legislation to disturb the States in their exercise of such jurisdiction. However, in the case of sales for resale, or so-called wholesale sales, in interstate commerce (for example, sales by producing companies to distributing companies) the legal situation is different. Such transaction have been considered to be not local in character and, even in the absence of congressional action, not subject to State regulation. (See Missouri v. Kansas Gas Co. (1924), 265 U. S. 298, and Public Service Commission v. Attleboro Steam & Electric Co. (1927), 273 U. S. 83.) The basic purpose of the present legislation is to occupy this field in which the Supreme Court has held that the States may not act."

Thus, the basic purpose of the legislation was to create Federal jurisdiction with respect to interstate movement of and sales for resale, or so-called wholesale sales, of natural gas; in other words, to occupy that field in which the States may not constitutionally enter. It will also be noted that reference is made to "sales by producing companies to distributing companies." There is no intimation in this language or in the report, however, that sales of a company engaged solely in producing and gathering gas, to an interstate trunk pipe line which thereafter sold to a distributor for resale for public consumption, were affected by the act. On the contrary, the language of the report clearly emphasizes the fact that the "sales for resale for ultimate public consumption" over which jurisdiction was being extended were only those sales to distributors who would resell to public consumers. Had the Congress found that the original sale of the producer and gatherer to an interstate trunk pipe line at the well-head, on the lease or in the field or area where produced so affects the interstate transportation and sale for resale of natural gas as to require regulation of such original sales, it would have expressly subjected those sales to the provisions of the act. But Congress did not so find and did not so regulate as is abundantly clear not only from the legislative history of the act but also from the plain terms of the act itself. The delegation of power is both positive and negative. Whenever Congress has subjected to Federal control activities and operations conceived as "affecting" interstate commerce as well as that commerce itself, it has done so by adequate and unambiguous statutory expression, as is evidenced by many congressional enactments, including the Public Utility Act of 1935, the National Labor Relations Act, the Fair Labor Standards Act of 1938, and other similar Federal acts.

The language also makes it clear that distribution of gas by a local distributor is not brought within the jurisdiction of the Federal Government. Under the present state of the Supreme Court decisions we do not believe the Federal Government could enter this field. (East Ohio Gas Co. v. Tax Comm., 283 U. S. 465, 51 Sup. Ct. 499, 75 L. ed. 1171 (1931).) We, therefore, come unequivocally to the proposition that only (a) transportation of natural gas in interstate commerce, in other words, the movement of the gas by interstate trunk pipe lines; (b) the sale in interstate commerce of natural gas for resale for ultimate public consumption, namely, sales by the interstate transporter to those engaged in distribution and reselling to public consumers'; and (c) natural gas companies engaged in such transportation and sale, are affected by the act.

Chairman Lea of the House Interstate and Foreign Commerce Committee, in debate on the floor of the House (Congressional Record, July 1, 1937, p. 6721) said:

*

"The object of this bill is to supply regulation in those cases where the State Commission has no power to regulate ** The bill does not apply to the production and gathering of gas."

It is an idle gesture to admit the act does not apply to "production and gathering" and at the same time contend that the price paid the local producer and gatherer nevertheless may be regulated. What could possibly affect production more seriously?

Further in the debate, Congressman Halleck, as a member of the Interstate and Foreign Commerce Committee (Congressional Record, July 1, 1937, p. 6723), in explaining the purposes of the bill, said:

"Gas is brought from the producing areas in these pipe lines and sold at the city gates to the public utilities which distribute the gas to the consumers. It is obvious the distribution of the gas by the local distributing company is subject to State regulation and the interests of the consumers are protected by State regulation. However, the transportation of gas in interstate commerce in the pipe lines and its sale to the distributing companies for resale is not subject to State regulation, and as a result, we have had a situation under which the price charged the distributing company at the city gate has been fixed wholly by the judgment, discretion, or action of the interstate company."

64758-47-15

Thus, it again is made clear by a member of the committee who prepared the legislation that the sales of natural gas for "resale for ultimate public consumption" intended to be made applicable to the act were only such sales as were made by interstate trunk pipe-line carriers at wholesale to distributing companies at the city gate. In other words, only sales that were made to someone who intended to resell the gas for consumption. Is it not obvious, therefore, to the most meticulous constructionist that sales made by a producer and gatherer of gas to an interstate trunk pipe line for transportation instead of and not for distribution were not covered by the act?

When the bill (H. R. 6586) came to the Committee on Interstate Commerce of the Senate for action, the same was reported out (August 11, 1937) with the following comment by Senator Wheeler, chairman of the committee:

"The Committee on Interstate Commerce, to whom was referred the bill (H. R. 6586) to regulate the transportation and sale of natural gas in interstate commerce, and for other purposes, having considered the same, report thereon with a recommendation that it pass without amendment.

