institutions, and the like receive the highest priority of service. Because of the business losses and unemployment entailed, every effort is made to protect industrial uses which are wholly dependent upon gas. The first to suffer curtailment or interruption are uses in which conversion to substitute fuels is most feasible. This is the pattern of service which is likewise recognized as appropriate by gas distribution utilities. For example, in the Chicago Tribune for April 14, 1947, a display advertisement by the Public Service Company of northern Illinois, which is called "an important message to those considering gas heating," read as follows:

No gas is available for additional space heating. Early in 1945, the Public Service Company of Northern Illinois foresaw its need for substantially greater quantities of natural gas. It applied to the pipe line companies which transmit gas from the Texas fields to this area, to increase their facilities and supply it with more gas. The pipe line companies, acting upon that request, ordered steel pipe to expand their systems even before they were granted the required Federal regulatory authorization. Expected delivery of this pipe has been prevented by a nationwide shortage of steel. Even though the Public Service Company of Northern Illinois and the pipe line companies have done everything within their power, necessary expansion of the pipe line system has not been completed. Therefore the company regrets that it has been obliged to impose these restrictions limiting the addition of gas heating customers The company at all times considers as its first obligation the continuance of service to residential customers and for essential community needs. It will protect this service in every way possible.

SOME PROVISIONS OF THE BILLS

* * *

Since it is our considered judgment that legislation at this time would be premature and unwise, we have not undertaken a detailed point-by-point analysis of the provisions and specific effects of these bills.

As already stated, it may be that some of the proposals in the bills are aimed at matters which, after all consideration of the Natural Gas Act and its administration as a whole, will be deemed to merit legislative action. We expect, if permitted to do so, to cover these, as well as other matters relating to the act, in our report to the Congress on the Natural Gas investigation.

There are, however, some features of these bills whose implications are so important-and in some respects so uncertain-that they should be mentioned specifically.

1. I have referred earlier to section 1 (b) of the act, and to the reasons why it seems to us unwise to adopt any legislation on this matter now before it is known whether there is really any need for such legislation. If it should finally be concluded, however, when all the pertinent considerations are before you, that amendatory action is required to make still more unmistakable than we think it already is the Congressional intent to exempt sales made to pipe line companies by those who independently produce and gather gas, we would hope that this would be done in clear terms which would not simply serve as a basis for possible future confusion and fresh controversy.

and

We are aware that the industry representatives seem satisfied with the definitions of "production," "gathering," "transportation,' the like, contained in the "gas bill." The "coal bill," on the other hand, attempts nothing in the way of definitions. The "gas bill" seeks to

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draw a dividing line in terms of "trunk transmission facilities" and "main receiving points." A somewhat similar effort to establish a sharp line of demarcation between transmission and distribution was contained in the original Lea bill in terms of "high-pressure mains" and "low-pressure mains," but was rejected after the State commissions, through Mr. Benton and others, had shown that it could not be applied satisfactorily to accomplish the desired purpose.14

The difficulty of stating so clearly statutory definitions in terms which will avoid all future uncertainty and controversy is well known. It is particularly apparent in the technical field with which we are here concerned, where analysis of the particular situation is so often required to determine the real function of the facility in question.

In stating this fact I do not mean to imply that the Federal Power Commission should alone be allowed to either "prescribe" or "proscribe" all remedies. We simply wish to point out that border-line cases, whether at the beginning or at the end of the line, calling for the sensible exercise of informed judgment, are bound to arise under almost any conceivable set of definitions. And I surely do not need to assure this committee that, if you should conclude that some further clarification is necessary to clearly express your intentions, it would be the sincere purpose of the Commission to assist in every way possible in any effort to find terms which will be clear and workable-just as it will of course continue to be our aim to give full effect to the policies declared by the Congress.

2. It must be obvious, however, that the whole intent of both Section (8) of the "coal bill" and the jurisdictional sections of the "gas bill" is although for different reasons-to go far beyond anything which might be thought necessary to reassure the independent gas or oil producer or to protect him against any possible threat of federal regulation.

