It would seem that the public interest would require that the scarce energy resources should be conserved with closer fidelity than the more abundant resources. NATURAL GAS SHOULD BE CONSERVED FOR NATIONAL DEFENSE Natural gas proved to be a highly important fuel during the war period. It was used in large quantities in the metallurgical industry for heat treating, annealing, and forging of steel in the manufacture of war matériel. These and similar processes require great heat and close temperature control, and in some instances, atmospheric conditions which are supplied advantageously with natural gas. Natural gas was also used to a large extent in emergency housing for civilian and armed service personnel because of the economy and rapidity with which installations could be made. During the war, approximately 50 percent of the additional synthetic ammonia produced for explosives was made from hydrogen derived from natural gas. Carbon black, a derivative of natural gas, is essential in the manufacture of tires, especially synthetic rubber tires, and its use was expanded tremendously during the war. Several large chemical plants were constructed for the manufacture of plastics, nylon, detergents, solvents, and numerous other chemicals, including acetylene, butadiene, toluene, and formaldehyde. It is also a fact well demonstrated in the last war that a large merchant coke industry is of major importance to the national security. It is the source of the coke for our foundry industry, without which our production of heavy war material is impossible. Merchant coke is divertible for steel plants in emergencies, and in World War II this was of great benefit in quickly developing production of steel and munitions without waiting for construction of new facilities or allocating materials for these. The byproducts of these plants and the basic raw materials supplied by derivatives of the coal tar they produce are an essential part of our chemical industry and of vital importance to our war-making potential. The Commission should be aware of these factors in considering applications for natural gas distribution that would destroy these plants. NATURAL GAS FOR MOTOR FUEL Motor fuel is indispensable in time of war. German processes have been recently improved by which natural gas may be converted to gasoline and Diesel oil at costs comparable with those presently prevailing for such fuels. A $20,000,000 plant for converting natural gas to gasoline and Diesel oil is now in the process of construction in Texas. Another one of larger capacity is projected for the Hugoton field in Kansas. The Texas plant will produce 5,800 barrels of gasoline and Diesel oil per day and the Kansas plant 6,000 barrels a day. This will require 164,000,000 cubic feet of gas each day at the outset. It has been estimated that within the next 15 to 20 years the daily production of these synthetic hydrocarbons may be considerably over 200,000 barrels daily. The presently known reserves of crude petroleum approximate 20,000,000,000 barrels, with an annual consumption of 1,700,000,000 barrels, or the equivalent of slightly more than 12 years' supply. Importation of petroleum is increasing from year to year. From our experience in the last war, we recognize the hazard of having to rely on imported supplies during such times. It would, therefore, seem that a foresighted policy would require weighing carefully the widsom of conserving natural gas to augment our limited and diminishing petroleum reserves. Natural-gas consumption increased 75 percent during the war years, 1941 through 1944. Another war would place a tremendous additional drain on our reserves. In the light of present unsettled conditions, it would seem that the husbanding of our scarce, vital natural resources, should be a matter of foremost importance. Our domestic economy is importantly geared to the motor vehicle and its importance in furthering the business and pleasure of our citizens will continue to increase if the price of fuel to provide propulsion remains within reasonable reach of the average citizen. In a speech made to the American Institute of Mining and Metallurgical Engineers on March 19, 1947, Dr. Robert E. Wilson, chairman of the Standard Oil Co. of Indiana, stated that by 1970 the demand for crude oil or its equivalent would be 56 percent more than in 1945. He called attention to the fact that oil is becoming harder to find and that "with the higher drilling costs, the greater depths required, and the increasing inaccessability of location, the cost of finding new reserves is about six times what it was a decade ago." He also stated that exports are bound to decrease and imports to increase as time goes on. This appears to be the consensus among members of the oil industry. I believe that this committee is quite familiar with the matter of crude oil requirements and reserves. It has been the subject of much investigation by congressional committees, and is frequently mentioned in the public press and trade journals. It is equally important that consideration should be given to our future peacetime needs of motor fuel. GASOLINE AND GAS FROM COAL The technological feasibility of manufacturing synthetic gasoline and Diesel oil from coal has been recognized for years. Processes were invented in Germany and used by the Germans quite extensively during the war at costs compatible with wartime requirements, but entirely out of reach in any reasonable peacetime economy. The economic feasibility of such