legislation is about to be enacted, it ought to be enacted in such form as to offer as little opportunity as possible to those who dislike the regulation imposed to contest its application.

The next amendment is:

3. Amend section 1 (b) of said bill, as printed, to read as follows: (b) The provisions of this act shall apply to the transportation of [natural] gas in high-pressure mains in interstate commerce and to [natural] gas companies engaged in such transportation, when such transportation is for ultimate distribution to the public, but 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: [Provided,] and [That] nothing in this act shall be construed to authorize the Commission to fix rates or charges for the sale of [natural] gas distributed locally in low-pressure mains or for the sale of [natural] gas to an ultimate consumer for industrial or domestic use only.

It was evidently the purpose of the one who drew the act to reserve to the State authorities the right to regulate the consumer rate, even though the consumer was an industrial user who received his supply in a high-pressure main.

I have suggested that certain domestic consumers also take their service from high-pressure mains, and that language should be inserted to make it clear that the act does not apply to any consumer receiving gas for his own consumption in either industrial or domestic use.

The language of course used by the Congress in the Federal Power Act was that the term "sale of electric energy at wholesale" which was what was regulated, "when used in this part means the sale of electric energy to any person for resale."

What the State commissions ask Congress to do, is to regulate interstate intercompany transactions, but not to regulate the rate to any consumer, whether he takes for industrial or domestic use; to regulate the sale price of gas only when sold for resale.

Now, let me refer just for a moment to something Mr. Battle said about rates in effect in Chicago. I do not know what the rates are in Chicago, what the industrial user pays, or what the domestic user pays; but they are fixed by tariffs on file with the State commission. They are subject to the regulation of the State commission. If there is an unfair discrimination between the two classes of users, the domestic users may complain of the discrimination to the State commission and have that regulated. Of course, the rates generally vary and are lower for industrial uses, coking use and manufacturing, than they are for domestic use. I should expect to find a variation in Chicago. Whether the variation is too great in Chicago I do not know, but as Mr. Cole implied in his questions directed to Mr. Battle, those rates are subject to regulation by the Illinois commission, and if there is anything wrong about them anybody has a tribunal to which he can make his complaint, and before which he can have a hearing.

Mr. COLE. Of course, Mr. Benton, the industrial field is highly competitive, and that to an extent should regulate itself.

Mr. BENTON. Let me say, Mr. Cole, so far as the State commissions are concerned, they do not come here on this, any more than on any other legislation, with a view of asking Congress to enact legislation to hamper or suppress an industry. It is the desire of the State commissions that the gas industry, natural or artificial,

shall have its full natural growth. They desire merely that the entire field of regulation shall be covered. It is not covered now. The operating costs of the distributing companies, where natural gas is used, is largely controlled by the gate rate. Thus, where the gas passes over a State line, it is beyond the jurisdiction of the State commission. Therefore, the rate at which the gas is sold to the public is largely beyond the control or regulation of the State commission. They ask to have the interstate gate rate regulated, and the full field of regulation covered. The field is one which the States cannot occupy. It can be occupied only under legislation enacted by Congress. The resolution of our Association asks the Congress to fill that gap in the field of regulation.

Mr. COLE. Mr. Benton, may I ask you a question there?
Mr. BENTON. Yes, sir.

Mr. COLE. In the early part of your statement-I did not want to interrupt you at the time-you pictured to the committee under the Illinois and other cases, the Southwestern Bell and all of them, the impossibility of the State commissions interfering with the contract price between the local distributing company and a natural-gas selling company, a nonaffiliate of the distributing company, it being part of the management set-up of the business, and the commission has difficulty in having anything to do with that contract. You have also pictured to the committee how expensive it is, almost prohibitive, and next to impossible for the State commission to go back into costs of distribution and transportation of this product.

I assume that there is some basis for those statements and some basis for the resolution passed last November, and that there are concrete definite cases of difficulty which the State commissions in this country some place have had.

So far, this committee has not received any indication of anything of that character in the testimony except occasional reference to St. Louis, St. Paul, Chicago, or some other city.

We have had, and we did have, cases in connection with regulating utilities in connection with the bill last summer which were raised, and instances were pointed out to us by the State commissions, where they evidently felt that the consumer was being charged too much for a product which they can regulate partially but have nothing to do with the contract price being imposed upon the local companies by these larger natural-gas companies. And, for the record, for the information of the House, I wonder if you can put in at this point some specific cases which have come to your attention-cases now pending, maybe, before some of the State commissions; litigation they have had where their efforts to regulate have been rejected by the higher courts and therefore some basis for the charge that the State commissions feel that these contract prices of natural-gas companies are so terribly high that they should be regulated.

Mr. BENTON. Mr. Cole, I can point to the very case in which the resolution which is here involved had its genesis. I have cited Missouri v. Kansas Natural Gas Co. That case involved an attempt on the part of the commission in Missouri to fix gate rates in Missouri and an attempt on the part of the Kansas commission to fix gate rates in Kansas. That litigation was carried to the Supreme Court of the United States, and the Supreme Court held that the State was without power to do that.

Now, of course, that settled the law for all commissions. At a later time-in 1930-there was another case where the Kansas commission attempted to fix the operating allowance for the gate rate in Wichita. It was, I think, the so-called Western Distributing Co. case, which I have cited, although I did not state the facts. It will be found in my statement. That was pending before the Kansas commission in 1930, when our association met in annual convention in the city of Charleston. The chairman of our committee on public utility rates presented a report on utility rates in general. He came from a State where they never had any difficulty with their gas rates. In his report, as first presented, he expressed the opinion that the regulation of gas companies could be adequately dealt with by State commissions without Federal regulation. The Kansas commission at once presented their matter on the floor of the convention. The convention recommitted the report to the committee for amendment, and the report finally adopted by the association recommended the enactment of legislation by Congress.

The matter was not then immediately presented to Congress for the reason that the Kansas commission, instead of awaiting action by the officers of the association, itself entered into communication directly with different commissions in the country to ascertain their attitude with respect to it. There was a meeting of commission representatives-I think about 25 commissions sent representatives-in St. Louis to discuss it. That conference was called by the Kansas commission. The conference voted that a committee should be there created to draw a natural-gas bill, and, acting in conjunction with the legislative committee of the association, to present it to Congress. A subsequent conference of commissioners was held, I think, in Chicago, at which that committee reported back and a bill which was presented was approved and presented by Senator Capper. Senator Capper had introduced a bill to create a gas commission, but our committee felt that it was not adequate and did not safeguard the rights of the States and prepared a very different bill. Before anything came of the matter the Congress adjourned.

When the public-utilities holding company bill was introduced at the last Congress our executive committee gave consideration to it. The committee felt that the immediate needs of the States would be met by the enactment of title III, and they supported it. They supported it without any request that it be extended to cover artificial gas.

What we said on the matter at that time you will have in mind. Then at our last convention the matter was again brought up, and this resolution, which applies both to natural and artificial gas, was adopted. Of course, we are presenting the resolution as the association adopted it, and we are stating the reasons which appeal to us as reasons why, when Congress is dealing with the matter, the legislation should be made complete. And let me say that when Congress shall have passed a bill which regulates the gas industry, it seems to me that it will have covered the field of utility regulation, so far as there is occasion now for any exercise of regulatory power by the Federal Government.

Mr. COLE. Mr. Benton, is it fair to say that although we may not. find cases pending involving the price of natural gas, that that is

because of the precedent established in the Kansas case, which all concede as the law?

Mr. BENTON. There is no question whatever but that is true. It would be perfectly idle for State commissions to start out to reduce, or to investigate, the gate rate in the case of interstate natural-gas service, in view of the decisions of the United States Supreme Court. They can do that only in the case of affiliate companies. There have been some very important gas cases of that character in Ohio, which I have put into the record. In those cases the charges were found excessive, and the reduction of the rates made by the State commission was sustained because there was affiliation between the companies.

I was presenting the amendments which we propose. I will complete.

4. Amend section 2 of said bill by adding thereto a new paragraph 9, as follows:

9. "Gas" means either natural gas or artificial gas or any mixture of natural gas and artificial gas.

5. Amend said bill by adding to section 7 a new paragraph (b) as follows:

(b) No gas company, which is supplying gas to a public utility company, engaged in distributing such gas to the public, shall discontinue service to such public utility company without first obtaining from the Commission a certificate that public convenience and necessity permit such abandonment.

That language is largely taken from the abandonment provision of the Interstate Commerce Act.

That completes the statement I wished to make, Mr. Chairman. Mr. HOLMES. You say there are 31 States now using natural gas? Mr. BENTON. Thirty-seven using natural gas, to some extent. Mr. HOLMES. What is the ratio of consumption between natural gas and manufactured gas?

Mr. BENTON. I have no figures on that whatever. If you wish merely an offhand statement from me, which is not based upon figures and which is not worth much, I will say that you will find that the States which are near the natural-gas territories, the MidWestern States, and the southern Rocky Mountain States, and the States which are near the Louisiana fields, get a very large proportion of the gas which is sold to the public from the natural-gas fields. The States in the East get very much less. I do not know that New England receives any. I think it does not.

Mr. HOLMES. I do not believe it does.

Mr. COLE. Are there any questions anyone desires to ask Mr. Benton about this? If not, the committee will adjourn subject to the call of the chairman.

(Thereupon, at 11:50 a. m., the committee adjourned to meet at the call of the chairman of the subcommittee.)

NATURAL GAS

TUESDAY, APRIL 14, 1936

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE
AND FOREIGN COMMERCE,

Washington, D. C.

The subcommittee met, pursuant to call, in the committee rooms, at 10 a. m., Hon. William P. Cole presiding.

Mr. COLE. The committee will come to order. Chairman Lea is sick and will not attend the hearings today. We will first hear Mr. Carpenter.

STATEMENT OF HON. RANDOLPH CARPENTER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS

Mr. CARPENTER. Mr. Chairman and gentlemen of the committee, may I say by way of introduction that my interest in the oil and gas matters and legislation dates back to the time when I was a member of the Legislature of the State of Kansas, at which time I introduced the first oil proration bill that was enacted into law. At the same time I introduced a gas proration bill. It was not passed at that time; but within the last 2 years, I think, it has been enacted.

So, now the oil and gas business, so far as the operations in the fields, proration, conservation, and the natural-gas companies are concerned, come under the jurisdiction of the State corporation commission.

I have just received a letter and some information from the attorney of the State corporation commission of the State of Kansas, Mr. Charles W. Steiger, with whom I am well acquainted, having been associated with him in regard to these matters. His statements in the letter interest me, and I wish to present his views as expressed in his letter to the committee for their consideration. I beg the indulgence of the committee to that extent. The letter only contains two pages and will not take over about 4 minutes to read. Mr. COLE. Very well.

Mr. CARPENTER (reading):

RANDOLPH CARPENTER, M. C.,

Washington, D. C.

STATE CORPORATION COMMISSION,
Topeka, Kans., April 8, 1936.

DEAR SIR: I am writing you concerning H. R. 11662. This is a bill introduced by Mr. Lea to regulate the transportation and sale of natural gas in interstate commerce. It also provides, "that nothing in this act shall be construed to authorize the Commission to fix rates or charges for the sale of natural gas distributed locally in low-pressure mains or for the sale of natural gas for industrial use only."