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I think the objections which I might have raised from the point of view of theory to the rest of this section might be waived for the time being, because the conflict has not developed. We have gotten together. We did not get together with the Interstate Commerce Commission, but we have got together with the Federal Communications Commission and with the Federal Power Commission; but the trouble arises just in those few lines. That is what I am trying to emphasize and to say that I think you may safely let the rest go to a mutual cooperation.
Now, the same thing might be said as to specific charges to depreciation and amortization.
Unquestionably the State commission would have the authority to fix rates of depreciation in intrastate rate cases. There is not any question about that. And there is not any question but what the Federal Power Commission would have the power to fix depreciation in interstate rate cases for the purposes of that rate case; but section 9 goes further and says that they must take the rate of depreciation which the Federal Power Commission fixes, and the Federal Power Commission might fix a rate on property nine-tenths of which is intrastate. That looks to us as if the tail were going to wag the dog, and we would rather have the dog wag the tail.
So I think that a change might be made there, and I will submit to take care of that.
Mr. PETTENGILL. Have you any opinion on 7 (c)?
Mr. MALTBIE. Yes; 7 (c) or its equivalent has been in the law of the State of New York so long—that is about 30 years—so long that everybody is becoming reconciled to it or given in, one or the other.
There are a few instances; there are instances where a municipality can create a competing plant without the approval of the public service commission; but no company under our jurisdiction engaged wholly in interstate business-and I have in mind now the railroads which are engaged in both-no company engaged in intrastate business in the State of New York, in gas, or railroad business, electricity, water, steam, telephone, can build a plant or exercise a franchise without a certificate of convenience and necessity. Some municipalities, but no company can.
All that that argues is for or against giving similar power to the Federal Government.
I think the most important question in this whole thing is not touched upon in this bill, and that is the question of waste of our natural resources; and if a certificate of convenience and necessity must be secured from a Federal department in order to conserve our resources, I am for it. I am for anything that is at all reasonable that will conserve our natural resources—gas resources we are talking about now.
I think-my personal opinion is—that that certainly will help. I do not think it clears the case up entirely, but it will help.
Now, you have asked-
There is just so much gas-no one knows the number of cubic feetbut theoretically there is an unknown quantity of cubic feet of natural gas in the reservoirs of the earth. How will you conserve that, whether it is sold to the customer by one company or two companies competing with each other?
Mr. MALTBIE. The tendency is, of competition, to get that gas out just as quickly as they can. Now, these pools that are tapped are often tapped not by one company or a company or companies controlled from one source, so that they can determine the rapidity with which it will be taken out by each company, but they are often tapped by persons or companies not under the same control.
Now, as this gas flows in the sands, to a considerable extent, when you tap a reservoir, if you get all of it right out at once you have got it. The other fellow has not. It is in there. If he does not take
so far as he is concerned, he does not get it. Consequently there is an incentive to get it out as soon as you can, if you have got competitors in the same pool, and that tends to selling the gas not for its most economical and advantageous uses, from a public point of view, but from an individual point of view.
Now, that is not theory. We have some cases—we had one right in New York just recently, the case of the Cabot Co., which asked permission and had to get a certificate of necessity and convenience. Some of the pipe-line companies engaged in interstate commerce in New York had gone ahead and built without getting any certificate. They said that they were not under our commission and were not under the Federal Government, because the Federal Government did not have any commission, so that they were free to do as they pleased.
But the Cabot Gas. Co. has a franchise. You practically have to cross streets. If you do not, you run up them. So they have to have a franchise to operate in the State of New York.
And they came to us. They were getting part of their gas over the Pennsylvania line in Pennsylvania. They wanted to sell to the Eastman Kodak Co, in Rochester, and they wanted to sell to one or two other companies, and incidentally small sales to others.
They came to us to get the certificate of convenience and necessity. We wrote an opinion in which we pointed out we, and no one else, at the present time could control the use that was being made of natural gas, and if it did not go into New York, it goes somewhere else. Consequently it was natural for us to say that the Eastman Kodak Co. could have it.
Now, the Cabots were outside the circle of some of these companies, and they have their own money. They have plenty of money, and they came before us, and we gave them the certificate, and partly for the reason or because we did not have any means of controlling,
conserving, the natural-gas supply. If we had had, or if there had been some means of serving, I do not know whether we would have given them the certificate or not.