a process in this country has not yet been demonstrated. Now, the Pittsburgh Consolidation Coal Co. and the Standard Oil Co. (New Jersey) have inaugurated a project designed to demonstrate on a pilot-plant scale processes already proven in the laboratory which may ultimately lead to the construction of large commercial plants for the production of gasoline and other liquid fuels and/or high-heat-value gas from coal. The conversion of natural gas to gasoline has passed beyond the experimental stage and large-scale-manufacturing plants are now actually under construction. Even though the experiment contemplated for the Pittsburgh area may develop a gas which can be used locally, there is no assurance that it will be economically practical to transport this gas by pipe line to distant communities. Conceding for the purpose of discussion that the manufacture of high B. t. u. gas from coal is practical and economic, this would not warrant continued dissipation of another valuable and relatively scarce natural resource which may be utilized for the same purpose. FLARE GAS Much has been said about the large quantities of natural gas which is lost in the oil fields by flaring or venting it to the air. The importance of eliminating the loss of casing-head gas by flaring should not be minimized. However, the propaganda that we hear to the effect that more pipe lines should be built to provide a market for flare gas and that controls should be removed so that it may be sold for fuel is not the remedy. There are plenty of pipe-line outlets in the producing regions where gas is being flared to absorb the entire output, but economic factors militate against it. Two of the largest interstate pipe lines in the country traverse producing areas in which great quantities of gas are flared, but of the total gas transported by them a relatively small percentage is gas that would otherwise be blown to the air. Flaring in gas fields as distinguished from oil fields has virtually ceased. Among the reasons for the failure of pipe-line companies to take more casing-head gas are, that a good deal of this gas is flared at isolated wells with small production, where it is not economically feasible to gather it; in other fields remote from transmission lines, where the cost of gathering, compressing, and delivering to pipe lines at prevailing prices for gas would be excessive. Pipe-line companies which own or control their own reserves in dry gas fields have no desire or incentive to purchase casing-head gas. Many oil producers prefer not to sell their gas to pipe lines for fear that they may subject themselves to Federal Power Commission regulation. Because of the fact that oil production in a given field is controlled by market demand and regulated by allowable takes, the quantities of available casing-head gas fluctuate considerably, and it is, therefore, not as reliable a source for regular supply as dry gas. The most efficient use of casing-head gas is its reinjection for the purpose of secondary recovery of oil, but this can only be accomplished by unitizing the ownership of a common oil reservoir so that all producers in the field are protected in the conservation and ultimate recovery of their fair proportion of the oil and gas. Difficulty in persuading individual operators in a field to agree to join with others in unitizing the field has retarded conservation of casing-head gas, but this difficulty is being rapidly overcome by State compulsion. The best example of how this may be accomplished is shown by a recent order affecting the Seeligson field in Texas. On March 17, 1947, the Railroad Commission, which had had the matter under consideration for about a year, issued an order directing that all oil and gas wells in the Seeligson field be closed in order to save a large volume of gas that is being flared. On March 19, 1947, the Wall Street Journal carried a story to the effect that six large companies operating in the Seeligson field will spend 9 to 10 million dollars to construct a "gasoline plant and re cycling unit" that will process 150 to 200 million cubic feet of gas a day. This gas will be reinjected for repressuring this oil and gas field. This is very significant in view of the fact that Seeligson is the seventh largest gas field in the country. I am informed that on March 31, the local district court, on the petition of several oil companies, temporarily enjoined the Commission from enforcing the order, on a showing that the operators had not been able to procure the materials necessary to construct a cycling plant. On March 27, 1947, the New York Journal of Commerce contained an article to the effect that: The Railroad Commission has scheduled hearings in April to determine whether 15 more important Texas oil fields shall be shut down to stop excessive waste of casing-head gas. The efforts of the Texas Railroad Commission have greatly accelerated the conservation of casing-head gas. In a paper presented by Jack K. Baumel, chief engineer of the Texas commission, at the December 1946 meeting of the Interstate Oil Compact Commission he stated: During the months of February, March, and April of 1946, the railroad commission held hearings in Corplus Christi, Houston, Fort Worth, and Midland, at which hearings it received reports from the industry as to the status of all conservation projects, then under consideration, dealing with the elimination of the flaring of casinghead gas in the State of Texas at that time. As a result of these hearings