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, 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 stock-taking should include more than just an inquiry into its own specific performance; it should involve consideration of the soundness of his interpretations of he 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 the House committee, reads as follows:

This, in turn, necessarily must embrace a survey of conditions within the regulated industry as affected by the regulatory policies of the agency and of the impacts of such conditions and policies-not only upon the owners and customers of the regulated business, but also upon allied or competitive industrial groups-all 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 paramount, 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 in that regard. Absent undue or unwarranted delay in its completion and filing-which I shall get into shortly-there would seem to be no reason for the committee or the Congress to deny to itself 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.

A survey of conditions within the natural gas industry discloses no such need. Far from being in dire straits calling for heroic measures of relief, 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 reputedly becoming harder and harder to come by. As was brought out in the House committee hearings through responses to questions put to Mr. E. Buddrus, president of the Panhandle Eastern Pipe Line Co., a major price factor has been the competition in gas purchases resulting from the construction of additional pipe-line outlets for producing areas.

Despite rate reductions to such important consuming centers as Atlanta, Birmingham, Chicago, Cincinnati, Cleveland, Denver, De

troit, Kansas City, Minneapolis, New Orleans, Pittsburgh, and St. Louis, aggregating close to $40,000,000 annually since the establishment of Federal regulation, pipe-line 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 to 2,185,494,900 thousand cubic feet 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 apparently they will be unable to fully meet, simply as a hard physical fact, for several years to come. So insistent are these demands for more natural gas, from both existing and prospective customers, that, not only are the coal and related interests asking for protection against further inroads into their traditional markets, but 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.

It would be impossible to shed tears over the plight of an industry which finds itself in such a situation as this. 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.

With this general statement of the Commission's position before you, I wish now to go more fully and specifically into some of the matters which have been so much alluded to in connection with this bill. I shall discuss first the pertinence of the natural-gas'investigation to the present proposals to amend the act at this time. Next I shall refer to the status of the much-discussed Interstate case. Then I intend to cover the facts concerning natural-gas shortages and the Commission's efforts to alleviate them. And, finally, I shall call attention to certain of the specific provisions of the gas and coal bills now, before the Congress.

THE NATURAL-GAS INVESTIGATION

Having asked that you defer action on the proposed amendments until you have before you the Commission's complete report on its natural-gas investigation, it is appropriate that we explain its scope, purposes, and relevance, and that we indicate its status and when it is likely to be available.

ORIGIN AND PURPOSE

As already stated, this investigation was initiated by the Commission on its own motion because its experience in the administration of the act had demonstrated the existence of certain broad questions of public policy and the need for their exploration on a more comprehensive basis than was possible in individual cases. It was made clear at the outset that the Commission's purpose was to gather adequate information which would enable it to deal with the conflicting contentions of those concerned with the complex problems of the

natural-gas business from whatever point of view. The express purpose was to appraise the present national policy regarding natural gas in all of its aspects and the practices and procedures of the Commission in applying the policies established by the Congress, including, among other important things, the very questions of gas production, gathering and use, field price, and rate making, and the issuance of certificates of public convenience and necessity to which these now proposed bills are pointed. It was explicitly stated, and has from the outset been understood, that the Commission-in affording to the gas producing and consuming areas, to the industry and its competitors, and to all other interested parties a full opportunity to develop the facts and their views-was collecting information, not only for its use and for that of the industry, but for the information of the Congress and the public, and to serve as a basis for the formulation of recommendations to the Congress in the event that the need for any amendatory legislation should appear.

SANCTIONS

In framing the Natural Gas Act the Congress, anticipating the probable need for special investigations from time to time, had wisely authorized the Commission to conduct such inquiries.

Section 11 (b) makes it

the duty of the Commission to assemble and keep current pertinent information relative to the effect and operation of any compact between two or more States heretofore or hereafter approved by the Congress, to make such information public, and to report, from time to time, the information so obtained, together with such recommendations as may appear to be appropriate or necessary to promote the purpose of such compact.

That is referring to compacts dealing with the conservation, production, transportation, or distribution of natural gas, as stated in section 11 (a).

Parenthetically it may be remarked that, in the light of this provision, it is hard to understand the recent comments made on behalf of the Independent Petroleum Association of America. It has stated-referring to a section of the staff report containing conclusions which are characterized as "intimidating," "impertinent," and "inappropriate"-that the Commission, in issuing a staff report which deals with State conservation laws and activities, is engaging "in matters which go far beyond those which fall within the Commission's proper concern.' And again:

It is the position of this association that the Commission has no rightful concern with the subjects of producing, gathering, and processing of natural gas. The entire report is beyond the scope of the Commission's authority. To comment upon specific statements, findings, and conclusions, with which the association cannot agree, therefore, would be superfluous. Again, however, we cannot resist directing the Commission's attention to the impropriety of the repeated presumptousness

of the several reports―

as is demonstrated by the concluding sentence of this report which in effect puts the States and industry on trial, apparently before the Commission. This sentence is as follows: "In a very real sense, the industry, as well as the conservation agencies in producing States where flaring continues on a large scale, will be on trial within the next few years."

