(b) By rules of procedure, interventions should be confined closely to actual "competitors of a party to the proceeding" or those whose intervention is actually "in the public interest", excluding remote and speculative interventions. If the issue of the right of intervention were disposed of in advance of the hearing, by order of the Commission, hearing evidence would be shortened and the issues in the case clarified.

(c) "Deficiency letter" requests could easily be confined to data actually relevant and essential to the particular application.

(d) Service Areas. The speedy determination and designation of service areas would lighten the load of administrative work on the Commission, enable it to expedite its handling of certificate and rate cases, and in general to keep its docket up to date. Defined service areas would enable the industry to render a more satisfactory service to the consuming public. A preliminary determination of a minimum service area for each company covering areas already served should be given consideration.

The foregoing recommendations are respectfully submitted for the consideration of the Federal Power Commission in the belief that their adoption will work favorably toward conserving a valuable natural resource, stabilizing the industry, encouraging exploration and development, settling conflicts within the industry and with competitive interests. These results will serve the public interest.

STATEMENT OF MID-CONTINENT OIL & GAS ASSOCIATION

Mid-Continent Oil & Gas Association, with general headquarters at Tulsa, Okla., is an oil trade association with approximately 3,000 members representing and serving all branches of the petroleum industry and related business, and in particular a majority of the oil and gas producers in the States of Kansas, Oklahoma, Texas, New Mexico, Arkansas, Louisiana, Mississippi, and Alabama in which area three-fourths of the Nation's natural gas and over two-thirds of the Nation's crude petroleum is produced.

Pursuant to the statement of Commissioner Smith at the closing hearing of the natural-gas investigation in Washington on August 2, 1946, this association filed notice within the time prescribed that it would on or before October 1, 1946, submit to the Commission a statement of its interest and position with respect to the matters covered by the investigation.

In the Columbian Fuel Corporation case, opinion No. 48, docket No. G-143, June 29, 1940, Mid-Continent Oil & Gas Association appeared amicus curiae to support the proposition that Federal jurisdiction had not directly or indirectly been extended to the activities of production or gathering of natural gas or the facilities used in connection therewith. We think the decision of the Commission in that case was a correct interpretation of the plain language of the statute. The problems now asserted to exist by the Commission, with respect to the interstate transportation and sale of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, find their origin in the fact that the Commission has receded from its holding in the Columbian Fuel Corporation case by assuming jurisdiction to regulate production and gathering activities and the facilities used in connection therewith through the medium of regulating the field price of gas and the adoption of the depreciated cost of producing properties of natural gas companies as an invariable factor for ratemaking purposes. In these matters the Commission and the courts have been guilty of administrative and judicial legislation.

The natural-gas investigation recently completed by the Commission has developed the incontrovertible facts that amazing progress is being made with respect to conservation of oil and gas by State regulatory bodies. State conservation laws are being improved as fast as science develops the basis for necessary changes and improvements. There would be no appreciable waste of natural gas if adequate prices prevailed and if fear of the extension of Federal control to production activities were dispelled; fear that sales of flare or waste gas to interstate natural-gas pipe lines will subject the producer to Federal control is interfering with the marketing of this type of gas and causing waste; adequate prices will only result from expanding unrestricted markets; adequate prices will insure greater conservation and terminate the controversy concerning the end-use control of natural gas. It is a highly significant aspect of the record that not one producer, transporter, State regulatory body, or other State representative, municipal authority, or consumer, or any representative of consumers, appeared to urge upon the Commission any possible reason or necessity for Federal control of the activities of producing or gathering natural gas or the facilities used in connection therewith. State and municipal representatives urged the importance of gas to - industrial development and efficiency, as well as its aid to the health, happiness, and general welfare of the public. The economic and social hazards of a restricted market were emphasized. Competitive fuel industries which suggested Federal regulation of the end-use of gas and thereby, in effect, asked for Federal protection for the maintenance of private monopolies, were shown to be deficient in necessary scientific research to protect their competitive positions. The oil and gas industry demonstrated that any competitive fuel industry, through vigilant scientific research, can protect, maintain, and advance its competitive position. It was pointed out by eminent scientists that centuries of energy supplies are domestically available which may, by scientific development, supersede the use of gas which it is now proposed should be saved for the future.