Mr. PETTENGILL. So you think that the Federal Power Commission can determine the question as to whether convenience or necessity would be served by issuing this certificate? But, as to the question of natural resources entering into the consideration, the statute does not say so.
Mr. MALTBIE. I know it does not say so, and all that I am saying is that I think it will help in that direction; and if it will, I am for it.
I think probably you gentlemen—I know you have—have this question of conservation in mind and possibly you have in mind next year or later, going further in this field and attempting to do something to conserve our natural-gas supply. The trouble is now the States cannot do it. The only way that the States can do it is through some compact that we tried in New York. We could not get a compact. It would not work. We could not get one at that time with the State of Pennsylvania.
Mr. MARTIN. Mr. Chairman-
Mr. MARTIN. Mr. Maltbie, we have had a daily diet here for the last 4 years about Government regimenting business, about the Government interfering in business, growing out of all of this New Deal legislation. It looks to me that here we are going a step further and absolutely depriving a man of the right to develop and use his own property and resources.
Mr. MALTBIE. You certainly are going to put him under regulation.
Mr. MARTIN. A man has a gas field or has an oil field and he is able to develop it, and he can find a market for his product, and he goes to the Government and asks for a certificate to do that, and the Government says, “We do not need it. The public does not need that gas or oil.” And he cannot develop it. A man cannot use his own property or own resources. You understand, I am not objecting to that. I am just pointing out the inconsistency of the thing.
The CHAIRMAN. Of course, this bill does not go that far. He can go into a new field.
Mr. MARTIN. You can go that far under section 7 (c), can you not?
The CHAIRMAN. No. You can go into a new without that.
The CHAIRMAN. He can go where they need it. You do not have to have a certificate in the State.
Mr. MALTBIE. I do not think that you have to have a certificate in the State.
Mr. BOREN. I do not see how section 7 (c) is a practical conservation section at all.
Suppose that you are talking about the same field, you have different costs of operations in the same field. They cannot all market their production, one company is marketing it, evidently transporting it, purchasing it from another company
Mr. MALTBIE. Of course, if you show that a company is not getting to market, it cannot do anything with its gas.
Mr. BOREN. And furthermore, under the present system-I suppose it is true in most oil and gas fields—it certainly is true in the West. We are just letting it go to waste. A great deal of the gas supply is wasted. I think that it was pointed out here this morning that something like 80 percent of it is simply being wasted instead of being used. If the restrictions are written into the law as indicated in section 7 (c), would not that have a tendency to curtail waste, of this 80 or 90 percent?
Mr. MALTBIE. It will not, if you are not going any further than 7 (c). I say that 7 (c) does not begin to adequately deal with what seems to me to be the most important thing we have, and that is waste of natural resources. If that is all, why, 7 (c) is entirely inadequate, in view of that. I simply said that it looks to me like a step in the right direction. Perhaps it is not a very long stride. Perhaps it is just edging along a little bit; but we have had it so long
in the State of New York that we are accustomed to it. It may bad thing, but it seems to work very well.
. Mr. PETTENGILL. I am not arguing that it is a bad thing. Is it necessary to duplicate it? You see my point ?
Mr. MALTBIE. Yes, I do.
Mr. PETTENGILL. I have listened to you with profound interest, because you are clearly informed on the subject; but I confess that I cannot follow you that there would be much conservation of resources in the ground through any grants or failure to grant a certificate to supply a market that is already being supplied by a competitor. I cannot see that, if it goes into illumination, or house heating, or industrial heating. Those are all recognized uses for natural gas.
The manufacturer of carbon black or something like that, might be a very inefficient use that can be controlled at the factory where the carbon black is being made. It does not require a Federal certificate of public convenience to regulate the use of natural gas for inefficient uses.
Mr. MALTBIE. Well, it perhaps would not reach it, because, of course, natural
gas can be used for carbon black or any other unwise purpose without getting into interstate commerce at all
. Mr. PETTENGILL. I would like to make one correction. I am sure that Mr. Mapes in starting the ball rolling had an entirely different situation in mind, but it is going into this hearing today that 90 percent of the natural gas is being wasted. That is not true. That 90 or 97 percent, Mr. Mapes, refers only to gas wasted when you manufacture gasoline out of it.
Ninety-five percent of the B. t. u.'s go into the air when you manufacture gasoline from natural gas. Except as to that one point there is no warrant in saying that 90 percent of the gas is being wasted.
Mr. MAPES. Ninety-seven percent of that that is being used in the manufacture of gasoline.
Mr. PETTENGILL. That is right.
Mr. MALTBIE. No such percentage of waste is taking place in the State of New York.
Mr. PETTENGILL. No.
Mr. PETTENGILL. My information is that out in the Panhandle there is not very much gas being wasted today, relatively.
The CHAIRMAN. We thank you, Mr. Maltbie. We will be glad to receive your suggested amendments.
Mr. MALTBIE. Thank you.
STATEMENT OF HARRY GANDY, JR., REPRESENTING THE
NATIONAL COAL ASSOCIATION
Mr. GANDY. Mr. Chairman. The CHAIRMAN. Will you give us your name and representation ? Mr. Gandy. Harry Gandy, Jr. I am a member of the staff of the National Coal Association which is the national organization of bituminous coal-mine operators, representing both captive and commercial mines in every producing field in the United States and just have a short statement. We filed a statement with your committee last year, and I want to put it in the record again this year. In the call of these bills for hearing, it was noted that you wanted to limit it to new matter insofar as possible, and for that reason, in order to conserve the time of the committee, I desire to resubmit for the record the statement made by our executive secretary, Mr. John D. Battle, last year, when a bill of the same nature was under consideration.
I desire to make it clear, beyond any chance of misunderstanding, that the statement is not a commitment either of approval or of opposition to the proposed legislation, it merely being for the purpose of pointing out to your committee certain defects which we feel the bill contains, chief among which is the exemption of the sale of natural gas for industrial use only. We have pointed out that with the exemptions that are seemingly provided for in the bill itself, the bill leaves scarcely anything to control. There is no need for me to go into those exemptions, because they are all explained entirely in the statement.
I desire to submit this statement for the record.
The CHAIRMAN. You may extend your remarks or file the statement.
Mr. GANDY. Thank you.
STATEMENT OF JOHN D. BATTLE, EXECUTIVE SECRETARY, NATIONAL COAL ASSOCIA
TION, BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, HOUSE OF REPRESENTATIVES, ON H. R. 11662, A BILL DESIGNED TO REGULATE THE TRANSPORTATION AND SALE OF NATURAL GAS IN INTERSTATE COMMERCE, APRIL 7, 1936
As a representative of the bituminous coal-mining industry I approach a discussion of this bill, which is apparently designed to regulate the natural gas industry by the Federal Government, with some misgivings. I do not come here as a spokesman for one industry proposing that you regulate another industry, even though that industry is a competitor of ours. I come here for the purpose of pointing out to you certain defects in this bill which in my opinion make it practically nil insofar as benefiting any one is concerned.
I must, of course, consider this bill as having been introduced in good faith and I therefore treat it most seriously. It is said to be for the purpose of regulating the transportation and sale of natural gas in interstate commerce and then in section 1, it seems to me, when the exceptions are taken into consideration, there is very little, if anything, left to regulate.
For instance, let us analyze section 1 briefly, and that is about the only section in which I am interested.
The bill first declares the business of transporting and selling natural gas for ultimate distribution to the public to be affected with a public interest and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest.
I am not a lawyer. Therefore, I do not discuss the question of the Federal power in the premises. I merely wish to point out some of the practical features in connection with this proposed law.
Then the bill provides that it shall not apply to the distribution of natural gas moving locally in low-pressure mains or to the facilities used for such distribution or to the production of natural gas. Thus production control is eliminated. I am not clear on the distinction between low-pressure and high-pressure mainsthere is nothing in the bill to indicate what the dividing line is ; thoroughly understood by those familiar with the industry—but at least it does not apply to natural gas moving in low-pressure mains. Likewise it does not apply to the distribution locally, and then there is a further exception to the effect that it does not apply to the sale of natural gas for industrial use.
Consequently the only phase of the industry, as I see it, that it is proposed to regulate is after the gathering ceases and the gas is turned into a main line, so to speak, until it reaches the city gate, and only then when it is moving in high-pressure mains across State lines.