is owned by the Standard Oil Co. of New Jersey and other strong oil interests. The purchases of natural gas for service in Chicago are covered by a series of contracts entered into some years ago. Under these circumstances, there may be some doubt as to whether the Illinois Commerce Commission could modify the price being paid by the People's Gas Light & Coke Co. for natural gas because of the excessive profits of Natural Gas Pipeline Co. of America.

Preliminary studies made by our staff indicate that the Natural Gas Pipeline Co. of America is currently making excessive profits to the extent of $1,500,000 to $3,000,000 per year, based upon a 6-percent return upon the cost of the pipe lire.

If the pending bill is enacted into law, the Federal Power Commission would clearly have the right to examine into the profits of the Natural Gas Pipeline Co. of America; and if such profits were found to be excessive, to modify the price accordingly. A reduction in price would be reflected directly in a lower cost of gas to the People's Gas Light & Coke Co., and, of course, a corresponding increase in their net operating income. Therefore, any reductions ordered would be a direct element in the determination of reasonable rates for the People's Gas Light & Coke Co. in the city of Chicago.

I think this will indicate to you quite clearly the extreme importance to the State of Illinois of this bill.

Now, as to the amendments which were discussed by Messrs. Booth and Dittmer, the first one merely suggested a change in the wording, so that the bill would clearly and definitely apply to the local situation. As originally worded, the bill merely covered companies transporting gas in interstate commerce and selling such gas at wholesale for resale to the public. Due to the intervening Chicago District Pipe Line Co., the wording, if strictly construed, would not apply to the Natural Gas Pipeline Co. of America. Therefore, it was suggested, with the approval of Mr. DeVane, that the wording be changed to cover all sales of natural gas at wholesale for resale.

The second suggestion was that the law be amended to give the Federal Power Commission authority to fix the rates by temporary order. This is of a good deal of importance to us now because even if the bill is promptly enacted into law there may be some doubt whether the Federal Power Commission would be able to act in time to give us the benefit of their action in the present proreeding in which a final order by this Commission must, issue not later than May 24 of the present year. The suggested amendment was patterned after the provision in the New York law recently adopted because this particular provision was recently sustained by the New York Court of Appeals in Bronx Gas & Electric Co. v. Maltbie, 271 N. Y. 365.

Please rest assured that we fuily appreciate your efforts to bring about effective regulation of interstate gas utilities. You may also be interested in knowing that Governor Horner, of Illinois, has communicated with the Senators and Representatives in Congress from Illinois and has requested their support of this bill. I hope it may be shortly reported out of your committee and sent on to speedy enactment. Very truly yours,




Washington, D. C., March 4, 1937. Hon. CLARENCE F. LEA, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives. MY DEAR MR. LEA: I am directing your attention in order that it may be placed before the committee and incorporated in the records of any hearings which may be held on this subject, a letter from the Hon. Henry Horner, Governor of Illinois, in support of H. R. 4008, which provides for the regulation of interstate natural gas rates.

I want to join with the Governor of Illinois in supporting this proposed legislation. I trust that you will advise the committee of my interest in this matter. With kindest regards, I am, Very truly yours,



Springfield, March 1, 1937. Hon. EDWIN M. SCHAEFER,

House of Representatives, Washington, D. C. MY DEAR CONGRESSMAN SCHAEFER: There is pending before the Committee on Interstate and Foreign Commerce of the House of Representatives H. R. 4008, which provides for the regulation of interstate natural-gas rates. Proper regulation of wholesale rates charged to local utilities by the interstate companies will afford much-needed protection.

Illinois consumers now pay approximately $15,000,000 annually to interstate natural-gas companies and effective regulation of gas rates in Illinois will be immeasurable aided by the enactment of H. R. 4008.

The early enactment of this bill is of great importance to the people of Illinois. I respectfully urge you to use your efforts to bring about its passage. Very truly yours,





Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., Hon. Clarence Lea (chairman) presiding.

The CHAIRMAN. The committee will come to order.
We will now hear Mr. Luke J. Scheer.



Mr. SCHEER. Mr. Chairman and gentlemen of the committee, in view of the nature of the proposed amendments to this bill I believe that we would like to dwell very briefly

Mr. MAPES. Would you mind stating for the record, your name and who you represent ?

Mr. SCHEER. Yes; my name is Luke J. Scheer. I am national secretary of the Cities Alliance, an organization of about 100 cities, particularly in the Midwest, and especially in Ohio and Michigan, which was organized specifically for the purpose of obtaining lower gas rates, and was organized for no other purpose. It has been in existence about 2 years, during which time we have centered our efforts primarily upon a more effective enforcement of the antitrust laws.

Mr. MAPES. That is the organization that former Mayor Smith, of Detroit, spoke for yesterday?

Mr. SCHEER. Mr. Smith is the national chairman.
Mr. MAPES. He is the gentleman who appeared here yesterday?

Mr. SCHEER. Yes; the national officers of the Cities Alliance are, chairman, John W. Smith, president, common council, Detroit, Mich. vice chairman, Daniel W. Hoan, mayor, Milwaukee, Wis.; treasurer, William C. Reed, councilman, chairman, Utilities Commission, Cleveland, Ohio; and secretary, Luke J. Scheer, 503 Waterboard' Building, Detroit, Mich.

The advisory board is comprised of the following: For the State of Indiana, George W. Freyermuth, mayor of South Bend; Iowa, J. H. Allen, mayor of Des Moines; Kentucky, Neville Miller, mayor of Louisville; Michigan, W. P. Edmonson, city manager, Pontiac, chairman, Michigan division of the Cities Alliance; Minnesota, Herman C. Wenzel, commissioner of utilities, St. Paul; Ohio, William C. Reed, chairman, utilities commission, city council, Cleveland, chairman of the Ohio division of the Cities Alliance.


Mr. Chairman, I have a letter signed by John W. Smith, national chairman, directed to the chairman of your committee, with reference to his position on this bill, H. R. 4008. It states:

On behalf of the Cities Alliance, and as chairman of the natural gas committee of the United States Conference of Mayors, I offer the following recommendations relating to the Lea natural gas bill, formally designated as H. R. 4008.

That no changes shall be made in the title, nor in sections 1, 2, 3, 6, 8, 11, 12, 13, 15, 16, 17, 18, 20, 21, 22, and 23 ;

That changes be made, some of them very minor, in sections 4, 5, 7, 9, 10, 14, and 18, as amended section by section on the attached sheets; and that an ad*ditional section, here designated as no. 712, shall be incorporated in the bill.

Gentlemen of the committee, I would like to point out that without a single exception all of these amendments were designed to broaden or clarify the functions that will be under the jurisdiction of the Federal Power Commission.

The amendments referred to in the letter of Mr. Smith relate to H. R. 4008, as outlined in his letter, and are as follows:

Amendment no. 1: Amend section 4 by adding a new subsection, to follow subsection (c) to read as follows:

“(d) Within six months from the date of the approval of this act each natural gas company which transports natural gas in interstate commerce shall file with the Commission true copies of all of its contracts-(1) for lease and royalty agreements of gas lands (unless excused by Commission for cause) ; (2) for the purchase of natural gas; (3) for the transportation of natural gas; and (4) for the sale or delivery of natural gas."

Thereafter each such natural gas company shall file promptly with the Commission true copies of any and all amendments, renewals, or new contracts on the matters heretofore enumerated.

Amendment no. 2: Amend section 5 by changing the section title as follows:

"Fixing rates and charges; determination of cost of production or transmission."

Thus the word “transmission” replaces the word “restoration."
Amendment no. 3: Add a new section, following section 7, to read as follows:

“SEC. 8. (a) The Commission shall establish regulations providing for the maintenance of accuracy and serviceability of all meters used in the control of operations of, and in the sale of natural gas by, natural gas companies under the jurisdiction of the Commission and shall provide tests for the determination of accuracy of such meters upon complaint or upon its own motion.

“(b) The Commission, upon complaint or upon its own motion, shall, from time to time, order such changes and improvements in equipment and operating procedure of natural gas companies under its jurisdiction, as it may determine, after investigation and hearing, are necessary to enhance safety in operation and maintain a proper quality of service within the limits of the capacity of the main pipe line and other major facilities installed by the owners."

Amendment no. 4: Amend section 9 by adding the word "production” after the word “the” and before the word “transportation” in line no. 6 of subsection (a).

Amendment no. 5: Amend section 10 by adding a new subsection to follow subsection (b) and to read as follows:

"(c) The Commission may, after hearing, determine the adequacy or inadequacy of the gas reserves held by any natural gas company, or by anyone for it, including its owned or Jeased properties or royalty contracts, and the Commission may, after hearing, determine the reasonableness or propriety of the inclusion of all delay rentals or other forms of rental or compensation for woperated lands and leases, in operating expenses, capital, or surplus.”.

Amendment no. 6: Amend section 14 by adding the words “and municipalities,” after the syllable "sions" and before the word "information” on line 6 of subsection (a).

Amendment no. 7: Amend section 19, subsection (a), line no. 5, page 27, by inserting after the word “practices”, the following clause: “or concerning apparent violations of the Federal antitrust laws,".

Further amend section 19, subsection (a), line no. 7, page 27, by striking out the last three words, namely, “under this act."

Amendment no. 8: Amend section 7 by adding a new subsection, to follow subsection (a), and to read as follows:

“(b) Up to the capacity of its pipe lines and its ability to procure sufficient natural gas, it shall be the duty of every natural-gas company which is engaged in interstate transportation of natural gas, unless reasonable cause to the contrary is established in public hearings before the Commission, to furnish natural gas to any city or town applying therefor which is able and willing to make arrangements to extend a service line to any main of any such pipe-line company, and said gas shall be furnished at fair and reasonable rates without unjust discrimination. Applications by such cities and towns for natural gas shall have priority for consideration in order of the dates of the filing of such applications, but the Commission, if it finds a duty to service, shall decide, after public hearings, held after due notice, the order in which applicants shall be served, priority being given to those cities and towns which, by reason of all pertinent considerations, including cost of the service, number of inhabitants, and need of industry served, indicate the maximum public benefit from such service."

Amendment no. 9: Further amend section 7 by entirely eliminating subsection (c).

Mr. SCHEER. Mr. Chairman, in my statement I shall deal with this ninth amendment which requests the striking out of subsection (c) of section 7 of the bill.

Mr. Chairman and gentlemen of the committee, in approaching the subject of our final recommendation to your honorable body, I believe we are justified in pointing out that our proposed amendments, thus far, have generally called for a broadening of the authorities to be granted to the Federal Power Commission in regulating the interstate transportation of natural gas.

Now, if our judgment in those recommendations, based as it is upon a collective experience of many years in these matters, is sound and constructive, is it not also permissible for you to assume that our cities are also sound and constructive in this final proposed amendment, where we request that a limitation shall be placed upon the authority of the Federal Power Commission?

On behalf of the Cities Alliance and the natural-gas committee of the United States Conference of Mayors I have been instructed to urge most respectfully the complete elimination from HR. 4008, the Lea natural-gas bill, that portion of section 7 which is described as subsection (c).

After 2 years of vigorous effort to free the natural-gas industry from unlawful monopolistic restraint, the aforementioned organizations are alarmed by any possibility that the Congress might, inadvertently, give its blessing to the practices and philosophy of monopolistic control now dominating the production, transportation, and distribution of natural gas throughout this Nation.

In an honest and sincere endeavor to view section 7 (c) of H. R. 4008 in the most favorable light, we cast about in our minds for some satisfactory amendment, but the longer we considered such a compromise the more convinced we became that one cannot add sugar to iodine and expect the resulting concoction to be palatable.

As pointed out by the committee chairman, Mr. Lea, section 7 (c) was not incorporated in the natural-gas bill which was reported out favorably by this committee in the closing days of the second session of the Seventy-fourth Congress. It appears strange to us that such a section was not previously incorporated in proposed natural-gas legislation, during 1934, or 1935, or 1936, if it is really such an essen


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