and the data received from the industry as of November 1, 1946, it is shown that 9 projects conserving 52,000,000 cubic feet of gas per day have been completed, 16 projects conserving 221,000,000 cubic feet of gas per day are in various stages of construction, and 44 plants designed to save 485,000,000 cubic feet of gas per day are being planned. The projects already completed have cost $8,500,000. These projects now under construction will cost $43,740,000, and those being planned will cost $75,090,000, or a total of $127,330,000. Figures submitted to the commission showed that out of the total casinghead gas produced in March 1945, 57.3 percent was flared to the air. The new projects under construction will reduce the total casinghead gas flared by approximately 900,000,000 cubic feet per day, and when all the existing projects are completed 18.4 percent of the total casinghead gas produced will be flared. In addition to the above conservation projects, it is believed that an addition of from 200,000,000 to 300,000,000 cubic feet of casinghead gas per day now flared may be and can be conserved, if the State of Texas and the operators completing these projects and those projects being planned in the future could be guaranteed that the threat and the encroaching powers of the Federal Power Commission would be curbed. Louisiana and Oklahoma, the two other principal States where flare gas is a problem, are following substantially the same procedure as Texas. Leaders in the oil and gas industry are beginning to realize the necessity for compulsory conservation of casinghead gas. Mr. Don Emery, vice president and general counsel, Phillips Petroleum Co., addressing the 1946 annual meeting of the Oklahoma Utilities Association, said: The practice of flaring gas to the air must be eliminated ultimately solution of the problem depends in large measure upon the willingness of the States to enact legislation compelling unit operations of oil pools, including the utilization of oil-well gas for pressure maintenance within the reservoir. There is no need or justification for ignoring conservation of natural gas at the consuming end of a pipe line in order to accomplish it at the producing end. It is my opinion that in considering applications for the extension of pipe lines into unserved areas, or the expansion of capacity into areas already served, and where coal is reasonably available, the Commission should carefully consider the question as to whether natural gas should be used for purposes that can just as well be supplied with coal. While this may sound selfish, it is also good conservation. The natural-gas industry in its quest for quick profits should not be permitted without restraint to broaden the areas of its service or to increase its sales without control. The present interest and future welfare of the general public should always be given first consideration, and the Federal Power Commission, delegated as it has been by the Congress to protect the public, should be authorized to insure that protection. I wish to state, Mr. Chairman, we appeared in opposition to the Rizley bill and its companion bills in the House, before the Wolverton committee, and in the course of that appearance more or less briefly dealt with some of the objections that we had to the feature of the Rizley bill in section 1 (b) which corresponds exactly with a similar feature in your bill, Senator Moore, which would deprive the Federal Power Commission of authority to consider the purposes for which natural gas is intended to be used in the consuming end of the line when they are passing on applications for certificates of public convenience and necessity. Senator MOORE. You have testified before on that before this committee, have you not? Mr. McGRATH. Not on that subject. Senator MOORE. I thought you had. Mr. McGRATH. I testified on the oil pipe line at one time before the committee but not natural gas, not that I can recall. Now, in addition to the comment that we made in opposition to that feature of the Rizley bill, I testified in opposition to section 6 of the Rizley bill, which corresponds to section 6 of S. 734 and which deals with administrative matters within the Commission. The latter phase of the subject was quite fully covered by my presentation and I have no disposition to add to it, although further comment might be made. Senator MOORE. That will be a part of this record, also. Now, then, because of the fact that the Dolliver bill, to which you have had reference, contained provisions that were largely the antithesis of what Congressman Rizley has placed in section 1 of his bill, we dealth in support of the Dolliver bill with many factors that may be considered in opposition to Congress Rizley's bill, and of course I have presented that. Now, with respect to Senate bill 1028, I think there is a misconception about the implications in that bill, and also some obscurity about the reason for it, and the possible opposition to it. The bill itself is not one that is new to this committee in essence. In 1941, when it was proposed to give the oil pipe lines the power of eminent domain, there were hearings by a subcommittee of the Senate Committee on Interstate and Foreign Commerce. I think you were a member of that committee, Senator. Senator MOORE. Not at that time. Mr. McGRATH. Perhaps not, but Senator Stewart was. Now, the outcome of that hearing resulted in the passage of the so-called coal bill which gave the oil pipe lines upon certification by |