This statement is concerned with the application and administration of the Natural Gas Act insofar as it affects the production and gathering operations of producers who are primarily engaged in the production of oil and who produce natural gas and oil-well gas as an incident to and as a part of their primary business of producing crude petroleum.

The production of gas may be roughly classified into three categories: (a) Gas produced with oil;

(b) Gas produced from so-called natural gas wells which may or may not be impregnated with certain vapors which, by mechanical processes, may be captured as liquid hydrocarbons; and

(c) Gas produced from certain types of high-pressure gaseous reservoirs which, when subjected to lowered temperature and pressure, produces a water white hydrocarbon commonly known in the trade as distillate or condensate. Approximately 55 percent of the gas production in the United States is produced with oil and as an incident to the production of oil. In the case of gas produced from oil wells, it is important to understand that both the gas and oil are originally in the same liquid state in the reservoir, and as such are subject to the applicable rules and regulations of the respective State regulatory bodies. Likewise, the withdrawal of the oil and gas therefrom is subjected to State regulation for the prevention of waste and the protection of correlative rights. Gas produced from gas wells or distillate wells is subject to the same local jurisdiction.

The activity of gathering oil from the wellhead into lease or field storage tanks, for delivery to such common carrier pipe lines as the buyer may direct, is well recognized in the industry, by the regulatory authorities and the courts as an incident to and a necessary part of the activity of producing oil. Likewise, the gathering of gas from the wellhead for delivery to gas pipe lines, although the gas may in some cases pass through a processing plant or booster station, is well recognized in the industry, by the regulatory authorities and the courts as an incident to and a part of the activity of producing.

In the case of oil, the production may be run to lease or field storage and thereafter delivered to trunk pipe lines at the convenience of the owner producer. In the case of gas, it cannot feasibly or economically be stored and the prevailing universal practice is to deliver, as directly as possible, into trunk pipe lines for transportation to ultimate buyers and consumers. Intrastate transportation, distribution, and sale of gas to consumers have been subjected exclusively to State regulation by the respective States. The production of gas delivered to pipe lines for interstate transportation and resale to distributors for public consumpion, are likewise regulated by State authorities as a local activity for the prevention of waste and the protection of correlative rights. Local distribution of gas for public consumption is recognized as being affected with a public interest and is completely regulated by the respective States in which such distribution activities are conducted. The trunk-line movement of gas from one State to another and the sale thereof in wholesale quantities to distribuors is an interstate operation which the State regulatory authorities may not under the commerce clause of the Federal Constitution burden with local regulations. Thus, it will appear that the natural-gas business is divided roughly into three phases:

(1) The production and gathering of gas for sale and delivery to trunk pipe lines for transportation;

(2) The trunk-line movement of gas and the sale and delivery of such gas at wholesale to distributors for resale for public consumption; and

(3) The distribution and resale thereof to public consumers.

The first and third phases of the gas business have historically and properly been regulated by local authorities as local activities. The second, or middle stage of the operation, was by the terms of the Natural Gas Act of 1938 committed to Federal regulation in cases where the trunk-line movement and resale of the gas was in interstate commerce. Administration of the act was reposed in the Federal Power Commission.

In view of recent rulings of the Federal Power Commission, certain decisions of the United States Supreme Court, the Circuit Court of Appeals, and the Federal district courts, and in view of the testimony of some of the witnesses appearing in this investigation, his association, on behalf of its membership, feels that it is proper that its interest and position be made known with respect to three propositions:

1. THE NATURAL GAS ACT DOES NOT APPLY TO PRODUCTION OR GATHERING, OR SALES MADE INCIDENT TO SUCH ACTIVITIES

The language of the Natural Gas Act is so plain and the legislative history is such that it is clear beyond any reasonable doubt to the oil and gas industry that the act is expressly confined to the interstate trunk-line movement of gas and

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 commerce

* * *

"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: