not have, to let business proceed in its ordinary process, and moreover, to let the public have the benefit of the use of the gas wasted through the capricious fault of the Federal Power Commission, and to let the owners safely sell their gas. Let the States control the local situation and let the Federal Government control the interstate problem.

By this proposed amendment it is intended to make it clear that without regard to whether the sale made by the independent producer to the pipe line, whether at the well, at the end of a gathering system, or at a gasoline extraction plant, be technically one in interstate commerce or not, it is a sale wholly outside the control of the Federal Power Commission, and in section 5 it is required that the prices paid to such producers by the pipe line company be allowed as an operating expense of the pipe line company.

The policy of the Commission in the use of the depreciated original cost philosophy for determining the amount to be allowed the pipeline company for the gas produced from its own leases, has been well characterized by certain members of our Supreme Court, as being a "delirious" method of pricing gas or determining its value, at the point where it enters the trunk-line transportation system. In many instances where no markets for gas existed in the field, the pipe-line companies, by the expenditure of many millions of dollars, created competitive markets through the construction of long-distance pipe lines. Those markets are competitive with intrastate markets, both for pipe-line and local industrial purposes. In many instances, the owners of such pipe lines have themselves acquired substantial reserves so as to be certain they will be in position to deliver gas to their customers as needed. The gas produced from their leases is of the same character and suitable for the same uses as is the gas of other producers. In many instances, through the exercise of foresight and good judgment, they have acquired leases under wildcat conditions at low prices just as other gas producers do. There is no reason why they should not be permitted to receive the same price for their gas as do others producing gas of the same character from the same source of supply. What would be said of a refusal to permit a grocer, in selling butter from his own dairy, to earn from his dairy operations in accordance with the commodity value of its products?

It must be kept in mind that the production of gas is not a utility operation, whether that production be by one having a pipe line or one not having a pipe line. The value of the gas as a commodity has no relation to the amount of money expended in acquiring particular leases or drilling them. As was observed by certain members of the Supreme Court, one person might, with the expenditure of $100,000, secure less gas than another with an expenditure of $10,000. Yet the gas produced from both would have the same value. The failure of the Commission to recognize this economic fact is responsible for many of the criticisms of its administration of the Natural Gas Act. If its present practices in this regard are continued, the public served by natural gas pipe lines from their own leases, in whole or in part, might suffer the risk of having, in the long run, insufficient sources of supply. A company which owns a natural gas pipe line under the Commission's jurisdiction and also owns producing properties, cannot be expected to maintain those properties as a source of supply for interstate customers, if they are to be allowed 1 cent or 2 cents for their gas, when

they could sell it to other companies for intrastate use or otherwise at much higher prices.

If the pipe lines are expected to maintain their backlogs of leases for protection of their markets, they must be permitted to earn from their producing operations, a nonutility function, as much as other producers in the same field producing the same kind of gas at the same time, are permitted to earn. This is proposed to be brought about in the bill now under consideration through a requirement that the Commission allow the company owning a pipe line for the gas produced by it or an affiliate, the market price in the field where the gas is produced and if there is no market price, then a fair and reasonable price determined as a "fair and reasonable" price is ordinarily determined, through a consideration of all pertinent facts and circumstances.

In originally enacting the Natural Gas Act, Congress thought it had removed from the Commission's jurisdiction all control over production and gathering, including the earnings from those operations and the prices under sales made in connection therewith. However, because of a reference in the act to interstate transportation, the technical point has been made and sustained that this exclusion of control over production and gathering merely relates to physical operations, and does not extend to a prohibition against the fixing of the earnings from those operations, or the price of gas sold in connection therewith.

As I have pointed out, the commodity value of the gas produced by an interstate pipe line or its affiliate is disregarded by the Commission because the producing properties of the company from which it is produced are included with the trunk line and its other facilities under the application of the original-cost-less-depreciation doctrine. In order to apply the original-cost-system theory, the Federal Power Commission has asserted jurisdiction over the production and gathering properties of the interstate pipe line companies. This has created the anomalous situation I have described, and has aborted the exclusion feature of section 1 (b) that provides that production and gathering-of any kind-shall not be under the jurisdiction of the Federal Power Commission. It has operated in one case which went to the Supreme Court, to create three prices for gas out of the same well, because title to the gas was in three different ownerships.

This extraordinary situation, which Justice Jackson said produced "delirious results" is remedied by section 5 of the proposed bill which provides that the Commission shall allow interstate pipe line companies, as an operating expense, the actual prices paid to nonaffiliates. If the gas is purchased by a pipe line or purchased from a subsidiary or affiliate, then the Commission must allow as operating expense the current market price in that field and if there is no such current market price, then the fair and reasonable value of such gas, taking into consideration all the elements of value, as value of property has been proved in millions of instances in Anglo-Saxon law.

An option to continue to use the original-cost-depreciated system is provided for those whose situation make it appropriate, upon the timely filing of a written election to exercise the option, which becomes a permanent election. In this connection, the witness, William A. Dougherty, before the House committee, explained this provision and recommended its adoption because of peculiar storage conditions and peak requirements existing in the Appalachian area.

The act contains numerous definitions which are intended to clarify the meaning of certain terms used in the act.

Thus natural gas is defined in section 2 in such a way as to make it cover the commodity which is now ordinarily transported and sold by long-distance pipe-line companies.

It was deemed advisable, in order to make certain that there could be no mistake or error in the meaning of this act, that would be susceptible of construction other than the meaning of Congress in passing it, to define "production," "production facilities," "gathering," " "gathering facilities," "transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission," "sale in interstate commerce of natural gas for resale," "local distribution," "local distribution facilities"-this being done in section 4 of the bill. These definitions, in making the act definite in its nature, operate in the public interest for the benefit of the consumer, as well as the producer and the interstate transporter of gas.

Equally important to distributors as to producers and gatherers is the amended definition in the bill of what constitutes a "natural-gas company." At both ends of the pipe line the Commission has usurped jurisdiction. Under the present act the producer and gatherer at the inlet end of the pipe line and the distributor at the outlet end, are equally in danger of being declared a natural-gas company, and required to submit to dual regulation by the Federal Power Commission and the State authorities, without any reasonable purpose being served except the satisfaction that a Federal bureau takes in extending its jurisdiction.

There is certainly no occasion for the Commission to have any jurisdiction over the activities or accounting practices of local distributing companies. The States regulate the rates of the distributing companies to the consumers, so what public interest can possibly be served by the Federal Power Commission declaring them to be "natural-gas companies"? If the distributor builds a line within his State to connect with an interstate line, the Federal Power Commission holds that the distributor is a "natural-gas company." This was testified to by witnesses, William A. Dougherty, Joseph Bowes, and others.

At

J. French Robinson, president of the intrastate East Ohio Gas Co., built connecting lines in Ohio and connected them with the facilities of two interstate pipe lines to enable it to furnish gas for East Ohio's consumers in Ohio. Notwithstanding the fact that the Federal Power Commission cannot fix distribution rates in Ohio, it declared East Ohio a natural-gas company. Robinson testified that to make the survey and the reports required under the Commission's order would cost from $1,500,000 to $2,000,000, and that this additional expense would, of course, be reflected in the rates to the Ohio consumers. the hearing before the Commission the attorney general of Ohio defiantly asserted that Ohio had no need of such a report, and that all that could be done with it would be for the Commission to file it in its archives, because the Commission could not fix a rate in the State of Ohio. Although the Federal Power Commission has no control over retail rates, still it seeks to require the company to reclassify its books of accounts and its property, including its production and distribution properties, all within the State of Ohio; it seeks to require

the company to make a study of "original cost"-all at the expense of the Ohio consumers.

Why should Ohio consumers be saddled with additional costs which will not result in any conceivable benefit to them?

So says Mr. William A. Dougherty, who is trying to operate that line.

These circumstances were not only recounted by witness Robinson, but were corroborated by witness Harry M. Miller, chairman of the Ohio Public Utilities Commission, who, after reciting this confused condition, stated that from the standpoint of the State of Ohio, "clarification of these questions of jurisdiction is of the utmost importance." Joseph Bowes, president of the Independent Natural Gas Association of America and president of the intrastate Oklahoma Natural Gas Co., testified before the House committee that consumers of many localities are denied the use of gas because local distribution companies are afraid to connect with an interstate pipe-line company for fear that they might be declared a natural-gas company and under the jurisdiction of the Federal Power Commission. His own company, which desires to remain an intrastate gas company, if it needs more gas for its consumers and connects with an interstate pipe-line company, under the rulings of the Federal Power Commission would be declared a natural-gas company.

