to probe into all matters so importantly affecting the public interest, it seems not unreasonable to expect that the procedure which we respectfully urge upon you will be deemed appropriate.

Senator MOORE. Thank you, Mr. Smith.

Mr. SMITH. Thank you, sir.

Senator MOORE. It seems that very definitely there is quite a misunderstanding between the situation as you present it and as the industry presents it.

Mr. SMITH. There appear to be differences of opinion; yes, sir. Senator MOORE. Did you have anyone else?

Mr. SMITH. I will inquire whether Commissioner Olds or Commissioner Wimberly wishes to add to my statement.

Mr. WIMBERLY. I do not think I have much to add, Senator.

Of course, in my mind, as far as the exemptions under section 1 (b) as to production and gathering are concerned, I have always been one just to read the English language with care, but yet without attaching implications to it, and I would not criticize either the lawyers or the courts, but I think that the language of section 1 (b) is certainly clear and definite. Much reference has been made to a dissenting opinion in the Columbian case, but I have never seen evidence since I have been on the Commission that the Commission was going to adopt the philosophy that was pronounced in the dissenting opinion in the Columbian case.

I do want to make reference to the quarterly session of the Interstate Oil Compact Commission which was held in Birmingham last week and attended by Chairman Smith and myself. Our relationships with the Interstate Oil Compact Commission, of course, are provided for in the act.

The Interstate Oil Compact Commission about a year ago gave invitation to the Federal Power Commission to designate a member to participate in and to attend its sessions and the Commission designated me as that member.

I think that in view of the tremendous thought that the Interstate Oil Compact Commission and the State regulatory bodies and the industry are devoting to conservation, that certainly very careful consideration should be given any virtual removal from the Natural Gas Act of certificate requirements.

I could not help but gather from the discussions that took place in Birmingham last week that there might be a conflict between the provisions of the bill that has been discussed here and the objectives of the Interstate Oil Compact Commission in the matter of conservation, not as to preventing physical waste, but as to giving serious consideration to just what the effect of withdrawals might be a year from now or 5 years from now on the natural-gas resources of the Southwest.

As a citizen of a gas-producing and oil-producing State, I honestly think very serious consideration should be given that aspect of the bill.

I am speaking as a citizen of Oklahoma and as a member of the Federal Power Commission when I make such a statement.

That is the only comment I would have at this time.

Senator MoORE. Mr. Olds?

Mr. OLDS. No comment.

Senator MOORE. Is Mr. McGrath here?

Mr. SMITH. Before we leave, sir, may I express appreciation of your very kind and courteous and considerate hearing.

Senator MOORE. Thank you..

STATEMENT OF TOM J. McGRATH, APPEARING ON BEHALF OF THE NATIONAL COAL ASSOCIATION, EASTERN GAS AND FUEL ASSOCIATES, CHESAPEAKE & OHIO RAILWAY CO., AND ANTHRACITE PRODUCERS IN THE STATE OF PENNSYLVANIA, WASHINGTON, D. C.

Mr. McGRATH. Mr. Chairman and members of the committee, my name is Tom J. McGrath. I am a lawyer with offices at 729 Fifteenth Street NW., Washington, D. C.

My testimony goes to the Rizley bill. I also want to speak about Senate Bill 1028 for just a moment.

I represent the National Coal Association, the Eastern Gas and Fuel Associates, Chesapeake & Ohio Railway Co., and anthracite producers of the State of Pennsylvania.

Since the passage of the Natural Gas Act in 1938, and particularly since it was amended in February 1942, I have specialized in matters involving applications for certificates of public convenience and necessity to the Federal Power Commission. In this work, I have represented various clients connected with the bituminous coal industry, as well as certain railroad operating unions.

The National Coal Association represents approximately 85 percent of bituminous coal production in the country, Eastern Gas and Fuel Associates is the second largest bituminous coal producer, and the Chesapeake & Ohio Railway Co. is the largest transporter of bitumi. nous coal in the country.

Future natural gas expansion is a matter of vital importance to the Chesapeake & Ohio Railway because bituminous coal is virtually the life blood of that company. In 1946, it hauled 73,000,000 tons of revenue coal at an average rate of return of $1.54 per ton for a total of $112,000,000. This represented 76 percent of all of the revenue tonnage hauled by that company and 55 percent of the total revenue received from its operations in that year.