We suppose that the Congress knew what it was doing in enacting section 11 (b) and that it meant what it said. The Congress, recognizing the national importance of these matters, specifically provided for the gathering of such information for its use and for the use of the public. It evidently realized that the Commission would have to inform itself regarding the conservation, production, transportation, and distribution of natural gas in order properly to perform the more limited regulatory duties with which it has been charged. It is surprising to find any responsible group within the oil and gas industry challenging either the desirability and necessty of such knowledge on the part of the Commission or the propriety of our action in carrying out the congressional mandate.

Still more broadly, section 14 authorizes the Commission toinvestigate any facts, conditions, practices, or matters which it may find necessary or proper in obtaining information to serve as a basis for recommending further legislation to the Congress.

* * *

In addition, the Senate Committee on Interstate Commerce-now this committee-had approved a resolution calling for just such an investigation and appropriating money for the purpose. This resolution was not pressed further after it became evident that the Commission already possessed ample authority and would have funds for this survey. There can be no question that the Commission, in initiating its investigation by an order issued in September 1944, was acting in accordance with the intent and the will of the Congress.

SCOPE AND REACTIONS

Under the wartime conditions then prevailing, there were unavoidable delays in getting the investigation started, the energies of both the Commission and the interested industry groups being largely occupied with more pressing matters. Efforts were made-which in the end were on the whole successful-to develop the broad outlines of the inquiry in a cooperative way. Nevertheless, although some recognized the useful public purposes which the investigation could serve, others seemed to fear that it might be used by the Commission in some sinister way as a device to justify amendments enlarging its powers and jurisdiction.

This apprehension became particularly apparent when it was made clear that the investigation, to be truly comprehensive and enlightening, would have to include within its scope certain matters over which the Commission admittedly has no jurisdiction, such as the supply of gas even when produced, as it so frequently is, in association with oil. Because of the concern manifested on this score, it was deemed appropriate for the Commission to issue certain reassurances, which, I dare say, are those which Congressman Rizley referred to earlier in his statement this morning. Thus, on December 30, 1944, former Chairman Basil Manly, then in active charge of the investigation and now vice president of the Southern Natural Gas Co., advised the representatives of the gas-producing States, through a letter to then Gov. Andrew F. Schoeppel, of Kansas, as chairman of the Interstate Oil Compact Commission, that

*

* the Federal Power Commission has no desire to extend its jurisdiction to cover the production of natural gas or otherwise invade what are properly regarded as the functions of the conservation authorities of the several States.

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And again, on July 21, 1945, Chairman Manly wrote to Mr. William R. Boyd, Jr., then chairman of the Petroleum Industry War Council and now president of the American Petroleum Institute, that

It seems desirable therefore to declare in unequivocal language that the Commission has no desire or intent to extend its jurisdiction as regards either oil production or petroleum pipe lines.

But, because of the interrelationships involved, it was obviously necessary for the Commission to proceed with its inquiry on a broad scope as the only means whereby a comprehensive understanding of the problem as a whole could be attained. A more limited approach would necessarily have left uncertain the significance of any omitted features of the processes of natural-gas production, transmission, distribution, and marketing. In other words, because of the interdependence of these processes and operations, knowledge of the whole is necessary if any part is to be properly understood. And, accordingly, the reactions to the investigation have been varied. Perhaps their range can best be described in the language of Mr. Don Emery, vice president and general counsel of the Phillips Petroleum Co., when he spoke before the 1946 annual meeting of the Oklahoma Utilities Association, as follows:

Upon publication of the Commission's intention to conduct the investigation a variety of interesting reactions occurred from a variety of groups and persons-producers, consumers, distributors, transporters, State commissions, State executives, city commissions. No particular reaction was characteristic of any particular group. Within each group the investigation was characterized at once as a necessary performance of duty and as an unjust inquisition; as an attempt to properly limit the Commission's power and as an attempt to enlarge its powers; as an effort to importune private industry to educate the public, the Congress and the Commission, and as an effort to indecently acquire the private information of private institutions; as a design to browbeat State commissions into the recognition of a superior Federal power and as a design to develop greater cooperation between State and Federal agencies; as a scheme to regiment the entire field of energy sources and as a national effort to make the public conscious of the cost implications of supplying different kinds of energy; as a diabolical plot to demonstrate the inadequacies of State control over its own resources and as a benign opportunity to demonstrate the efficacy of local regulation.

After all this bombast

the phrase is Mr. Emery's—

after all this very necessary democratic process of blowing off steam, the Federal Power Commission commenced and continued to conduct the natural-gas investigation with dignity, with imagination, and with marked consideration, extending to all persons that full hearing so aptly forecast by

the presiding Commissioner

in his opening statement at the Kansas City hearing:

“This investigation provides us all with a needed opportunity to sit down together in a cooperative spirit to explore our common problems."

In concluding his remarks, Mr. Emery stated:

What recommendations the Federal Power Commission may make to the Congress as a result of the investigation is at this time a matter of purest conjecture. In reference to any recommendations that are made, all interested parties, includ