open for determination in each case by the Commission itself (p. 42).

The staff of the Commission says that

it must be granted that there will be some situation where the determination as to jurisdiction under the act can be made only after examining into the facts and circumstances with respect to the particular functions actually performed (p. 42).

It further says that

there can be no single test or formula which will afford an appropriate and ready answer, applicable to all of many different situations, in determining when production and gathering have been completed and transportation in interstate commerce within the purview of the act has begun (p. 43).

I very definitely disagree with this conclusion. The definitions which are in H. R. 2185 can always be applied by a producer or gatherer or by the Commission itself under any factual situation for the purpose of determining the question of jurisdiction.

If the Congress does not write some standard into the law to govern the Commission in its determination of when production and gathering end and interstate commerce subject to its jurisdiction commences, then the producers and gatherers will still be at the mercy of the

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