The purpose is to extend the exemption to interstate natural-gas companies, insofar as their own produced gas is concerned. Without going at this time into the relative merits of the "field price" and "cost" standards of rate making-which, as pointed out earlier, is a matter that was much discussed on the record of the natural gas investigation and one that the Commission intends to cover thoroughly in its report-it is significant that section 51/2 of the "gas bill" leaves the natural-gas company free to select, at its option, whichever of these methods might be to its greater advantage under its own particular circumstances, and without, as has already been shown, any assurance of advantage to the independent producers, many of whom are al-' ready under contract for the life of their gas reserves.

This free option would be a most unusual provision to find in a regulatory measure. In thinking of this proposal, I am reminded of the language of Mr. R. H. Hargrove, vice president of the United Gas Pipe Line Co. and now president of the American Gas Association, when, in response to a question about this very proposal during the hearings on the natural gas investigation, he said:

I can't quite justify in my mind an election in the matter on the part of the pipe-line company (Tr. 13340).

14 Hearing on H. R. 11662, April 7, 1936, pp. 84, ff.

3. The first six policy declarations included in the "coal bill" are stated in such general terms that, quite apart from any questions about their objectives, it seems reasonably certain that any administrative agency which sought to apply them would find itself embroiled in almost endless controversy as to the meaning of the various elements enumerated and the relative weights to be given them in determining the public interest in a particular case. I would hate to think of trying to conduct, or to bring to a conclusion, certificate proceedings conducted under the standards set forth.

On the other hand, section 1 (b) of the act if amended by the "gas bill" would state that

nothing in this chapter shall be construed as authorizing the Commission to prohibit or restrict the transportation or sale in interstate commerce of gas for utilization for any purpose for which such gas may lawfully be used.

Just what does this provision mean, particularly in relation to section 7 of the present act, which requires that a certificate of public convenience and necessity must be obtained from the Commission before pipe-line facilities may be constructed or operated? And what, if any, authority would this, as well as other provisions of the "gas bill." confer upon State agencies in the field of interstate commerce? From the language of the proposal it appears that the Commission should give no consideration whatever to the nature and extent of the markets proposed to be served under authorization granted by a certificate. Just how public convenience and necessity could be determine l without any consideration of the market and the nature of the demand for gas is hard to see.

4. The last provision of the "gas bill" states that

any natural-gas company may, without obtaining such certificate, maintain, extend, or enlarge those facilities for any transportation or sale of natural gas, for which a certificate has been issued, for the purpose of maintaining continuity of service, or of supplying increased demands in its existing markets.

Evidently, what is proposed here is that natural-gas companies should be authorized by law without any limitation to enlarge or extend their facilities for transmitting increasing amounts of gas into areas which they now serve.

I wonder whether the interstate pipe-line companies have considered the full implications of this proposal. If such a provision were to be enacted there would be no need for a certificate except when a pipe line proposes to enter a new market. Once in such a market, it would be free to expand as it wished, but its corresponding obligation to the public might by no means be so clear.

While we have tried to flag here a few matters for your attention, there are other questions of high importance involved in these bills, all of which require careful and balanced consideration with regard to the public interest. We recognize the very useful purpose served by this hearing in helping to focus your attention on some of the issues presented, and with which we too have been struggling in our own investigation of the Natural Gas Act and its administration. But we do not suppose that this committee intends to act hastily, under pressure and in the atmosphere of urgency, which has been aroused by some of those seeking the enactment of these bills, or without having the full record before it.

At about the time our hearings began, the same Mr. Hargrove to whom I referred earlier, then writing in the American Gas Association Monthly 15 as chairman of the natural gas department of that organization, had this to say:

As further evidence of its willingness to cooperate, the steering committee of the Natural Gas Industry should consider itself in continuous session to advise with the Commission during whatever time is required for the complete investigation.

It is obvious that the Federal Power Commission has a monumental task ahead if it proposes to do a through and exhaustive job. The implications of the investigation are too far reaching for the natural gas industry to adopt a complacent attitude. On the contrary, it should see that a complete and detailed examination of every important phase and factor of the industry which may be placed under scrutiny is presented in its proper light.

The industry has a right to insist and a duty to see that the inquiry be limited to practical objectives and that every pertinent fact be read into the record before a single legislative recommendation is made.

