the effect of the Constitution was then understood under decisions of the United States Supreme Court and with the intent to leave other local utility operations of companies subject to local control under State laws.

That is demonstrated, we think, by what this subcommittee said in its report, which report I quote from in my statement.

It was made very clear in that report, that the Congress refrained from giving the Federal Power Commission jurisdiction to regulate any direct sales to consumers of any character for the express purpose of permitting the States to continue to exercise the jurisdiction over sales to consumers which the Supreme Court had recognized in the Pennsylvania Gas case to exist in the States.

That is, the power to regulate direct sales to consumers even though interstate commerce was involved. But some of the largest pipe-line companies have refused to recognize what this committee said in its report and are contesting the jurisdiction of the States to regulate direct sales. They are pointing to the act and saying, "Congress said nothing in the act to indicate that it was its intent to leave to the State authorities the regulation of such interstate operations as were local in their character and are not regulated under the act."

There is litigation in Michigan, and in Indiana not yet concluded. In Indiana the matter has been passed upon by the supreme court of the State in an opinion which holds that sales of gas to industrial consumers are just as much subject to regulation by State authorities as any other sales to consumers, regardless of whether they are to be considered as intrastate sales or interstate. The opinion holds that was the purpose of Congress.

There is an appeal from that case in the Supreme Court of the United States. We are not fearful of the outcome of that appeal if this legislation does not cut the ground out from under our feet.

That opinion of the court, we think, ought to be before this committee. I have a copy of it which I hand to the clerk, and ask that it be incorporated following my statement.

May that be done?

The CHAIRMAN. It depends upon the length of the opinion. May I see it?

Gentlemen of the committee, this opinion, which has been presented with the request that it be printed as a part of the record, constitutes 23 long typewritten pages. The opinion has been rendered by the Supreme Court of the State of Indiana, in the November term, 1946, the opinion itself having been delivered on February 5, 1947. It would seem as if it had been made a part of the regular records of the State of Indiana, and therefore of the published report of the decisions of that State. What is the desire of the committee with respect to the incorporation of this in its entirety?

Mr. HALE. Mr. Chairman, could not the witness summarize the opinion?

The CHAIRMAN. It would seem to me, Mr. Benton, that it would be better if you would take this opinion and either in syllabus form or otherwise, pick out those portions of the report which you wish to bring to the attention of the committee.

It is rather a long opinion to make a part of our records when it is already in the lawbooks and can be examined by any member of the committee that wishes to do so.

Mr. BENTON. I presented it merely so that it might be easily available to every member of the committee.

I will be glad to reduce it by cutting out portions which I think perhaps they might not be interested in.

The CHAIRMAN. We will be glad to receive it as an exhibit in the case with the privilege upon your part, if you wish, to summarize it as a part of your remarks.

(The opinion referred to follows Mr. Benton's oral statement.)

Mr. HALE. I think we should have the citation in the Indiana Law Reports so that any member of the committee can readily find it.

Mr. BENTON. It is not yet reported, Mr. Chairman. I will reduce it to whatever length the chairman may indicate, if he will indicate, and ask that it follow my statement, or I will make a genuine endeavor to reduce it to its lowest terms without direction.

The CHAIRMAN. You may do so.

Mr. BENTON. Thank you.

When the Natural Gas Act was passed we had no opinions from the United States Supreme Court which indicated the importance which that Court would come to attach to declarations on the part of the Congress with respect to its intent that State regulation might be applied to regulate interstate matters left unregulated by Congress.

We now have such opinions, the most recent and important of which was in the Prudential Life Insurance case, following the enactment of the McCarran bill, which provided that the insurance business should be subject to regulation and taxation by the States.

In that case the court reviewed decisions and the opinion gave full effect to the statute. It was a taxation case. In the amendments which we have presented we have followed the language of the McCarran Act so far as it relates to regulation. The amendments presented provide that those matters and activities of gas utilities which are not regulated under the Natural Gas Act, as amended by this act, shall be considered local and shall be subject to regulation by the States.

