certain specific changes in various sections of the Natural Gas Act which have been advocated by certain trade association groups within the oil and gas industries. The fourth (H. R. 2569) was introduced more recently and is supported by their competitors in the coal business and allied interests. It is a related measure, in the sense that it deals with some of the same subject matter, but its objectives are, for the most part, diametrically opposite; and its approach is that of a general statement of policy. rather than that of amending individual provisions of the present statute. For convenience I shall refer to these proposals from here on as the "gas bill" and the "coal bill," respectively.

POSITION STATED GENERALLY

As stated in the legislative report filed with your committee, it is the position of the Commission that it would be unwise for the Congress at this time, in an atmosphere of seeming haste and urgency, to enact the proposed legislation, which is designed to serve certain limited special purposes, by reason of the fact that the Commission has not yet completed and submitted to the Congress its forthcoming comprehensive report on the natural gas investigation (docket G-580) which has been referred to rather frequently during these hearings and also in view of the pendency before the United States Supreme Court of the very important Interstate case, on which argument was heard by the court on May 2.

Before going on to discuss these matters, however, I want to point out that the Commission, in taking the position that these bills are premature, is not asserting that all of their provisions are wholly without merit; some of them may, after mature and balanced consideration, be found to be necessary or desirable. But, until the Commission has completed its analysis of the entire range of interrelated problems encompassed by the natural gas investigation, has submitted its tentative conclusions, in accordance with the predetermined procedure, to all those interested for their criticism and comment, and has transmitted its final report and recommendations to the Congress, an adequate basis for a sound, over-all evaluation of the various proposals contained in these bills from the standpoint of the broad public interest will be lacking.

It is not our position that the present statute is in all respects perfect or that the Federal Power Commission has never, as shown by subsequent developments, made a single mistake or error of judgment in its efforts to administer the act in accordance with the congressional intent. On the contrary, the Natural Gas Act in its present from being only a little over 5 years old, it would be most unusual if problems had not arisen in connection with the initial application and interpretation of the statute. During much of this time, too, wartime and reconversion conditions have made more difficult the situation of both the industry and the Commission.

That more serious complications have not developed is a tribute to the wisdom of the Congress in framing the Natural Gas Act as it didon the basis of a very careful, deliberate, and thorough study of the proposed regulatory legislation. The Natural Gas Act was proposed as a result of the Federal Trade Commission's exhaustive survey, made

pursuant to joint resolution,1 and was supported by resolutions of the National Association of Railroad and Utilities Commissioners. Between the introduction of the first bills-by Congressmen Rayburn 2 in 1935 and Lea in 1936, and by Senator Wheeler in 1936 -and the approval of the Natural Gas Act in 1938, as well as in connection with the extensive amendments of 1942, much of the time and thought of the House Committee on Interstate and Foreign Commerce, and of the corresponding committee in the Senate, has been devoted to this important and complicated subject. It would be unfortunate, indeed, if the substantial changes in the act represented by these bills were now to be made without mature consideration of all phases of the public interest.

As stated previously, however, the Commission is not here suggesting that all consideration of the act and its administration be avoided or killed off through indefinite postponement. If we had not recognized the existence of problems and a real need for their thorough and impartial examination, we would certainly have not undertaken the natural-gas investigation, which has as its essential purpose this very thing for the information and assistance of the Commission and the Congress, as well as the public at large. We seek simply an opportunity to complete our report on that investigation-a matter of a few months-and to lay the results and our recommendations as a whole before you for what they are work prior to your taking any action on these particular bills. We think that is a reasonable proposal to make; we fail to see how anyone can properly complain if you see fit to follow it.

In this connection I think the following quotation from the statement filed with this committee at this hearing by the Michigan Public Service Commission is particularly pertinent:

** We as a State regulatory body feel that we have an appreciation of of the duties and responsibilities of similar regulatory commissions on the Federal level. During the past 2 years the Michigan Public Service Commission along with the commissions and utilities of several States have participated in an over-all investigation by the Federal Power Commission to gain a more comprehensive knowledge of all phases of the natural-gas industry. The first phase of this investigation has been completed, but the analysis of the vast amount of testimony and the final report have not been completed. We would recommend that your honorable committee and the Congress have the benefit of this report before making final disposition of bill H. R. 2185.