"Report No. 709 on the bill (Ĥ. R. 6586) explains well and analyzes thoroughly the bill. The Committee on Interstate Commerce feel there is nothing they wish to add to this report which for the benefit of the Senate is herewith appended."

Thus, it is clear that there was complete agreement between the Senate Interstate Commerce Committee and the House Interstate and Foreign Commerce Committee with respect to the purposes of the legislation.

In debate on the floor of the Senate with respect to H. R. 6586 which was enacted as the Natural Gas Act, approved June 21, 1938, the following colloquy appears (Congressional Record, Aug. 19, 1937, p. 9312):

"Mr. AUSTIN. Mr. President, may I ask the Senator from Montana [Mr. Wheeler] a question concerning this bill? Does the bill undertake to regulate the production of natural gas, or does it undertake to regulate the producers of natural gas?

"Mr. WHEELER. It does not attempt to regulate the producers of natural gas or the distributors of natural gas; only those who sell it wholesale in interstate

"Mr. AUSTIN. Mr. President, will the Senator yield for one other inquiry? "Mr. WHEELER. Yes.

"Mr. AUSTIN. Is the bill limited in its scope to the regulation of transportation?

"Mr. WHEELER. Yes; it is limited to transportation in interstate commerce, and it affects only those who sell gas wholesale."

What are sales of natural gas at wholesale? Certainly, it could not seriously be contended that sales of gas by an individual producer at the well, on the lease, in the field or area where gathered, constitutes the sale of gas at wholesale. In the first place, such sales are infinitesimally small compared with the total gas bought and sold by interstate transporters; and, second, these sales cannot constitute any greater quantity than that produced or permitted to be produced from he individual wells of the producer. They could not be relied upon to constitute a continuous and adequate flow of gas for wholesale delivery in any sense comparable to the wholesale gas deliveries of an interstate transporter, which usually is connected to a great variety of fields in widely separated producing areas, which, in some cases, are located throughout two or more States. Webster's New International Dictionary defines "wholesale sales" to mean "selling to retailers or jobbers rather than consumers." Every statement in the reports of the committees of Congress that have considered this legislation and every utterance of every Member of Congress considering the bill indicates beyond reasonable doubt that sale "for resale for ultimate public consumption" used in the statute had specific and express reference to only those sales made at wholesale at the city gate to distributors for distribution to

consumers.

To hold that the price received for gas sold to a "natural gas company" as defined in the act, by a producer and gatherer may be regarded, is to hold that the activity of producing and gathering, notwithstanding the plain language of the statute to the contrary, is subject to the same regulation as a "natural gas company." The jurisdiction to fix price is the power to regulate every activity with respect to the article to be sold. Hence, to hold that the Commission may regulate the price which may be paid to the gatherer and producer is to completely override the exemption expressly granted by the statute.

Later in the debate (Congressional Record, Aug. 19, 1937, p. 9313) Senator Wheeler, chairman of the Interstate Commerce Committee, declared:

1

"The only thing it (H. R. 6586) proposes is to attempt to regulate the price at which natural gas shall be sold at wholesale."

With respect to the fear which some Members of Congress had that there might be room in this legislation for an extension of Federal power by misconstruction of the intent of the Congress, we call attention to the statement of Senator Connally, the Senator from Texas, on this point (Congressional Record, Aug. 19, 1937, p. 9313):

"Is it not also true, even though the utility commissioners advocate it (H. R. 6586), that whenever a Federal agency takes over an activity such as this the State authorities begin to shift or lose their responsibility? If we turn this over to the Interstate Commerce Commission, essentially what they do will be reflected all over the country, because the interstate rates will be superimposed on the State commissions and they must necessarily be governed by them. Did not that happen to the railroads?"

In answer to this expression of apprehension by Senator Connally, Senator Wheeler replied:

"Mr. WHEELER. There is no doubt about that, but this is an entirely different situation.

"Mr. CONNALLY. Yes; one involves the railroads and the other involves gas. "Mr. WHEELER. No. * ak * It applies only as to interstate commerce and only to the wholesale price of gas."

We request that particular attention be paid to the use of the word "price" as used by Senator Wheeler in the above declaration. What is the "wholesale price" of gas? The "wholesale price" of gas could mean only one thing, namely, the price paid by distributors for gas delivered to them in wholesale. There is no other meaning possible under the language of the bill as clearly interpreted by the Members of Congress at the time it was enacted into law. Any other construction must necessarily be strained and is to read something into the statute that is not there, and must as a result defeat the plain unequivocal intent and purpose of the Congress in passing the legislation.