We have not incorporated the language relating to taxation, because we have been interested only in having the public utility operations of gas utilities subject to regulation, either by the Federal agency under the Federal act, or by the State agencies to the extent found necessary in the respective States under State laws; and we make no recommendation about taxation.

Some representatives of the natural-gas industry have expressed to us the fear that these amendments will operate to open the door to State taxes on sales of producers and gatherers excluded from Federal Power Commission regulation by this act.

Our amendment, however, as I have just said, is drawn to express congressional assent to regulation only. It omits the language as to State taxation; and, of course, so far as sales of producers and gatherers are intrastate in character, they are subject to State taxation without congressional assent.

But some sales of producers and gatherers undoubtedly are sales in interstate commerce, in that they are made for immediate transmission into other States for sale and consumption in those States.

But taxation is not regulation, and we think that the amendments that we have drawn could not be stretched to cover taxation of those sales.

But the fear is also expressed that what is in effect a tax, but which is called a minimum field sales price, may be imposed under the guise of a "regulation" for the purpose of conservation, and that sanction for State action of that kind may be claimed under our amendments.

To that we make the obvious reply that producing and gathering are local operations. They were so recognized when this act was passed in 1938. They are local, just as plainly as the production of grain and the harvesting of grain are local, and, as such, they are subject to State regulation without the expression of Congressional assent.

If the imposition of a field price is, within the contemplation of law, a regulation of those operations, then the State may impose such field price without any assent on the part of Congress. If it is not, then calling a minimum field price a conservation regulation in a State statute or a Commission order will not make it regulation; and the same will gain nothing from our amendment. They also express the fear that the gas-producing States may impose end use restrictions on production.

That alleged apprehension is far-fetched and fanciful, we think. As sovereigns of the soil within their borders, the States can control production, subje t only to the restrictions against confiscation in the Federal Constitution. Whatever restrictions, under the Constitution, may be laid on production for the purposes of conservation may be laid without federal assent, just as the States today enforce their conservation orders, under State laws.

Inasmuch, however, as these apprehensions, which have been voiced to us, may be pressed on the committee, let me say that these amendments we are presenting are designed only to safeguard the public right to full regulation of the public utility operations of gas companies.

If Congress shall wish to guard against any possible misconstruction or misapplication of those amendments, in the way of subjecting to State regulation any matters connected with the business of production and gathering, which it is deemed are within the reach of Congress, and which Congress now determines should be left untouched by any regulatory agency, Federal rule or State, a proviso attached to our proposed paragraph (e) of section 1 will operate to insure against any such possible apprehension, and will leave the general field of regulation of the utility activities of the gas companies in the several States, which shall not be covered by this act, subject to such regulation as may be found necessary, and as may be imposed by State authority.

That is the sole purpose of our amendments.

We think the objections to which I have just referred are fanciful, and that they will not impress the committee, but if they do impress the committee, it will be very easy for the committee, by a proviso, to guard against those specific apprehensions, while still providing for the full regulation of the utility operations of the gas industry, so that the gas industry will not be able to claim that what is removed from the jurisdiction of the Federal Power Commission by this bill, the provisions of which are novel in many respects, and may reach much fur

ther than on their surface they would seem to reach, shall not by reason of this legislation be put in a twilight zone, where neither the Federal agency nor the state agencies can regulate them.

The State commissions are interested, and should be, in a proper regulation of the utility activities of all utilities. If they are utilities which serve distributing companes, which must continue to serve, and at reasonable rates to enable dstributing companies to serve and give reasonable rates to their consumers, then they are activities which should be subject to regulation, either by the Federal Commission or the State commission.

So the amendments which we have presented, to Section 1, would place a statement in the act that what is not subject to regulation by the Federal Power Commission, as an agency of Congress, shall be regarded as local, and subject to regulation in the several States, by the States, as local sovereigns, to the extent that regulation is there found necessary, and shall be there provided for by law.

The amendment to section 4 I had intended to discuss. It is, however, fully covered in by filed statement, and in recognition of what has been said as to the length of time I should consume, I leave the statement to speak for itself.

I come now to the statement for the Illinois Commerce Commission, and make the same remark with respect to that.

