B

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

The CHAIRMAN. Mr. Martin.

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 into a new field.

go

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.
Mr. PETTENGILL. That is, he can go into a new market?

Mr. WADSWORTH. He can go into an old market.

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 be a 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. MALTBIE. There is very little in the State of New York.

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.

The CHAIRMAN. We will hear Mr. Gandy.

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 ASSOCIATION, 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; it may be 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.

If I am wrong in this interpretation of the bill, I hope that I may be corrected now. But if I have properly construed the bill, then if this high-pressure main line goes directly by 25 manufacturing plants, there is nothing to provide for any regulation of the price that may be charged for this gas, as gas for industrial use is exempted from the bill. If there were some domestic consumers along the line not subjected to State or city regulation, I presume the price of natural gas to them would come within the provisions of this bill, and if there were governmental buildings, such as hospitals, Army posts, etc., located along the pipe line not subject to city or State control, I presume the price to those institutions under this bill could be regulated.

Now let us determine who uses natural gas. According to the United States Bureau of Mines-and I wish to put this statement of the Bureau in the record if it has not already been placed there by others-31 percent of the natural gas is used for field purposes, 16 percent by domestic consumers, 5 percent by commercial consumers, 13 percent by carbon-black manufacturers; 7 percent by electric public-utility power plants, 5 percent by petroleum refineries, 2 percent by cement plants, and 21 percent for other purposes. The other purposes are not defined, but I presume they include blast furnaces, glass works, Government buildings, hospitals, barracks, etc., brick and clay burning, general hospitals, hotels, and small manufacturing plants not otherwise described.

To analyze further these figures of the Bureau of Mines: 31 percent used in field production, as I construe the bill, would not be subject to any regulation; 53 percent would not be subject to regulation, as it is for industrial use. I cannot distinguish between industrial and commercial use. This leaves only 16 percent used for domestic consumers, and if I understand the general operation of the industry, by far the greater portion of this 16 percent would be distributed locally by local plants and not subject to this bill. Therefore I repeat what I said at the outset; under the very provisions of the bill itself there is practically nothing left to regulate when the exceptions are taken into consideration.

The figures from the Bureau of Mines are for the year 1934 and are found in their mineral market report, no. M. M. S. 414, dated October 29, 1935. This same report points out that there has been a large increase in the production and use of natural gas in recent years and states that the major portion of the recovery in total distribution in 1934 was due to a material gain in demand for industrial purposes. The report likewise shows a large increase in the number of domestic and commercial consumers 1934 over the previous year.

Attention is called to the fact that the average value at wells per thousand cubic feet in 1934 was 6 cents, and the average value at point of consumption per thousand cubic feet was 22.3 cents. I take it from this report that this covers all of the gas, and I particularly call your attention to the fact that for domestic, including commercial distribution, which would account for only 21 percent of the total, the average value at point of consumption was 68.6 cents per thousand cubic feet. So it would seem that the domestic consumer is paying a very high price for gas and industrial users are paying very low prices.

Natural gas has displaced millions of tons of bituminous coal throughout the Nation. It is our opinion that natural gas is being sold for industrial purposes at prices that are reasonably low, while at the same time the domestic and household users are paying prices that are several times greater than those for industrial users. Our industry is interested in this phase of the business, that is, the industrial use of natural gas, as it comes in direct competition with coal and by practices that we question. We feel that the competition is unfair. It is reported to me that it is not an uncommon practice for the manufacturers of natural gas to call on an industrial plant and offer to furnish heat or power at 10 percent less than thel are paying at the time without even ascertaining what the fuel bill is. I submit that this kind of competition is unfair and cannot be met on any sound business principle.