I have also been retained to represent operators producing approximately 80 percent of the commercial anthracite mined in the State of Pennsylvania. One and one-half million people living in five counties of Pennsylvania are almost solely dependent upon the continuing profitable operation of the anthracite industry. The market for anthracite coal has been substantially restricted in recent years due to the competition of competitive fuels, particularly oil and natural gas. Further large encroachments by natural gas upon anthracite markets will have a devastating influence on that industry and the residents of the communities dependent upon it. For that reason, they have a special interest in the legislation now before your committee.

Representatives of my clients have met in recent days with representatives of the coke producers, railroads, and the solid fuel dealers of the country for the purpose of analyzing and discussing the provisions of S. 734, generally referred to as the Moore bill.

In order to conserve the time of the committee and to avoid undue repetition, the coal and railroad group has asked me to present to your

committee our analysis of the Moore bill and some of the reasons why we believe that certain of its features should be rejected.

In our appearance before the House Committee on Interstate and Foreign Commerce we opposed the provisions of the Rizley bill appearing in lines 12 to 16 of section 1 (b), which would deprive the Commission of the power to consider and give effect to the purposes for which natural gas is to be used, when it passes upon applications for certificates of public convenience and necessity. In that appearance, I stated some of the objections that we have to that portion of the bill just referred to, as well as to section 6 of the Rizley bill, which is identical with the Moore bill. I understand that this committee will consider that statement as being applicable to that portion of the Moore bill, S. 734, found in section 1 (b) lines 12 to 16, reading as follows:

Nothing in this chapter shall be construed as authorizing the Commission to prohibit or restrict the transportation or sale in interstate commerce of gas for utilization for any purpose for which such gas may lawfully be used.

Our objections to section 6 of the Moore bill were fully stated before the House committee as objections to an identical section in the Rizley bill. It will be my purpose in this statement to elaborate upon our objections to the above quoted language without repeating or otherwise dealing with the points that I raised in opposition to the identical provision in the Rizley bill.

Our position with respect to natural-gas matters may be succinctly summarized as follows: We recognize that natural gas is a clean, convenient, and efficient fuel; in view of the relatively limited quantity of natural-gas reserves, we believe that it should be conserved for uses which will serve the broad general public to the greatest social advantage for the longest possible period of time. We believe that it is contrary to the public interest to continue to expand the use of natural gas for economically wasteful purposes, especially in areas where coal can be had in abundance and where it can be used with substantially equal efficiency.

Natural gas is especially adaptable for cooking, water heating, refrigeration, and air conditioning in homes. It is extensively used in commercial establishments, such as restaurants, hotels, and laboratories. It can be used to advantage industrially in processes where high temperatures and close temperature control are required. Recent experiments have demonstrated the practicability of converting natral gas to motor fuels and we believe that this will prove to be one of its most important uses, particularly in view of the declining ratio of petroleum reserves to consumption and the trend to a greatly reduced ratio of new petroleum discoveries to consumption.

Our opposition to the use of natural gas for inferior purposes is frankly motivated by the desire to prevent dislocations in the indus-. tries we represent, with consequent loss of employment and of invested savings, and future higher cost or poorer service to consumers. We do not object to profit as the motive for those in the natural-gas industry who desire now to exploit the available reserves of natural gas by rapidly expanding its distribution into market areas in which other fuels are economically available and where coal has been the basic fuel in the past and which must depend upon coal in the future. The question before the Congress and this committee is whether our position or that of the natural-gas industry most nearly coincides

with the public interest. We do not urge the adoption of our views solely on the grounds of effects upon the industries represented. We urge them rather on the ground that their adoption is in the interest of the public.

As shown by section 1 (a) of the act, it had its genesis in a report of the Federal Trade Commission to the Seventieth Congress, first session, in 1936. This very comprehensive report on all phases of the natural-gas industry concluded with strong emphasis on the necessity for conserving natural-gas resources. At page 606 of part 84–A, that Commission said:

*

Conservation is the first problem that demands attention. Vast acreage is being drained and natural gas is being subjected to profligate and wanton waste and uneconomical uses. * * such a valuable nonreplaceable natural resource of general countrywide use and need should in the public interest be conserved and utilized to the highest economic and social advantage.

Until the spring of 1944, the Federal Power Commission took the position that it was without authority to consider the purposes for which it was intended to use natural gas in passing upon applications for certificates of public convenience and necessity.

