SEC. 2. Subsection (5) of section 2 of said Natural Gas Act is amended to read as follows:

“(5) Natural gas' means neither gas in its natural state as produced from the well, or residue gas from gas in in its natural state, from casinghead gas or from other gaseous substance after extraction of hydrocarbon liquids, or any mixture of natural and artificial gas."

SEC. 3. Subsection (6) of section 2 of said Natural Gas Act is amended to read as follows:

"(6) 'Natural-gas company' means a person engaged in the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission as in this Act defined, or the sale in interstate commerce after the commencement of such transportation of natural gas for resale subject to the jurisdiction of the Commission, as in this Act defined, but to the extent only that such person is engaged in such transportation and sale; but such term does not include (a) any person that transports natural gas solely as a common carrier subject to part I of the Interstate Commerce Act, as amended, or (b) any person engaged in local distribution within a State who receives natural gas within or at the border of such State and sells and delivers such gas (i) to the general public for ultimate consumption therein, or (ii) to another person engaged in local distribution within the same State who sells and delivers such gas to the general public for ultimate consumption therein."

SEC. 4. Section 2 of said Natural Gas Act is further amended by adding thereto the following definitions:

"(10) Production' means the recovery of natural gas from reservoirs where naturally found and also the recovery of residue gas from natural gas, casinghead gas, or other gaseous substance by any method or treatement or processing through removal of natural gasoline, butanes, and other hydrocarbons or other chemicals or substances of commercial value, whether such recovery be made prior to, during, or incident to the transportation of natural gas in interstate commerce, and includes the delivery and sale of natural gas from production facilities, at any point thereon, whether such delivery and sale be in interstate or intrastate commerce. 'Production facilities' means the land, leaseholds, wells, separators, extraction plants, and other facilities used for or incident to such production.

"(11) 'Gathering' means the operation of gathering facilities and includes the delivery and sale of natural gas from such facilities, at any point thereon, whether such delivery and sale be in interstate or intrastate commerce; and 'gathering facilities' means facilities used for or incident to moving, by natural or mechanical pressure, natural gas produced or purchased in the production and gathering area to the point or points of delivery into inlets of the trunk transmission facilities used for the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(12) "Transportation of natural gas in interstate commerce' or 'transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission means and is limited to the operation of moving natural gas in interstate commerce through the whole or a portion of the trunk transmission facilities of a natural-gas company or companies (including facilities or properties for surface or underground storage) which facilities commence at the trunk pipe-line compressor station or stations or main receiving point or points established by a natural-gas company for the purpose of receiving gas from gathering facilities or from processing plants for transportation, and extend therefrom to the point or points in the State of local distribution or on the boundary of such State, at which such natural gas moves from the trunk transmission facilities of a person into the local distribution or trunk transmission facilities of another person who sells such natural gas in local distribution. If, before local distribution occurs, natural gas is transported across a State boundary line in trunk transmission facilities of the person who sells such natural gas to consumers in local distribution, then the transportation of such natural gas by such person, up to, but not beyond, the point at which it enters the pressure reducing, or measuring station, or local distribution facilities of such person, shall be transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission.

"(13) 'Sale in interstate commerce of natural gas for resale' or 'sale in interstate commerce of natural gas for resale subject to the jurisdiction of the Commission' means and is limited to such sale when made after the transportation of natural gas in interstate commerce subject to the jurisdiction of the Commission. "(14) 'Local distribution' means the operation of local distribution facilities and includes the delivery or sale of gas therefrom; and 'local distribution facilities'

means pipe lines and other facilities used for or incident to the distribution of natural gas to the general public within a community or distribution area for ultimate public consumption for domestic, commercial, industrial, and any other purpose."

SEC. 5. Said Natural Gas Act is amended by adding thereto the following section: "SEC. 52. The Commission in its regulation of rates and charges of a naturalgas company for the transportation and sale of natural gas subject to its jurisdiction and in the exercise of all its other functions under this Act shall be governed and controlled by the following provisions:

"(a) It shall allow to a natural-gas company as an operating expense an amount determined as follows: (1) the actual prices paid for gas purchased if the purchase is made by a natural-gas company from nonaffiliates and nonsubsidiaries; (2) if the gas is produced by such natural-gas company or purchased from a subsidiary or affiliate, the prevailing market price in the field or fields where produced for natural gas of comparable quality, volume and pressure, delivered under similar conditions, if such market price exists in said field; or, if there is no prevailing market price for such natural gas in said field or fields in which produced, the fair and reasonable value of such gas, taking into consideration prevailing prices for natural gas of a comparable quality, volume and pressure delivered under similar conditions in the general vicinity, and other pertinent factors, provided such value shall exclude a calculated value for such gas based upon the producer's investment in and cost of the properties from which such gas is produced and shall be restricted to the purposes of this section; and (3) reasonable compensation. for gathering all of such gas produced by such natural-gas company or purchased by a subsidiary or affiliate of such natural-gas company, and for delivering the same to the inlet or inlets of the transmission facilities of such natural-gas company: Provided, That a naturalgas company owning production facilities or gathering facilities, or both, upon the date when this subsection takes effect may elect, by filing a written statement with the Commission not later than ninety days after such date, that its production and gathering facilities then owned and thereafter acquired shall be included with its facilities used for the transportation of natural gas in interstate commerce in any determination by the Commission of the rates and charges of such company subject to the jurisdiction of the Commission; and after the exercise of such election, the provisions of clauses numbered (2) and (3) of this subsection shall not be applied by the Commission in determining such rates and charges.