Also, further in the debate the intent and purpose of the legislation is further clarified by the following (Congressional Record, August 19, 1937, p. 9315): "Mr. BULKLEY. The city of Cleveland uses gas imported from West Virginia; and the company which distributes the gas buys it in West Virginia from another corporation that is owned by the same people. How can we get around that?"

"Mr. WHEELER. Simply because of the fact that under the bill, if the gas is shipped in interstate commerce, the Federal Power Commission has the right to investigate and say whether or not the company which ships it charges a fair rate for the wholesale gas which it is selling to the city of Columbus or the city of Cleveland. At present, that cannot be done. No one can say whether the price charged is a fair price, or whether it is a high price, or whether the city of Cleveland or the city of Columbus is being robbed. When efforts are made to get that information they are blocked by injunctions in the lower Federal courts because it is said that the city has no authority over interstate commerce."

Is there any possible room in this explanation of the bill by the chairman of the Interstate Commerce Committee of the Senate that would warrant the construction that sales of gas by an individual producer at the well-head, on the lease, in the field or area where produced, is brought within the jurisdiction of the Federal Power Commission? On the contrary, is it not equally obvious that the words "sale for resale for public consumption" as written into the statute by the Congress, had reference solely to wholesale deliveries of gas by interstate transporters to local distributors; for example, the sales made to the Cleveland city distributor by the natural-gas pipe line company engaged in transporting the gas from West Virginia to Ohio, referred to by Senator Bulkley. We reiterate that a sale of natural gas by an individual producer to a trunk pipe line is a sale for transportation and not for distribution. As a simple physical matter the only sale that can be made for resale for public consumption is a sale made to a distributor that resells to consumers. The legislative history in connection with the writing of this legislation and its passage by both branches of Congress is so definite, clear, and convincing on this point that we do not believe it is possible to construe the act otherwise without doing violence to the plain letter of the law. We submit that no language can be found in the statute or in its stated purpose by the congressional committees that prepared the legislation or any Member of the Congress that enacted it into law for overriding the plain command of section 1 (b) excluding the production or gathering of gas from regulation under the act. The language of the statute could not have been more carefully chosen to accomplish a complete exemption of production or gathering from the purview of the law. The exclusion of production and gathering from the operation of the

statute is complete and without qualifying condition of any character whatsoever. The legislative history is unanimous in declaring the intent and purpose of the law.

To disregard the command of the law is to usurp the powers otherwise reserved to the States contrary to the words and purpose of the act and results in government by bureaucracy not only without the authority of the Congress but in direct contravention to the clear intent of Congress.

II. THE COMMISSION DOES NOT HAVE JURISDICTION TO REGULATE END USE OF GAS The Commission has said, in connection with the application of the Tennessee Gas & Transmission Co. for certificate of convenience and necessity (docket G-230, opinion 93A, adopted September 24, 1943), that the Natural Gas Act does not vest the Commission with complete and comprehensive authority which would permit it to act as arbiter over the end use of natural gas. The insistent urgings of competitive fuel industries, however, that the Commission should take into consideration and give weight to the factor of "superior" and "inferior" uses of natural gas in granting certificates of convenience and necessity for the construction of interstate natural-gas pipe-lines and the importance that this theory assumed in the natural-gas investigation just completed, cause the producers of oil and gas to be apprehensive that end use control of gas may become an established practice of the Commission through indirection, by requiring what it deems to be a "superior" use of the gas as a condition precedent to the granting of certificates of convenience and necessity.

The large amounts of gas that have been discovered incidentally in prospecting for oil, have flooded the market, resulting in prices in some areas below the cost incident to producing, gathering, and delivering the gas into high-pressure lines. Since more than half of the natural-gas production of the United States is produced with, and as a part of, oil production, and since the oil may not be produced without at the same time producing the gas, and since returning the gas to the producing horizon in many cases is not economically feasible, gas has become a drug on the market in many fields, and as a result of such conditions Mr. E. DeGolyer testified during the gas investigation on hearings (XXIII-3589) that approximately a billion to billion and a half feet of gas is being flared daily in the State of Texas. It seems obvious that any attempt to conserve through restrictions against socalled inferior uses fails miserably as an attempt at conservation. No use of gas can be inferior to its burning in an oil field flare, which, of course, is no use of the gas at all. To further restrict the market for natural gas by placing limited or specified conditions upon the use of it, is to encourage the further waste of existing surplus gas rather than to conserve it. The problem is one of encouraging the use of gas and the finding of new uses rather than to restrict its use. One of the most difficult problems confronting oil producers in the midcontinent area at the present time is the disposal of gas produced with oil. Any rule or regulation of the Federal Power Commission, or any other agency, that would result in or have a tendency to reduce the amount of gas being consumed would emphasize the problem and make its solution more difficult.

The oil industry in recent years has made great progress in the conservation of gas produced with oil through the installation of equipment for returning the gas to the producing horizon for the purpose of maintaining reservoir pressure, thus prolonging the flowing life of oil fields and using the reservoir incidentally for the storage of gas which may be produced and used at some future time. The record of the gas investigation just completed is replete with instances of this character of installations. The witness, George Fancher (XXVI-4056) pointed out that waste in Texas has dropped from 37 percent, or a total of 380,000,000,000 feet in 1934, to 4.57 percent in 1944, or a total in that year of 111,000,000,000 feet. Much of this 111,000,000,000 feet is casinghead gas which has been processed for natural gasoline. The oil industry is continuing its study of this problem seriously and with the determined objective of reducing the waste of oil-well gas to a minimum. Increased uses for gas and expanding markets would be of inestimable assistance. The witness, DeGolyer (XXIII-3588), observed:

"Conservation of oil-field gas is largely a matter of the price at which the gas can be sold. Gas can be collected, processed, and sold only when the net cost of so doing is less than the price which is to be received therefor."

Restrictions upon or control of the use of gas would result in shrinking the market for gas and thereby further widen the breach between the present oversupply

and demand. Supply and demand have always been the immutable economic law by which prices were controlled. No industry is in more need of greater demand to balance its supply than the natural-gas industry.

The great quantity of gas available from the oil and gas fields of the midcontinent area and the comparatively few interstate pipe lines serving the area have made it physically impossible as well as economically impractical for these pipe lines to connect with and take gas ratably as between fields or even between separately owned properties within the same source of supply. Thus, the protection of correlative rights has been a serious problem of the State regulatory bodies and the industry. To further depress or minimize the market by imposing restrictions of use upon the gas being transported and sold in interstate commerce is to enhance and emphasize this difficult problem to the detriment of the producers and thousands of individual owners of the mineral and royalty interests.

We submit that the Natural Gas Act does not confer any such implied powers or jurisdiction upon the Commission. It seems clear that the language of the statute "sale for resale for ultimate public consumption for domestic, commercial, industrial, or any other use"-excludes the possibility that the Commission has power or jurisdiction to determine the manner in which the gas might ultimately be used. It seems obvious that if the Commission assumes jurisdiction to control the transportation or sale of natural gas for specific uses that it is, in effect, controlling distributors and consumers who are not within the purview of the statute. Although the Commission was delegated authority to regulate interstate sales for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, the nature or character of the use is not a subject for determination by the Commission.

It is true that by amendment of section 7 of the act, approved February 7, 1942, Congress provided:

"The Commission shall have the power to attach to the issuance of the certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions as the public convenience and necessity may require."

We urge, however, that an administration of the act in such manner as to assert controls and limitations which directly affect persons and activities not within the scope of the law is an unreasonable interpretation of any inference that may be drawn from the above-quoted language. Certainly any restriction or regulation that would control the end use of gas is a restriction and control of the distributor and the consumer as well as the interstate wholesaler. By the same token, such controls and restrictions reach back to the producer and gatherer.

The standards set forth in section 7 of the National Gas Act, as amended, contain no language that can reasonably be interpreted as requiring the Commission to exercise control over end-use of gas by indirection through its power to grant or deny certificates of convenience and necessity.

The production of natural gas, for the prevention of waste and the protection of correlative rights, and its intrastate transportation and sale to local consumers are clearly within the regulatory jurisdiction of the State. Certainly the scope of Federal jurisdiction does not extend to the regulation of the use for which gas may be transported from Texas gas fields and sold to Texas consumers, nor may the State of Texas prohibit or interfere with interstate transportation and sale of natural gas to the citizens of Missouri (Pennsylvania Gas Co. v. P. S. C., 252 U. S. 23, 40 Sup. Ct. 279, 64 L. ed. 434 (1920); Okla. v. Kan. Natural Gas Co. (221 U. S. 229, 31 Sup. Ct. 564, 55 L. ed. 716 (1911)).

Thus, under the application of the regulated end use of gas in interstate commerce, the citizens of Texas and other gas-producing States, with complete immunity, are privileged to use gas free of all Federal restrictions, while the citizens of Missouri and other nonproducing gas States, by Federal regulation, are denied the same privileges and immunities.

Section 2, article 4, of the Federal Constitution expressly provides: "The citizens of each State shall be entitled to all privileges and immunities of the citizens in the several States."

There can be no economic reasons involved. The economic situation with respect to the use of gas for specific purposes in Texas is no different than in Missouri. We are, therefore, brought to the conclusion that the regulation or end-use control of gas moved and sold in interstate commerce is viewed by the Commission as a social problem. End-use control would be enforced as a conservation measure for the future benefit of that portion of the Nation's citizenry dependent upon interstate commerce for a supply of natural gas. Such however