catalyst. And we feel, our data indicate, that iron is a far superior catalyst. So we today can make, and are making on an experimental scale, relatively high octane gasoline. Those two processes will be tied together, turning the coal into a mixture of a high heating value gas, and liquid products. The largest of those liquid products will be gasoline. Along with that will be a lot of heavier oil, so-called Diesel oil, which can be used for Diesel purposes, and some of it for household heating, and what have you. And along with that a certain amount of what we called oxygenated products, alcohol, and the like. Those are the four major products that will flow out of the process. If that can be conducted in the Pittsburgh area it means that even in that area we will have a good market for the gas, and there it will come into competition with natural gas, back it up back into the fields, we hope, and yet we also are turning out your liquid products in a territory which offers a tremendous demand for them, and correspondingly good markets. Mr. HARRIS. Is there any indication yet what percentage would be gas, and what percentage liquid products from coal? Dr. LEWIS. Just tell us what you want. We will give you all gas, or we will give you all liquid products. Actually we think that we do best by operating a process in such a way that will get both, and in roughly equal amounts, from an energy point of view. We think that the process of turning out both will be economically more advantageous than the modification of the process that would be necessary to furnish either one alone. Mr. HARRIS. In other words, you think you could go one better than the refineries, and produce anything you want? Dr. LEWIS. No. We cannot produce anything we want. My wants go far. My imagination is considerable. If you ask me to produce anything I want, the sky is the limit. No. We have our limitations. But within our limitations we feel that we will get the best results by producing partly gas, and partly oil. Mr. HARRIS. But at the present time you are somewhat fearful that that process will be so costly it will not be practical? Dr. LEWIS. That is right. Mr. HARRIS. Until you have further developments? Dr. LEWIS. That is right. Or until the price of gasoline goes up, or gas. Mr. HARRIS. You do not visualize the cost would go down? Dr. LEWIS. Of course, one of the things that worries me is this question of inflation. Our estimates as to what it would cost to build today are way ahead of what they were a year or a year and a half ago. Way ahead. I am hopeful tht we will be able to master this problem of inflation, and that prices and costs, such as prices of steel that are necessary to build the equipment, will go down. When that happens we can put down the cost of this material. Of course, when that happens, however, the price of gasoline will also probably go down. But it looks to me as if the time is surely oming when the price of gasoline and gas will be high enough so that this process will find its economic place in a competitive set-up, and that that future is not too far ahead. Mr. HARRIS. You think the heating values of that product would be about equal to the natural gas? Dr. LEWIS. Yes. I am talking about a gas with a heating value per unit volume equal to that of natural gas. A thousand British thermal units per cubic foot. On the other hand if you want a gas with 2,000 British thermal units per cubic foot, we will furnish it. We will want you to pay for it, but we will furnish it. Mr. HARRIS. That is very interesting. Thank you. The CHAIRMAN. Any further questions, gentlemen? (No response.) The CHAIRMAN. Doctor, your statement has been most interesting and informative. I think when Mr. Harris suggested that there was no limit to what you could do as a scientist, it was based probably on our experience this past week when we had the opportunity to visit the California College of Technology and saw the wondrous things that were there being done by the research scientists. Naturally it brought us to the thought that there is not any limit to what can be done by you folks who are engaged in research. We naturally expect great things from the Massachusetts Institute of Technology because of its past record of accomplishment. It has been a very great privilege to have you with us, and you may be assured that your statement will have the careful consideration of this committee. Dr. LEWIS. Thank you. STATEMENT OF JOSEPH BOWES, PRESIDENT, OKLAHOMA NATURAL GAS CO., AND PRESIDENT OF INDEPENDENT NATURAL GAS ASSOCIATION OF AMERICA Mr. Bowes. My name is Joseph Bowes. I reside at Tulsa, Okla., and I am president of the Oklahoma Natural Gas Co., a company which, with its predecessors, has been in the natural-gas business in Oklahoma since 1906. It is a completely integrated natural gas company, engaged in the production, gathering, purchasing, transmission, and distribution to the public of natural gas for fuel and other purposes. Its business and properties are wholly located within the State of Oklahoma. I am also president of the Independent Natural Gas Association of America, a voluntary trade association, with approximately 1,600 members residing or located throughout the United States. Its membership is comprised of gas royalty owners, gas producers, gas pipe line companies engaged in the transportation of natural gas, both intrastate and interstate, and gas companies engaged in the distribution of gas to the public. This association is organized and maintained solely for the purpose of promoting and advancing the welfare, progress, and development of the natural-gas industry in the United States. I appear