"(b) If a natural-gas company is engaged in operations and activities which are not within the Commission's jurisdiction, the Commission, prior to the fixation and determination of the rate base and the rates subject to the jurisdiction of the Commission, shall (1) segregate from all the property and facilities of such natural-gas company the property and facilities used in the operations and activities subject to the Commission's jurisdiction under this Act by proper allocation made in accordance with the use to which the property and facilities are devoted; (2) segregate from all the revenues of such natural-gas company the revenues received from its operations and activities subject to the Commission's jurisdiction under this Act; (3) segregate from all the expenses of such natural-gas company the expenses incurred or expended in the operations and activities subject to the Commission's jurisdiction under this Act by proper allocation made in accordance with the use to which the property and facilities of such natural-gas company are devoted; and (4) in making such segregations and allocations of property, revenues, and expenses; the Commission shall not assign to the jurisdictional class of property, operations, and activities any of the properties, revenues, or expenses of a nonjurisdictional class of properties, operations, and activities."

SEC. 6. Section 7, as amended, of said Natural Gas Act is amended by adding at the end thereof the following subsection:

"(h) It shall be the duty of every natural-gas company furnishing natural gas directly or indirectly to any distributing company for distribution and resale to the public as a public utility service to furnish and supply service which is reasonable, having regard to the public utility character thereof, and to the duty of such distributing company to supply reasonable service to its customers. The Commission shall have power upon complaint or upon its own motion, after notice and opportunity for hearing, by order to require any natural-gas company to perform its obligations under this subsection and to

install and maintain such service instrumentalities as shall be reasonably necessary for that purpose, With respect to trunk transmission facilities this subsection is subject to the proviso contained in subsection (a) of this section." SEC. 7. (a) Subparagraph (b) of paragraph (1) of section 1 of the Interstate Commerce Act, as amended, is amended to read as follows:

"(b) The transportation of oil or other commodity, except water and except hatural or artificial gas, by pipe line, or partly by pipe line and partly by railroad or by water; or the transportation of natural gas by pipe line solely for others for hire, and not engaged in the selling of natural gas; or".

(b) The first sentence of paragraph (3) (a) of section 1 of the Interstate Commerce Act, as amended, is amended by inserting after the words "pipe-line companies" the words "subject to the provisions of this part." Passed the House of Representatives July 11, 1947.

Attest:

JOHN ANDREWS, Clerk.

Senator MOORE. Senator Capehart is out of town. He cannot be here. Senator Stewart will be here presently.

S. 734 is identical with H. R. 2185, introduced in the House by Congressman Rizley, of Oklahoma, and H. R. 2235, introduced by Congressman Carson, of Ohio, and H. R. 2292, by Congressman Davis, of Tennessee. Hearings have been conducted in the House by the Interstate and Foreign Commerce Committee at which both proponents and opponents of the bill have been heard. Because of the urgency of other matters, however, the House committee recessed hearings before representatives of the Federal Power Commission had an opportunity to be heard, I also understand that some of the proponents of the bill who failed to appear in person because of lack of time have filed statements which appear in the House record. I am advised the House committee in the near future will reconvene to hear the Federal Power Commission and possibly representatives of other governmental bodies that have not had an opportunity to be heard.

The purpose of the present Senate hearings is to make available to the members of this committee the testimony thus far presented to the House, together with a summary from both the legislative and administrative viewpoints. It is the hope of this committee that by this procedure we can avoid long and duplicating hearings on the proposed legislation. I am, therefore, placing in the record at this time a transcript of the hearings conducted in the House to date on the bills introduced by Congressmen Rizley, Carson, and Davis. I understand the printed transcript is not yet available but it will be filed at this point in the record.

(The transcript was filed with the committee.)

Senator MOORE. The purpose of S. 734, like the House bills, is to amend the Natural Gas Act of 1938, as amended in 1942, to the end that widespread confusion and uncertainty which appear to have developed in both the oil and gas industries, and probably to some extent in the Federal Power Commission itself, may be eliminated. Several Supreme Court decisions, in which the Court was sharply divided, have given rise to much fear in the oil-and-gas industry as to the extent of the authority of the Commission under the Natural Gas Act, which appears to be causing many producers to withhold their gas from the market, thus tending to cause waste of a valuable resource which, if true, must necessarily eventually result in a shortage of gas to the con

suming public. Also, complaints have come from some of the interstate natural-gas pipe lines that the administrative procedure of the Commission has hampered and interfered with the expansion of existing lines or the building of new lines, to the severe detriment of the consuming public.