The witness, J. C. Steiner, from Ohio, produces gas and sells it to the East Ohio Gas Co. East Ohio being a natural-gas company under the orders of the Commission, Steiner is also fearful of coming under the jurisdiction of the Natural Gas Act under the uncertain state of the law as administered by the Federal Power Commission. Many like instances are in the record. Numberless instances could be established. Why should an American businessman, under American law, be forced by usurpation or capricious technicality into a business status not of his own practice or choosing. Let us "render unto Caesar what is Caesar's" but not make a Caesar out of a Federal administrative agency.

Witness Henry, engineer for the Illinois Commerce Commission, also testified as to the lack of any necessity for Federal regulation of any of the operations of local distributing companies, showing that necessarily, under the Commission's interpretation of the existing Natural Gas Act, there will be conflicts in jurisdiction. Why not put the matter at rest by passing this bill, instead of following the advice of the Federal Power Commission to let them continue to cure these things by administrative policies?

It is proposed by the bill to incorporate in the Natural Gas Act such a definition of transportation within the Commission's jurisdiction and such a definition of distribution outside the Commission's jurisdiction as to render any further conflicts in jurisdiction impossible. Now, I want to discuss for a minute "end-use control."

The Moore-Ferguson bill in the Senate and the Rizley-Ferguson bill in the House provide in section 1 (b) that the Federal Power Commission shall not

prohibit or restrict the transportation or sale in interstate commerce of gas for utilization for any purpose for which such gas may be lawfully used.

Now, that seems to me to be a rather reasonable sort of thing. You have got gas. It is not like moonshine whisky. It is supposed to be lawful and legal, and certainly should be allowed to compete in a free market as a lawful and legal commodity.

Witnesses, domestic consumers, industrial users, State authorities, city officials, as well as the producers and transporters of natural gas, appeared and protested the doctrine of end-use control by the Federal Power Commission before the House committee by which that authority would be able to direct the use to which the gas may be put, regardless of the wishes of the buyer or the seller. These witnesses vehemently protested fastening end-use control on the American public. Only a few competitive interests supported it. I understand the State of Louisiana, once urging control of end use to prevent the exportation of gas from that State, has now abandoned the idea.

Every witness appearing for the bill before the House committee, who touched on the subject, vigorously opposed conferring on the Federal Power Commission jurisdiction to determine who should use natural gas and for what purpose.

I think there was probably one exception. Some lady lawyer appearing from Pittsburgh, Pa., if I understood her testimony correctly, she at least had ad libbed from a written statement and thought the Federal Power Commission should have jurisdiction over everybody that has anything to do with gas and oil, and that would include end use as well.

Senator STEWART. It would not include Congress, would it?
Representative RIZLEY. Yes.

Maj. Thomas H. Allen, president of the Memphis Gas, Light, and Water Division, a Memphis municipally-owned utility, presented cogent reasons against the doctrine of end use control, stating in substance that those urging the application of this idea were solely interested in the welfare of the coal interests and that it served no over-all public purpose. Hines Baker gave as his opinion that there is not sufficient wisdom in any administrative authority that could be organized, to plan sufficient standards to make "end use" workable. He insisted that it would be unwise and unsound to give the Federal Power Commission control of the end use of a single fuel, natural gas, when all other competitive fuels are uncontrolled. Col. E. O. Thompson of the Texas Railroad Commission used a homely illustration, suggesting we should not tie the eastern housewife to a coal scuttle. * * * To quote him further:

It is desirable that the statute be made clear that there shall be no administration that will encroach upon the well-defined constitutional authority of the States over their resources and industry. It should also be made clear beyond any possible misconstruction that the Federal Power Commission may not attempt to regulate the use of gas by consumers-to say who shall use gas and for what purpose.

Witness Edward Falck, Deputy Director of Power in the War Production Board during the war, detailed the difficulties involved in controlling the use of gas under the War Powers Act, and expressed the opinion that as a peacetime proposal it would be incapable of practical enforcement.

By indirection in many instances, by the attachment of "conditions" to certificates, and directly in the Memphis case and the Boone, Iowa, case, the Commission has asserted jurisdiction over end use control.