here at the invitation of the chairman of this committee and as the president of the Independent Natural Gas Association of America to present my views with respect to House bill No. 2185, which is designed to amend the Natural Gas Act approved June 21, 1938, as now amended. I favor, without any reservations, the approval and passage of this proposed amendatory act. Notwithstanding the fact that the Natural Gas Act, as amended, provides in plain and unambiguous language, that the provisions of that act shall not apply to the production and gathering of natural gas, the Federal Power Commission has repeatedly asserted jurisdiction over the production and gathering of natural gas, in certain instances, under its rate regulatory powers granted in that act. The production and gathering of natural gas is purely a local matter, varying and differing, in the practical and operating problems presented, in different areas. The proposed amendatory legislation, if enacted into law, will deny to the Federal Power Commission the exercise of any jurisdiction, for rate-marking purposes or otherwise, over the production and gathering of natural gas in any one State and over the transportation and delivery of that gas by the person producing or gathering same, to an interstate pipe line, at a central point or points of delivery. The Federal Power Commission has held that a company engaged in the business of producing and gathering natural gas within the State of Louisiana, transporting same to central points of delivery, and there selling and delivering that gas within the State of Louisiana to interstate pipe lines is a natural gas company, subject to the jurisdiction of the Commission, notwithstanding the local aspects of the activities of the company concerned. It has held that a natural gas company which purchases gas from an interstate pipe line company at one point in a State and transports it to another point in the same State for sale and distribution to the public is a natural gas company, subject to the jurisdiction of the Commission on the theory of "continuous flow." It has asserted the right to deny the issuance of certificates of convenience to companies subject to its jurisdiction on the theory that the end use to be made of the gas was an inferior use. These continued administrative extensions of jurisdiction by the Federal Power Commission have had the effect of denying or destroying a free and unrestricted market for natural gas where produced. They are having the effect of holding back and restraining field developments for gas. They will normally depress and interfere with the prices for which gas can be sold in the field. Oil companies and producers of gas are becoming more reluctant to produce, save, gather, and deliver their gas to interstate pipe lines because they are fearful that the Federal Power Commission will subject them to the jurisdiction of that Commission and declare them to be natural-gas companies, as defined by the Natural Gas Act. There are many instances where cities and towns, located within economic distances from interstate pipe lines, could secure the advantages and economies for their citizens attending the use of natural gas. Local companies that would be interested in constructing natural-gas systems in these communities, or converting and adopting existing gas systems to the use of natural gas, are fearful and apprehensive that if they did so, they would be declared a natural-gas company subject to the jurisdiction of the Commission, if they were thereby required to construct a transmission line, connecting with the interstate pipe line and transport natural gas for a distance of even a few miles. This proposed legislation, if approved by the Congress and enacted into law, will clearly deny the jurisdiction of the Federal Power Commission in such local situations and will deprive the Federal Power Commission of any authority to decide what uses can be made of natural gas transported interstate. Natural gas is in direct competition with al lother types of fuel. In our economy and under our traditional scheme of free enterprise, such competition should continue, unrestrained, without the administrative impediments of controlled uses in the case of natural gas and wholly uncontrolled uses in the case of all other fuels. The proposed legislation, if enacted into law, would prevent the Federal Power Commission from exercising any jurisdiction over production and gathering facilities; it would permit the delivery of gas, within the State where produced, to an interstate pipe line at convenient points without the constant fear of being subjected to regulation from Washington; it would prevent the Commission from exercising jurisdiction over the end uses of gas transported in interstate commerce, either directly or by negative order and would prevent the Commission from exercising any jurisdiction over a person engaged solely, so far as the transportation of natural gas in interstate commerce is concerned, in producing, gathering, selling, and delivering such gas, in the State where produced, to an interstate gas pipe-line company. Mr. JOSEPH BOWES, MISSOURI NATURAL GAS Co., Farmington, Mo., March 19, 1947. President, Independent Natural Gas Association of America, Post Office Box 871, Tulsa, Okla. DEAR MR. BOWES: This company distributes natural gas in an area south of St. Louis serving nine towns. As a public utility, it is subject to regulation by the Missouri Public Service Commission. We are interested in the proposed amendments to the Natural Gas Act and would like to point out to you our position with respect to some of the more important features of these proposed amendments. 