NO NEED FOR HASTY ACTION

In making this suggestion we are aware that efforts have been made to take advantage of postwar conditions of shortage which exist, and are likely to continue for some time, within the natural-gas industry as, unfortunately, with respect to a good many other commodities and services. As recently pointed out to a congressional committee by Walter S. Hallanan, chairman of the National Petroleum Council and president of the Plymouth Oil Co., there are in existence or in prospect

1 Final Report on Utility Corporations of the Federal Trade Commission to the Senate of the United States pursuant to Sen. Res. 83, 70th Cong., 1st sess., approved Feb. 15, 1928 (as extended by S. J. Res. 115, 73d Cong., 2d sess., approved June 26, 1934), on "Economic, Corporate, Operating, and Financial Phases of the Natural-Gas-Producing, Pipe-Line, and Utility ndustries, With Conclusions and Recommendations," S. Doc. 92,. pt. 84-A (70th Cong., 1st sess.), 1936.

2 H. R. 5423, 74th Cong., 1st sess.

3 H. R. 11662, 74th Cong., 2d sess.

* S. 4480, 74th Cong., 2d sess.

shortages of various fuels-liquified petroleum gas, domestic fuel oils, Diesel fuel oils, and even tractor fuel, as well as natural gas.

The Commission knows of the hardships caused by interruptions of gas service during the past winter, and of the virtual certainty that they will recur next winter, as well as of the misunderstandings concerning their causes which have been engendered. It has, as I shall show, been doing, and it will continue to do, what it can-under its somewhat limited powers and in cooperation with the State regulatory commisssions, the pipe-line companies, and the distributors and consumers of natural gas-to alleviate these conditions.

With the true facts in mind, as to both the underlying causes and the efforts of the Commission, it is amazing that there should have been so many efforts to lay the blame for recent natural-gas shortages on the doorstep of the Federal Power Commission through unsupported charges that it has prevented the natural-gas industry from properly developing and serving its markets.

Similarly, it has been alleged that, notwithstanding the plain intent of Congress as expressed in section 1 (b) of the act, the Commission has willfully sought to extend its jurisdiction to include the independent gas producer-and perhaps even to undertake the regulation of the oil industry as well. The result of all this has been said to be that such producers are afraid to sell their gas in interstate commerce lest they subject themselves to Federal regulation, that gas which might otherwise be used is wasted, and that all this has something to do, too, with recent shortages of natural gas.

This is not so. I do not deny that there has been apprehensionsome no doubt genuine and much that has been stimulated by extravagant "viewing with alarm" by those interested in securing this proposed legislation-among independent gas and oil producers. This has occurred particularly since the decision of the circuit court of appeals in the Interstate case, to which I shall refer at greater length later. It is also true that natural gas independently produced and sold to pipe-line companies is tending, perhaps in part through the action of State agencies and particularly by reason of increased demand for pipe line and other uses, to bring higher prices in the field. It is true, furthermore, that arm's length prices for purchased gas are allowed by the Federal Power Commission as operating expenses in ráte proceedings, and that there is no policy of the Commission which prevents the payment of reasonable field prices for independently produced gas if pipe-line companies are ready and willing to do so.

It seems likely, therefore, that some gas is now being held in anticipation of better future prices, just as increasing amounts are being reinjected into the ground for essential conservation to maintain pressures for raising oil. Also, large amounts are still being ventedpartly, it is asserted, because recovery costs at many scattered locations do not make its capture in available volumes and at present freelydetermined prices economically feasible, but due no doubt also to pipe and equipment shortages, as well as the inertia of established industry practices.

There is nothing whatever to indicate, however, that a lack of available gas in the fields has in any way contributed to the recent shortages. In rare instances where State proration orders might

Interstate Natural Gas Co., Inc. v. Federal Power Commission et al., 156 Fed. (2d) 949.

otherwise have interfered with the full utilization of pipe-line capacity to meet emergency needs, there has been notable cooperation to avoid such an unfortunate result. An important illustration is the action of the Texas Railroad Commission with respect to gas going into the Big and Little Big Inch Pipe Lines to help out in the Midwest and Appalachian areas last winter. Nor does it appear that plentiful reserves are lacking to back up the numerous applications to construct additional pipe-line facilities which have been filed with the commission in recent months. So I think it is fair to say that during the shortages of the past winter not a cubic foot of gas which could be transported through existing physical facilities failed to move to market. That is the prospect for next year as well. The shortage problem is not one of gas but, essentially, of pipe-line capacity to take it where it is needed.