On January 3, 1944, the United States Supreme Court handed down. its decision in the Matter of Federal Power Commission v. Hope Natural Gas Company, 320 U. S. 591, 88 L. Ed. 333, in which the Court said:

When it comes to cases of abandonments of or extensions of facilities or service, we may assume that apart from express exemptions contained in section 7, considerations of conservation are material to the issuance of certificates of public convenience and necessity (p. 612). * * *

The act of February 7, 1942, by broadening section 7 gave the Commission some additional authority to deal with the conservation aspects of the problem (p. 617).

The duty of the Commission to exercise its powers with respect to conservation, in the light of the Hope decision, was first urged upon the Commission in cases involving Hope Natural Gas Co. and several other companies operating in the Appalachian area. In its opinion 114 in that case, dated April 26, 1944, the Commission said:

That considerations of conservation are material to the issuance of certificates of public convenience and necessity under section 7 of the Natural Gas Act is not open to question. (Citing the Hope case.) We are deeply cognizant of the necessity for conservation of the country's irreplaceable natural-gas resources.

However, the Commission has done little or nothing since that time in the way of establishing a definitive policy which would tend to restrict the use of natural gas for purposes that are economically wasteful.

Of course, the Commission has conducted its investigation in docket. No. G-580. Apparently this accounts to some extent for the delay on the part of the Commission in arriving at a conservation policy.

It will undoubtedly explain its position in this respect when it completes its report in docket No. G-580. The subject of end use control, was one of the most controversial matters submitted to it in the Natural Gas investigation, and one upon which extensive evidence was taken.

Consideration of end uses of natural gas as a factor in determining questions of public convenience and necessity is required if we are to properly conserve our remaining limited natural gas resources. I will deal more fully with the matter of conservation later on in this

statement.

We believe that the Commission should retain the power to so administer the Natural Gas Act in such a manner as to conserve, so far as practicable, our reserves of natural gas for utilization which affords the highest social benefits to the public, consistent with reasonable rates and adequate service. According to the latest published report of the Bureau of Mines, at the end of 1945, 10,850,000 domestic customers consumed 16 percent of the marketed natural gas, 875,000 commercial customers consumed 6 percent and 44,000 industrial customers consumed 78 percent, with a total consumption of 3,875,172,000,000 cubic feet. A very large, but undetermined percentage of industrial consumption was for inferior purposes which could have been taken care of efficiently by coal.

The superior uses of natural gas from the standpoint of the general public are usually classified in about the following order: cooking in homes, water-heating, refrigeration, cooking in hotels, restaurants, etc., domestic househeating, superior industrial uses, such as I have referred to. At the bottom of the list is industrial boiler fuel.

Justice Jackson, in his concurring opinion in Federal Power Commission v. Hope Natural Gas Company, 320 U. S. 591, 88 L. Ed. 333, stated:

Utilization of natural gas of the highest social as well as economic return is domestic use for cooking and waterheating followed closely by use for space heating in homes. This is the true public utility aspect of the enterprise and its preservation should be the first concern of regulation.

The act should be so administered as to assure long-time continuity of service to the domestic user, and to conserve supplies for preferential commercial and industrial uses.

We believe that the general public is entitled to this protection. If the Moore bill were passed in its present form, the Commission would be deprived of authority to prevent economic waste of this valuable resource.

In order to maintain a profitable load factor and at the same time keep domestic rates at a reasonable level, it may be necessary for a pipeline company to have a substantial industrial load. The Commission is cognizant of this fact, and has, we believe, been altogether too liberal in applying this principle.

New York State has had an experience typical of many of the older producing States. In the course of more than 50 years as a gas producing and consuming State, it has seen times of plenty as well as scarcity. At times discoveries of flush production have been wantonly wasted, whereas at other times consumers have had to revert to other fuels because of lack of gas. Now their reserves are virtually exhausted.

From a peak production of 41,000,000,000 cubic feet in 1938, there was a decline to 7,700,000,000 cubic feet in 1944. There have been no substantial discoveries in the past 10 years and New York is now required to rely increasingly upon imports from other States.

In its brief filed with the Federal Power Commission in Docket No. G-580, the public service commission of that State said:

There can be no adequate conservation of natural gas without a determination by some authority that the end use is proper in the interest of conservation and of uniformity, such a determination should be in the hands of a Federal agency (p. 2).