1. SECTION 1. END USE We believe that no agency should be given authority to fix the purposes for which any commodity may be used, thereby restricting the number of purchasers. We feel that everyone should be allowed a free choice of the fuels he wants to use, and that the purchaser should be allowed to determine the proper use that he wants to make of the fuel which he purchases. 2. SECTION 1 (B). IN RELATION TO PRODUCTION AND GATHERING Our company, like all distributing companies, is concerned with future supplies of natural gas for our consumers. We think it is of great importance that the oil companies owning natural gas should be positively assured that if and when they deliver natural gas to an interstate pipe line they would not come under the jurisdiction of the Federal Power Commission. They are primarily oil companies, but substantial owners of natural gas. If this provision is enacted, many billions of cubic feet of natural gas will become available to the distributing companies. We do not believe it was the intent of Congress that these oil companies or independent producers of natural gas would come within the provisions of the act. 3. DEFINITION OF "NATURAL GAS COMPANIES" We are of the opinion that the definition of "natural gas companies" as provided in section 3 is of the utmost importance to a local distributing company being regulated by a State regulatory commission. We feel that both the interest of the company and the consumers will be best served if purely local distribution will be subject only to regulation by local authorities, rather than by both the State commission and the Federal Power Commission. There seems to us to be no justification for duplication of regulatory authority. Because of the strictly local character of their business, the intrastate companies prefer regulation by their State commission, and wish to be allowed to expand their operations without becoming subject to the Federal Power Commission. For example, there is an area south of the area we now serve, containing 16 towns, all of which would like to be served with natural gas. We are now engaged in making studies to enlarge our operations to serve these communities, but to do so it would be necessary for our company to construct some trunk transmission lines to connect with the interstate pipe-line company. Some of the directors of our company feel that under the present act, if we do this we become subject to Federal Power Commission. The management of our company is unwilling to undertake the building of the necessary trunk transmission lines because this may have the effect of bringing our company under the jurisdiction of the Federal Power Commission, although it and its operations are already subject to the jurisdiction of the Missouri Public Service Commission, from whom it would have to obtain certificates of public convenience and necessity as well as approval of rates, if the extensions are made. Unless this provision of the Natural Gas Act is amended, it is quite likely that these communities desiring natural gas will not be served by our company. 4. FIELD PRICE OF NATURAL GAS As stated before, we are concerned with having a long-time supply of natural gas. We cannot understand how the transportation companies owning gas reserves and supplying us with natural gas can be expected to continue to search for and develop new gas areas if they are going to be limited to earnings based on costs. We think a long-range view should prevail. This is, to permit the transportation companies to charge in their operating expenses the prevailing field price for natural gas and thereby encourage them to continue search and development for additional reserves. The gas belonging to transportation companies is without question worth the same money as the gas belonging to an adjacent independent producer. This portion of the amendment will undoubtedly be of great benefit to distributing companies and consumers by providing additional reserves to furnish gas for a long time in the future, and cause our properties to continue to be worth our investment in them. These are the important features of the proposed amendments concerning our part of the industry, and I trust Congress in its wisdom will enact these amendments and aid in promoting the expansion of this industry which serves such a large portion of the people of our country. Very truly yours, MISSOURI NATURAL GAS Co.. President and General Manager. STATEMENT OF RICHARD WAGNER, PRESIDENT OF THE CHICAGO CORP., CHICAGO, ILL. Mr. WAGNER. The Chicago Corp. has total assets in excess of $40,000,000. Its equity capital is owned by more than 20,000 stockholders, no one of whom has as much as 3 percent of the outstanding common capital stock. While formerly the company partook of the nature of a so-called investment trust, it now functions in part as an independent oil and gas producer and in part as a venture capital corporation. By this latter term I mean that it supplies risk capital to new enterprises and to growing companies. In 1938 the Chicago Corp. financed a natural gas processing and cycling plant in the Gulf coast area of Texas. Prior to that time substantial quantities of both oil and gas had been discovered in this area. Due to the lack of markets no attempt had been made to develop and utilize gas. In the persistent effort to find oil, vast volumes of gas that were neither needed nor wanted had been developed over an extensive region. Local markets absorbed only a minor portion of the combined gas potential of the wells. Many gas wells were capped and abandoned. Gas leases that had no oil possibilities |