Finally, your early and favorable consideration of this bill has even been said to be necessary if the gas industry is to survive. In support of that rather extreme view it has been said that perhaps no stronger language for the necessity of this legislation can be found than that contained in my opening statement at the first of the hearings in the natural-gas investigation in Kansas City on September 18, 1945, which was then quoted in part, my language being as follows:

It seems clear that any administrative agency-which operates as an arm of the legislature in interpreting and applying to specific situations the regulatory policies expressed generally in the statutes under which it functions-should pause from time to time to make certain essential appraisals. This stocktaking should include more than just an inquiry into its own specific performance; it should involve consideration of the soundness of its interpretations of the legislative expressions of policy and an evaluation of those policies themselves. The remainder of the paragraph, which was not included in the portion quoted to this committee, emphasized that all of these matters should be "viewed in the light of the general public interest, which is of paramount importance.'

We have no doubt that this committee and the Congress will, like the commission, want to give these proposals to amend the Natural Gas Act the calm, sober, and unhurried consideration which a full exploration of their impacts upon the general public interest requires. It is our earnest belief that the commission's forthcoming complete report and recommendations based on its extensive natural-gas investigation, which was undertaken for just such purpose, will be of real assistance to you. Absent unwarranted delay in its completion and filingwhict I shall get into shortly-there would seem to be no reason for the committee or the Congress to deprive itself of whatever advantage there may be in having that report before it acts, unless such immediate action is, as asserted, urgently required for the survival of the industry.

Conditions within the natural-gas industry do not support any such claim. It would be hard to find a more lusty, growing industry. Field prices for gas, about which there has been much complaint by the producers, are rising. Gas reserves are greatly in demand, with proven acreage in the better-known and more accessible fields becoming harder and harder to come by. Earlier in this hearing it was brought out, through responses to questions put to Mr. E. Buddrus, president of the Panhandle Eastern Pipe Line Co., that a major price factor has

been the competition in gas purchases resulting from the construction of additional pipe-line outlets for producing areas.

In spite of rate reductions to such important consuming centers as Atlanta, Birmingham, Chicago, Cincinnati, Cleveland, Denver, Detroit, Kansas City, Minneapolis, New Orleans, Pittsburgh, and St. Louis, aggregating close to $40,000,000 annually since the establishment of Federal regulation, pipeline companies generally are in a most prosperous condition, with liberal earnings and credit that permits large borrowings at current rates of 2 to 3 percent and some preferred stock issues yielding less than 4 percent.

According to natural-gas statistics published by the American Gas Association, utility consumers of natural gas increased from 7,533,000 in 1938-when the Natural Gas Act became effective-to 9,478,000 in 1946, with sales up from 1,222,738,000 Mcf to 2,185,494,900 Mcf and revenues increasing from $427,668,000 to $709,033,300. Furthermore, the pipe lines are in the happy situation of having a backlog of unsatisfied demand which they will be unable to meet fully for several years to come. So insistent are these demands for more natural gas, from both existing and prospective customers, that the coal and related interests are asking for protection against further inroads into their traditional markets. And many important gas companies are finding it necessary to seek the assistance of the commission, and of the State regulatory agencies, in holding off consumer demands that they cannot at present possibly satisfy.

This situation was ably described to this committee in the statement of Chairman Siggins of the Pennsylvania Public Utility Commission. In his review of the shortage problem he quoted from the Smaller Manufacturers' Council of the Pittsburgh Chamber of Commerce as follows:

Everyone, including users, as well as the gas companies, estimated that 1943 (the peak war year) would undoubtedly be the top demand after the war use. Nineteen hundred and forty-six proved to be approximately 13 percent over that peak to the surprise and consternation of everyone involved.

In addition to the unexpected postwar increases of industrial gas use, he stressed the tremendous increase in the number of househeating customers, noting that in the Pittsburgh area there was an increase of 63.4 percent from the winter of 1945-46 to the winter of 1946-47. To meet this emergency, the Pennsylvania commission, among others, has found it necessary to sanction regulations limiting additional space-heating loads.

Clearly, the survival of the industry is not so threatened nor is its financial condition such, as to require emergency relief from oppressive or destructive regulation.