There are only about 50,000 employees in the natural-gas industry throughout the country, according to the Bureau of Mines report for 1934. The bituminous-coal industry employs around 500,000 men directly in the mines and as many more indirectly in transportation, distribution, and sales forces. Thus there are several million people entirely dependent for a livelihood on the bituminous-coal industry and your attention is directed to the fact that some 60 to 65 cents out of every dollar paid for the mining of coal goes direct to labor. We do not know the labor cost in connection with natural gas, but it must be very small compared with coal. About 50 cents out of every dollar taken in by the railroads goes direct to the payment of wages. By far the greater portion of coal moves by rail transportation. Taking into consideration those employed directly in the mining industry and those industries allied

or associated with it, it is estimated that for each ton of coal displaced by some other fuel or form of energy, a person either directly or indirectly employed in the coal industry loses a day's work.

It is our information that gas is being sold to some industrial concerns in the city of Chicago for 12% cents per thousand cubic feet, whereas the household rate is about five times greater, and in this connection it must be borne in mind that natural gas has a higher B. t. u. value than manufactured gas. There are certain special rates, we understand, in effect in Chicago from March 1 to December 1 which will average about 18 cents per thousand cubic feet.

The Government buys a considerable quantity of gas, the last report indicating that it purchased 2,385,389 cubic feet in 1930. There has been a tremendous increase in the use of natural gas by the Government since 1930 but figures are not available. It is noted that at some of its Army posts, in sections far removed from the gas fields, it is sold as low as 20 cents per thousand cubic feet. In some buildings in Alabama the rate is as low as 16 cents; in Iowa, 14 cents; and in West Virginia, 15 cents. Even at Fort Sam Houston, Tex., where the price is 21 cents for industrial use, the domestic rate is 55 cents. In some instances there are sliding scales, the larger the quantity the lower the rate. These instances are, called to the attention of the committee merely to emphasize the fact that this is a competition that we feel is altogether unfair. Therefore, I say to you that if you are going to regulate the natural-gas industry, why exempt the one class of business that destroys labor? Why exempt the industrial gas? Why take a chance on adding to the cost of gas for domestic use and leave industrial users free to buy at any price? Therefore I repeat that the bill as drawn will accomplish very little good for any one.

The history of all regulation of business is, I believe, that the ultimate cost of the commodity involved is increased. There may be and probably are instances where that is desirable. But I raise the question: Is it desirable to increase the cost to one class of users and leave the larger class of users free to practice methods which, as a competitor, we feel are unfair in many instances, wasteful and generally speaking not helpful towards recovery? Specifically, gentlemen, I have to suggest that in the interest of fair play, insofar as it may be possible in this measure, that you strike out the following words in line 12 on page 2: "or for the sale of natural gas for industrial use only."

Mr. EICHER. Mr. Gandy, for my information, what is a captive ́ mine as distinguished from a commercial mine?

Mr. GANDY. Well, there are two lines of thought, technically, as to what a captive mine is, but in general a captive mine is a mine that produces coal which the owner of the mine consumes. Now, there are two thoughts about this, one being that it has to be the same legal entity that produces and consumes the coal. The other is that where the mining company is a wholly owned subsidiary of or is controlled through stock ownership by the company consuming the coal, then that, too, is captive coal. But, essentially, it is a mine where the coal is consumed by the one who produces it.

Mr. EICHER. And not sold?

Mr. GANDY. That is right.

STATEMENT OF W. A. DOUGHERTY, NEW YORK, N. Y.

The CHAIRMAN. We will hear Mr. Dougherty.

Mr. DOUGHERTY. Mr. Chairman and gentlemen of the committee, my name is William A. Dougherty. I am an attorney. My address is 30 Rockefeller Plaza, New York City. I am connected with the management of some natural-gas pipe lines, one of which is the Colorado Interstate Gas Co., which runs through Mr. Martin's territory. Another is the Mississippi River Fuel Corporation. That takes gas from northern Louisiana to St. Louis, Mo., East St. Louis, Ill., and Alton, Ill.

A third is the Interstate Natural Gas Co., which operates from northern Louisiana into Mississippi and then again into Louisiana,