Mr. Dolliver's bill does not broaden the powers of the Commission. It merely sets up standards for the guidance and control of the Commission in considering questions of public convenience and necessity.

No such standards exist in the act today. It seems to us that these standards are clearly in the public interest, easily understandable, and that no need exists for the completion and report in docket G–580 before such standards are adopted.

We are apprehensive that unless Congress takes action at this session, it will be at least another year, or possibly a year and a half, before any such legislation can be passed.

In that time, unless the Commission changes its practices, the dissipation of natural gas, by uneconomically wasteful uses, will continue to increase.

SUBSECTION (C) (1)

Now, subsection (c) (1) of the act merely requires that the Commission shall give first consideration to the needs of national defense. I need spend no great length of time on that. It must be obvious, of course, that the Commission should consider those matters and the Commission has. I do not want to leave the inference that the Commission has not expedited, with all reasonableness, applications that were filed during the war to enlarge facilities or to install pipe lines that were intended to contribute to the war effort.

I might say very briefly that natural gas made a very substantial contribution in the war, particularly in the metallurgical industry for heat treating, annealing, and forging of steel in the manufacture of war material. And where it was used for such purposes as Mr. Harper related yesterday-high-class industrial uses, to which we have no objection.

These and similar processes require great heat and close temperature control, and in some instances, atmospheric conditions which are supplied advantageously with natural gas and in these special processing furnaces, it is very desirable for that purpose.

Natural gas was also used to a large extent in emergency housing for civilian and armed service personnel because of the economy and rapidity with which installations could be made.

Now, natural gas made a very substantial contribution from the chemical standpoint, as more than 50 percent of the additional synthetic ammonia produced for explosives was made from hydrogen derived from natural gas.

Carbon black, a derivative of natural gas, is essential in the manufacture of tires, especially synthetic rubber tires, and its use was expanded tremendously during the war. Several large chemical plants were constructed for the manufacture of plastics, nylon, detergents, solvents, and numerous other chemicals, including acetylene, butadiene, toluene, and formaldehyde.

This information is taken from the PAW report that was filed with this Congress last year entitled "Petroleum in War and in Peace." Now, on the other side it is also a fact well demonstrated in the last war that a large merchant coke industry is of major importance to the national security. This is something in which our industry is very much interested. Coke made a very important and indispensable contribution to the war effort.

While I am not an expert on the subject I have heard it testified too many times that coke is the only fuel that can be used for certain purposes in foundries in the cupelos of foundries and, of course, foundries were very important during the war.

It is the source of the coke for our foundry industry, without which our production of heavy war material is impossible. Merchant coke is divertible for steel plants in emergencies, and in World War II this was of great benefit in quickly developing production of steel and munitions without waiting for construction of new facilities or allocating materials for these.

The byproducts of these plants and the basic raw materials supplied by derivatives of the coal tar they produce are an essential part of our chemical industry and of vital importance to our war-making potential. The Commission should be aware of these factors in considering applications for natural-gas distribution that would destroy these plants.

Similarly, the Commission, as the governmental agency charged by Congress with responsibility for continuing watchfulness over the extension of transportation and sale of natural gas in interstate commerce should be continually aware of the effect of its actions directly upon our ability to maintain our productive strength in time of national emergency.

It is evident that thickly populated and highly industrialized areas that have become largely dependent upon single pipe lines, or even a network of pipe lines, would be more vulnerable to enemy action, whether by sabotage or direct aerial or other attack, than would these same areas if supplied with fuel from thousands of coal mines through our vast railroad network in thousands of railroad cars.

Some aspects of these matters would obviously require consultation with other agencies, such as the armed services. Some cases might require a report to Congress rather than specific administrative action. Maintenance of adequate storage and stand-by capacity, however, is more directly within the province of the Commission either for direct action or action in cooperation with State agencies. It is appropriate that the Commission should be continually aware of the necessity from the standpoint of national defense of insuring insofar as possible a dependable supply of fuel for all purposes.

It should not be inferred that the Commission has not given due regard to the requirements of national defense. It has without hesitancy authorized the construction and expansion of natural-gas facilities to take care of our war needs wherever these were demonstrated to exist. These requirements should always be uppermost in the minds of the Commission.

Now, gas was used also where it was readily available and was conveniently installed for the heating of emergency housing facilities for Army and civilian personnel who were occupied in the war effort. The use of natural gas increased 75 percent during the war, 1940 through 1944, and that in itself shows the reliance that our war effort places on natural gas, and it is something that should be given very serious consideration, especially under the unsettled world conditions today when we think about further expanding our natural-gas service or where it is proposed that we ignore, to a considerable extent, the economic use of that gas.

Now, motor fuel, as you know, is indispensable in time of war. I am not going to discuss that in a technical way, because in the first place

the members of this committee are already conversant with the impending shortage of domestic motor fuel. We are importing more motor fuel year after year. Our present supply, or known reserves are said to be the equivalent of about 1212 years' supply.

German processes have been recently improved by which natural gas may be converted to gasoline and Diesel oil at costs comparable with those presently prevailing for such fuels.

A $20,000,000 plant for converting natural gas to gasoline and Diesel oil is now in the process of construction in Texas. Another one of larger capacity is projected for the Hugoton field in Kansas. The Texas plant will produce 5,800 barrels of gasoline and Diesel cil per day and the Kansas plant 6,000 barrels a day. This will require 164,000,000 cubic feet of gas each day at the outset. It has been estimated that within the next 15 to 20 years the daily production of these synthetic hydrocarbons may be considerably over 200,000 barrels daily.

The presently known reserves of crude petroleum approximate 20,000,000 barrels, with an annual consumption of 1,700,000,000 barrels, or the equivalent of slightly more than 12 years' supply.

Importation of petroleum is increasing from year to year. From our experience in the last war, we recognize the hazard of having to rely on imported supplies during such times. It would, therefore, seem that a foresighted policy would require weighing carefully the wisdom of conserving natural gas to augment our limited and diminishing petroleum reserves.

Natural gas consumption increased 75 percent during the war years, 1941 through 1944. Another war would place a tremendous additional drain on our reserves.

In the light of present unsettled conditions, it would seem that the husbanding of our scarce, vital natural resources, should be a matter of foremost importance.

SUBSECTION (C) (2)

Now, passing to subsection (c) (2), that section requires that the Commission shall take into consideration the wisdom of a policy which will

conserve the reserves of natural gas for utilization which affords the highest social benefits to the public, consistent with reasonable rates and adequate service.

That is a section which is the antithesis of one portion of the Rizley bill and around which a good deal of the controversy in this matter revolves. On its face it would appear in the interest of the públic that gas, being a limited resource, insofar as known reserves are concerned, one with a short life, should be conserved for the uses that will best serve the general public.

According to the latest published report of the Bureau of Mines, at the end of 1945, 10,850,000 domestic customers consumed 16 percent of the marketed natural gas, 875,000 commercial customers consumed 6 percent and 44,000 industrial customers consumed 78 percent, with a total consumption of 3,875,172,000,000 cubic feet. A very large but undetermined percentage of industrial consumption was for inferior purposes, which could have been taken care of efficiently by coal, where coal is reasonably available at a relatively reasonable price.

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Now, the so-called superior use of natural gas from the standpoint of the general public are usually classified in about the following order: Cooking in homes, water heating, refrigeration, cooking in hotels, restaurants, and so forth, domestic house heating, superior industrial uses, such as I have referred to. At the bottom of the list is industrial boiler fuel, because there it is merely a matter of generating heat for whatever purpose it may be useful.

Now, then, during the course of these proceedings Justice Jackson's opinion in the Hope case has been repeatedly referred to by representatives of the natural-gas companies, and I thought if not with great praise, at least with approbation. There is one feature of the opinion that they made no reference to and I would like to recommend to you gentlemen, if you find the time, that it might be well worth your while to read the whole opinion. It represents, not by Justice Jackson himself alone but probably by his staff, a very extensive research and study of the natural gas situation.

Now, in that opinion, Justice Jackson said this, that the other side did not quote:

Utilization of natural gas of the highest social as well as economic return is domestic use for cooking and water heating followed closely by use for space heating in homes. This is the true public utility aspect of the enterprise and its preservation should be the first concern of regulation. (Federal Power Commission v. Hope Natural Gas Co., 320 U. S. 591, 88 L. ed. 333.)

Now, that is the concept that underlies section (c) (2) of the Dolliver bill, and in view of the limited resources of natural gas, its dissipation for economically wasteful purposes should be eliminated as far as possible.

The proposed amendment is not a mandate to the Federal Power Commission to prescribe the use of natural gas for any type of industrial use. Its main purpose is long-time continuity of service to the domestic user, and to conserve supplies for preferential commercial and industrial uses, and when the opponents attempt to give the impression that the coal and railroad industries are foolish enough to think that they can bar industrial uses, why they are attempting to mislead the public and this committee. We not only recognize the necessity and desirability of natural gas for these preferential industrial uses, but we recognize the necessity of the pipe-line companies, in many instances, having substantial loads of industrial gas in order to create a load factor that will be profitable to the companies in order that they may maintain reasonable rates to the customers.

If the general public is not entitled to this protection, there is no need for this type of legislation.

In order to maintain a profitable load factor and at the same time keep domestic rates at a reasonable level, it may be necessary for a pipe-line company to have a substantial industrial load. The Federal Power Commission is, in effect, directed to give consideration to this fact in applying this provision.

Now, I want to impose upon the good nature of the committee for just a minute to relate the experience of New York State, which is one of the oldest gas-producing States in the country. In fact, history shows that natural gas was first used at Fredonia, N. Y., for lighting the street in 1849. So these gentlemen have had some experience with natural gas in that State.

Now, at times in that State during periods of flush production, gas has been wantonly wasted, whereas at other times consumers have had to revert to other fuels because of lack of gas. Now, their reserves are virtually exhausted.

From a peak production of 41,000,000,000 cubic feet in 1938, there was a decline to 7,700,000,000 cubic feet in 1944. There have been no substantial discoveries in the past 10 years and New York is now required to rely increasingly upon imports from other States.

In its brief filed with the Federal Power Commission in docket G-580, the Public Service Commission of that State said:

There can be no adequate conservation of natural gas without a determination by some authority that the end use is proper. In the interest of conservation and of uniformity, such a determination should be in the hands of a Federal agency (p. 2).

And again in the report it said this:

The inference has been made at several points in the record that New York State foolishly wasted its own resources and is now asking that other States come to its aid. The history of the waste of Oriskany gas through use as fuel on a large scale as a substitute for coal, with a saving of a small percentage of the -cost, is an example of the need for central control. The gas consumed during this period was produced only partly within New York State, a large part coming from Pennsylvania and other States within the Appalachian area. For New York to have forbidden its use as boiler fuel would have resulted in its being diverted to similar use in other States and would not have preserved it for future use of residential and high-grade commercial and industrial purposes within New York State (p. 6).

The use of natural gas for boiler fuel has most frequently been referred to as the least desirable purpose for which natural gas may be used, especially in area where coal is available in abundance. In support of our position that the Commission should consider the "end use" to which natural gas is to be put in determining questions of public convenience and necessity, and especially as applied to its use for boiler fuel, we call as witnesses to support our contentions, leading authorities connected with the natural-gas industry.

I have cited the experience in New York State. Mr. Ralph Davis, one of the best-known geologists and petroleum engineers in the country, in commenting on that experience stated in 1942:

Deep Oriskany sand was found in southwestern New York some 10 to 12 years ago, resulting in a great increase percentagewise in the natural-gas production of the State. Unfortunately, the New York State Public Service Commission permitted these fields to be rapidly depleted by burning the gas for inferior purposes such as boiler fuel. The importance of gas conservation is now so evident everyone can see it (Oil and Gas Journal, October 1942, p. 36).

Mr. E. Holley Poe, whom many of you know no doubt, the president of the recently formed Texas Eastern Transmission Co., which intended to operate, and is operating or will be operating, the Big Inch lines after May 1, a man of long experience and formerly a director of the Natural Gas Division of PWA, and while in that position he testified before a Senate committee headed by Senator Clark, as I remember-Senator Reed was on the committee-they were investigating the natural-gas shortage in the Midwestern area. That was in February 1943. Mr. Poe said this:

From the standpoint of the consumer, I think everybody will bear me out that gas is most desirable. It has three balls already pitched and is almost a