That sound admonition, apparently intended alike for the Federal Power Commission and for the natural-gas industry, has been followed by the Commission. It is regrettable that it seems to have been abandoned at this juncture by some groups within the industry who are now urging partial legislation before all the pertinent facts can be placed before this committee.

CONCLUSION

The position of the Federal Power Commission on these matters may be summarized as follows:

1. We are not stubbornly opposing any and all attempts to amend the Natural Gas Act, either to clarify its meaning or to insure that its administration will be wholly in accord with the congressional intent. If we held any such smug view of course we would never have undertaken the evaluation of Federal policy and the self-appraisal involved in our natural gas investigation. If that investigation had been designed simply to support some preconceived objectives, we certainly would not have adopted our procedure of sending the tentative reports of our staff for comment and criticism by all interested parties before submitting conclusions and recommendations to the Congress.

2. We believe, however, that any needed legislation should deal fairly with the problem as a whole, rather than in piecemeal fashion, with priority to some measures pressed by those having a special interest in certain changes. We expect that our full report on the investigation upon which so much effort has been expended, not only by the Commission but also by the others who have participated-will within a few months give you a sound and helpful basis for your decisions regarding all these questions in terms of the public interest.

3. We cannot see how anyone will be harmed if further consideration of these bills is deferred until the report on the investigation can be completed and laid before you. In view of the care with which the Committee on Interstate and Foreign Commerce is accustomed to probe into all matters so importantly affecting the public interest, it seems not unreasonable to expect that the procedure which we respectfully urge upon you will be deemed appropriate.

Mr. Chairman, you asked for some reference as to House bill 2956, the so-called eminent domain or Schwabe bill. Our legislative re

Issue of September 1945, p. 378.

port on that, sir, was filed with the committee with a letter of transmittal dated April 16, and I presume it is also of record.

It is very brief. It calls attention to the fact that the proposed amendment provides generally for the exercise of eminent domain by natural gas companies in a fashion similar to the present provision of section 21 of the Federal Power Act, so far as license projects are concerned.

It states that the Commission has no objection to the amendment of section 7 of the Natural Gas Act as proposed in that bill. The proposed amendment really does not affect at all the regulatory duties and powers of the Commission. That assumes, of course, that after your consideration of these matters now before you we still have some regulatory powers and duties. It states also that a similar report is submitted on S. 1028, the identical bill introduced in the Senate. The other members of the Commission, Commissioner Draper of Wyoming, Commissioner Olds of New York, and Commissioner Wimberly of Oklahoma, are here. They may wish to add something to the statement which I have already made, if that is permitted. Commissioner DRAPER. I have nothing further to add, except to endorse Chairman Smith's statement.

Commissioner OLDS. I have nothing to add.

Commissioner WIMBERLY. I take the same position. I think the Chairman stated our position quite clearly.

The CHAIRMAN. Are there any questions, gentlemen?

Mr. Dolliver?

Mr. DOLLIVER. Mr. Smith, you have referred to the bill which I introduced, H. R. 2569, and you have referred to it rather sketchily in your statement.

Mr. SMITH. Yes, sir.

Mr. DOLLIVER. I would like to ask you if you have a notion that there is a need ultimately of a declaration of policy by the Congress for the guidance of the Federal Power Commission with respect to the administration of the Natural Gas Act?

Mr. SMITH. Your bill runs principally to the matter of the socalled end-use question, and I suppose that is what you would like me to refer to particularly.

Mr. DOLLIVER. Yes. It also refers to the national defense, and a variety of things.

Mr. SMITH. Yes, but again with respect to the use and conservation, if we may use that term, of natural gas.

Without wanting in any way to avoid a direct answer to your question, I would say this: We are of course a little bit in the position of being damned if we do, and damned if we don't. There has been a lot of talk here in these hearings about the purported control of end-use by the Federal Power Commission. The people who are on the gas side of that picture say we have done too much in that respect, that we have exceeded our authority. Those who are competitively alined against them say we have done too little in that respect and have not utilized all the authority we have. Maybe under those conditions we may be somewhere near the right position. I do not know. The Commission addressed to Congressman Lea, as chairman of this very committee a couple of years ago, a statement called "Five Years Under the Natural Gas Act." In that we stated that we did not