The Illinois Commerce Commission is interested in having certain amendments made to the act. They have been considered by the national association and the national association concurs with the Illinois Commission as to the necessity for the addition of paragraphs (h) and (i), which are proposed to be added by a new section 7, and are set out on page 1 of my statement for the Illinois Commission.

Also on April 16, Mr. Henry, chief engineer of the Illinois Commission, presented an amendment to section 3 of H. R. 2185, one of the provisions of which-it is the paragraph (a) which he suggested, I think, of his proposed amendment-would provide that natural gas companies which receive gas from another State, at the border of a State, or within a State, and sell the same for public consumption within the same State, shall not become thereby subject to regulation under the act.

Mr. Henry pointed out the very obvious fact that a distributing company which distributes gas produced in another State must have a connecting main line to connect its distributing facilities with the pipe-line company to receive that gas.

And often the distributing company has to build and maintain that connecting line.

The Federal Power Commission has held that the operation of that line, for the sole purpose of getting gas from the pipe line company to be used in local distribution, is not local distribution but is "transportation" subject to the act, and makes the company, as to certain activities and reports, subject to the Federal Power Com

mission.

We think that that construction, by the Federal Power Commission, disregards the plain intent of the act, as indicated by this committee and by the language of the act itself, and the national association desires to concur in support of the proposal contained in paragraph (a) of that amendment, as presented here by Mr. Henry.

Mr. Chairman, I will not dwell upon these statements longer, in view of the suggestion made by the chairman, but will let the several statements speak for themselves.

Mr. HALE. Mr. Benton, although you present these proposed amendments on behalf of the Illinois Commerce Commission, in which they originated, they stand on the same footing as the other amendments which you proposed; is that right?

Mr. BENTON. That is right. They have been considered by the president and by the executive committee and were approved by resolution of the executive committee instructing their presentation and support on behalf of the association.

Mr. HALE. Are there any questions of Mr. Benton?

Mr. CARSON. May I make one observation, Mr. Chairman?

In reading the Natural Gas Act of 1938 and reading the reports of the various committees leading up to that, it seems to me that it was clearly not the intention of Congress in enacting the Natural Gas Act to confer any jurisdiction on the Federal Power Commission over purely local distributing companies, or over facilities used for local distributing companies, since these were completely under the jurisdiction of the State.

I want the record to show the statement made by the committees of both the House and the Senate in reporting this bill to their respective bodies. This is quoting from the language of both the House and the Senate:

There is no intention in the present legislation to disturb the States in their exercise of such jurisdiction. The bill takes no authority from the State commissions and is so drawn as to complement and in no manner to usurp State regulatory authority.

That seems to me to be very clear language. Is that your opinion of that?

Mr. BENTON. I agree with you. I am glad you have emphasized that by reading it.

Mr. CARSON. Thank you.

Mr. HALE. Thank you, Mr. Benton. We are all indebted to you. The committee will adjourn until 2 o'clock.

(Thereupon, at 12:55 p. m. the committee recessed until 2 p. m., same day.)

MEMORANDUM COVERING STATEMENT TO BE MADE FOR THE NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS ON H. R. 2185, H. R. 2235 AND H, R. 2292 BY JOHN E. BENTON, ADVISORY COUNSEL OF SAID ASSOCIATION

My name is John E. Benton. I was formerly the general solicitor of the National Association of Railroad and Utilities Commissioners, and I am now its advisory counsel. I appear for that association under the direction of the president of the association, Hon. Duane T. Swanson, of Nebraska, and by request of Hon. Frederick G. Hamley, who is now general solicitor of the association.

The association embraces the membership of the regulatory commissions of the several States and Territories of the United States, except only New York, the commission of which is not actively identified with the association, and Delaware, which has no State regulatory commission.

The members of the Federal regulatory commissions-he Interstate Commerce Commission, the Federal Power Commission, the Federal Communications Commission and the Securities and Exchange Commission-are likewise members of the association; but, upon matters of legislation, the association never undertakes to speak for the Federal commissions. They speak for themselves, if they desire to be heard. The association is maintained exclusively by the State commis