Recent administrative and judicial interpretations of the Natural Gas Act raise the important issue of congressional policy as to whether Federal authority should be extended to regulatory fields now occur pied by the States. Under existing application of the Natural Gas Act, as I understand the orders of the Commission and the opinions of the Court, the Commission may:

(1) Consider the activities of production, gathering, and processing of gas and the facilities used in connection therewith for purposes of making rates for an interstate natural-gas company;

(2) Consider the purposes for which the gas is to be used as a factor in granting or denying applications of an interstate natural-gas company for a certificate of convenience and necessity;

(3) Extend its rate-making authority to local sales now subject to State regulation; and

(4) Regulate the extension or expansion of natural-gas pipe-line facilities for transportation or sale of natural gas in existing markets for which a certificate has already been issued, and which extended or enlarged facilities are confined to the purpose of maintaining continuity of service or of supplying increased demands in such existing markets.

Specifically, S. 734 is designed to effectuate a congressional policy of defining and limiting the Federal regulatory authority to that area of interstate commerce between the point where natural gas enters the interstate gas company's trunk-pipe line and the point at which it is delivered into the distribution system of local distributors or the lines of an industrial user; and to facilitate the procedural requirements with respect to issuance of certificates of convenience and necessity, thus withdrawing Federal authority from those fields of regulation now occupied by the States, namely, production, gathering, processing, use, and local sales.

The question to be considered, therefore, is whether or not it is in the broad public interest for the Congress to continue the traditional policy of restricting the Federal regulatory power exclusively to those fields which may not, for constitutional reasons, be entered by the States, and to refrain from the extension of such Federal regulatory powers to those activities over which the States have properly asserted jurisdiction.

Congressman Rizley, author of one of the bills pending in the House, and who is familiar with the record of the hearings before the House Interstate and Foreign Commerce Committee, has consented to appear here as a witness and to summarize what he deems to be the salient points of the testimony developed. Mr. Smith, Chairman of the Federal Power Commission, will discuss the testimony from the administrative viewpoint. Since the Commission, however, has not had an opportunity to be heard by the House committee, it will be appropriate

for Mr. Smith to make such additional comments on the proposed bill as he may deem advisable, for the consideration of the committee. If there are other witnesses who desire to comment on the record of the House hearings now or when the House hearings have been finally closed, this committee will be glad to have such witnesses file a statement of their views, which will be incorporated in the record.

Mr. McGrath, representing the National Coal Association, I understand, desires to file a statement at the conclusion of this hearing. If there are others wishing to file a statement at this time, copies should be furnished Mr. Jarrett, clerk of the committee.

In connection with S. 1028, which grants to interstate natural-gas pipe-line companies the right of eminent domain when necessary to carry out and perform the purposes for which certificates of convenience and necessity may have been granted by the Federal Power Commission, I want to insert in the record a report of the Federal Power Commission on the bill.

(The report is as follows:)

FEDERAL POWER COMMISSION REPORT ON S. 1028, BILL TO AMEND THE NATURAL GAS ACT

There is respectfully submitted herewith a report on S. 1028, a bill to amend section 7 of the Natural Gas Act, approved June 21, 1938, as amended February 7, 1942, by adding after subsection (g) a new subsection (h) thereto.

The proposed amendment provides generally for the exercise of the right of eminent domain by natural-gas companies with respect to necessary rights-of-way in connection with the construction and operation of natural-gas pipe lines. This proposed amendment is similar to section 21 of the Federal Power Act, which also provides for the exercise of the right of eminent domain by licensees regarding dam sites.

The Commission has no objection to the amendment to section 7 of the Natural Gas Act as proposed in S. 1028.

We have submitted a similar report on H. R. 2956, an identical bill which has been introduced in the House.

FEDERAL POWER COMMISSION, By NELSON LEE SMITH, Chairman.

Senator MOORE. This bill, S. 1028, amends section 7 of the Natural Gas Act by the addition of a new subsection which provides that when any holder of a certificate of public convenience and necessity cannot acquire by contract, or is unable to agree with the owner of property on the compensation to be paid for, the necessary right-of-way for the construction and operation of a pipe line for the transportation of natural gas and the necessary land for the location of compressor ́stations or other equipment, it may acquire the same by the exercise of the right of eminent domain in the State courts or in the District Court of the United States for the district in which the property may be located provided the amount claimed by the owner of the property to be condemned exceeds the jurisdictional amount of $3,000. The bill further provides that the practice and procedure in any condemnation suit shall conform as nearly as may be with the practice and procedure in a similar action in the State courts where the property is located.

There are two conditions to the exercise of the right of eminent domain under this bill: