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mine whether or not it would have to comply with the order or the order might be further suspended.

Mr. MARTIN. Where is the time limit in the law? Does it provide that after you file an application, institute legal proceedings, and after you file your application, or where is that?

Mr. DOUGHERTY. There is a time limit on page 24, line 22. There is a provision for 60 days after the order of the commission is made on the application for rehearing. You must file your petition in the court, in the United States Court of Appeals.

The final amendment that we have to suggest is in line 12, page 28. That concerns section 20 (b), and our amendment is to take out the words "rule, regulation, restriction, condition, or." This section has to do with penalties, imposition of both fines, and imprisonment. 20 (a) deals with violations of the law itself, and 20 (b) goes to the question of violating any rule, regulation, restriction, condition, or order made or imposed by the conimission.

It is the feeling of some of us in the business that in view of the broad powers of making rules and regulations and conditions, that the commission has under this law, that it is rather severe to apply a penalty to the violation of these numerous rules and regulations, even though they knowingly be made, and our suggestion is that subsection (b) be limited to orders of the commission, so that if the commission makes a definite order against a definite company, violation of that would incur the penalty, but that general regulation and rules apply in so many instances that they ought not to be incurred or ought not to carry with it this penalty section.

Mr. COLE. Mr. Chairman,
The CHAIRMAX. Mr. Cole.

Mr. COLE. If the rules and regulations were published and you had timely notice of them, would that suggest any different approach to you?

Mr. DOUGHERTY. Mr. Cole, the only trouble is that the rule-making power, particularly as included by some of the amendments suggested by Mr. Scheer this morning, go into the question of procedure, methods of carrying on your business, and many of the managerial functions; that even with the provisions that you have mentioned, with the acceptance of regulations and rules published, the question of their full meaning and your knowledge of them, I think, is a little too broad in the field of extending criminal law.

I think it ought to be limited more definitely to specific orders of the commission.

I do not think it is a thing of paramount importance, but I do feel that it would be much fairer if the law were limited to specific rules and regulations.

The CHAIRMAN. Suppose that you have some regulation that provided for a regular practice for the commission and a company violated it; under what method would your client be penalized or the violation be penalized ?

Mr. DOUGHERTY. Well, if it were of a serious enough nature, of course, the company could be required to come in and show cause why it should not be compelled to comply, and an order would be entered, and then a penalty follow. It would mean, before these criminal proceedings were started on things that have to do with regulations

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and rules, that the company would be brought into the commission and an order issued against it.

The CHAIRMAN. What is the present practice of the commission about publishing its orders and regulations ?

Mr. DOUGHERTY. I do not know as to the Federal Power Commission, because I have had no experience with it. Other commissions, some, do publish their rules and regulations in pamphlet form or book form. Others do not publish them. They issue them in very limited numbers, in mimeographed form, and they are available.

Mr. BOREN. Might I ask you a question there? Your contention there is based upon this idea that if some company is violating a rule knowingly or otherwise that the commission then can issue a cease and desist order and that then places them subject to the penalty.

Mr. DOUGHERTY. Yes, sir; that is the way it would work out.

Mr. COLE. Did we not pass a general law requiring all rules and regulations of these departments to be published?

Mr. DOUGHERTY. My understanding is that there was a Federal Register established by Congress in which all rules and regulations of all departments would be published, and that, I think, is kept as a part of the archives. It is, of course, quite a voluminous part of the volumes that are published here.

I have my own personal thoughts to give to you with respect to some of the amendments that have been suggested here. Naturally I do not know what others in the industry think of these various amendments, but I would like to comment on them briefly.

First, Mr. Benton proposed an amendment changing the definition of a natural-gas company, and also rewording to some extent the provision that gives jurisdiction to the Commission. He took out in each instance the words “to the public” and I realize the reasons for it. I would suggest, however, that the committee consider inserting in place of those words which he has taken out, the following: "for ultimate public consumption.” So that it is clear even though there your successive sales of gas, all of which are subject to the Commission's jurisdiction, that the gas ultimately must be distributed for general public consumption before there is any right to fix the rates, so that we get no problem of indirect industrial sales that might perchance on their face be under this Commission's jurisdiction.

I have no suggestion concerning temporary rates, particularly, except that they should be put into force, if at all, only under the reservation of correcting any injustices that might occur later.

With that power in the Commission I would suggest that it is definitely unfair to limit this period of 5 months, and I think that you ought not to change it from 5 months to 12 months. That period has to do with putting into effect new rates by the company upon its initiative. It would file its schedule, and the Commission then would start in on a hearing. Five months I think is now in the interstate commerce law and all that the 5 months means is that if within 5 months a hearing has not been completed, the company can put the new increased rate into effect and collect it under bond.

Now, having this in mind that the purpose of a temporary rate is to try to give relief to the public quickly, when the public feels that it needs it, I submit to your fairness that when the company thinks

that it needs it, if it can make certain within a period of 5 months some sort of a showing, it ought not to be put otk longer than that, because it has no recourse under this particular section to go back and get reimbursed for that 12 months during which it has been collecting less than a fair and reasonable rate.

So that as a matter of fair play I suggest that the 3 months be left as it is so that other things will be put aside and the company will not be deprived of relief or revenue to which it may be entitled longer than that period which has already been approved by this Congress in the interstate commerce law.

With respect to the amendments that were proposed by Mr. Scheer, the first one is listed as no. 1, to add to section 4 a new subsection taken out of Mr. Crosser's bill.

I commend to your attention the great increase in expense that would result if that is put in. What that section does is this: Says that all companies must file with the Commission true copies of all contracts for lease and royalty agreements of gas lands inless excused by the Commission, for gas, and all contracts for the purchase of gas. Of course, it is quite evident that a great deal of additional expense is going to be put on the taxpayers and the natural-gas companies as a result of this legislation.

Mr. MARTIN. That would take in all of the vast areas of wildcat territory?

Mr. DOUGHERTY. Well, it would, Mr. Martin, unless the commission said we did not have to do it. Now, I submit, that it is not necessary. The only purpose of having information on lease and royalty agreements is when you are determining a rate and when you are going to determine a rate you can have those things brought in. If you are to have them kept up to date like the current inventory, you may be having records maintained here in Washington that will never be taken out of their filing cabinets; will never be brought into use; and, consequently, the very fact of having to prepare them for all of these companies, all of the copies of all of our leases that run for 2, 3, or 4 years, and keeping them on file every time we renew them when there is no rate proceeding involved seems to me an unwise expenditure of time and money.

Mr. MARTIN. It would certainly be a vast volume. That business arises all over the West. The farmers have got their lands umder lease from year to year. It would take an archives building to hold them.

Mr. DOUGHERTY. That is right, Mr. Martin. Now, the other two points, that of furnishing the additional contracts, for the purchase

gas and delivery of gas has already been covered by pertinent provisions of the Lea bill. So that the only thing this adds is full information and copies of leases and royalty agreements and purchase contracts. Many companies have as many as 100 or 150 purchase contracts with independents from time to time, and there is no pertinency or value to them as I see it until you get into a rate case and then you can ask that they all be brought in.

Amendment no. 3 suggests the addition of two paragraphs from Mr. Crosser's bill which go pretty far into the matter of manage

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ment of the companies. The first has to do with establishing regulations providing for the maintenance of accuracy and serviceability of all meters used in the control of operation and that I think would not be objectionable, because similar provisions are already in the State laws.

The second one, however, gives the commission power toorder such changes and improvements in equipment and operating procedure of natural-gas pipe-line 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.

That, I feel, is going a long way toward controlling the discretion of the people who are responsible to the consumer for getting gas through the line and responsible to the people who are putting their money into the property, see that it is done in an economical way and can be made to produce some returns.

Possibly we might work those things out with the department of the power commission that would be set up. That would depend, of course, upon how much experience those people they will hire have had in the natural-gas business. But I suggest that it will not help in the determination of fair rates; that it will not aid the commission in carrying on its functions to let it take charge of the operating procedure of these companies that are spread all over the United States.

The amendment no. 5, which says that the Commission may after hearing determine the adequacy or inadequacy of gas reserves, presents to my mind some difficulty.

What is adequacy of gas reserves for a company that is serving the city of Cleveland depends upon how many years you want to serve that city with natural gas. A reserve might do one the one hand for a period of 5 years, but if on the other hand you want to serve them for 25 years or 50 years it would not do, and under the law as it now is, the Commission can exclude carrying charges of vast amounts of reserves as charges that have no immediate bearing on the immediate rate.

But I know this, that in financing these pipe lines, the question of the reserves that are behind the line is of immense importance. I have had experience recently in selling bonds to insurance companies on pipe lines, and they required a geological engineering survey of the years that the supply in the field would last and required that the loan be paid off within that time.

Now, if anything would happen to interfere with that company maintaining those reserves, it would seriously impair our ability to pay back that loan. If we ran out of gas before the end of time, or had to go elsewhere for it and pay more money for it, so, I submit to your earnest consideration this question of determining adequacy of reserves. As I say, the law already gives the Commission the right to exclude delay rentals if the Commission feels that the reserve for which the delay rentals are included are too extensive, and I think the Commission would have that right even without this wording with respect to determining the adequacy of the inadequacy of gas reserves.

I have no other suggestions concerning these amendments.

On section 7 (c), certificate of convenience and necessity: There are a number of statutes of that sort I think in the public interest. Of course, it depends upon the viewpoint from which you are looking at the question. If you live in a city and want natural gas, why, you look at it from the point of view of the consumer. If you are looking at it from a viewpoint of the conservation of gas in a particular area and the utilization of it for a purpose that is economical, then that is a different viewpoint from which to look at it.

The gas business is such that people want to sell all they have all at once. They do not want to keep it for future generations, and frequently it is used for a purpose where its immediate value in terms of dollars and cents is very low, and the question is whether or not some Federal authority should have the right to see that a proper and orderly development of this gas business takes place and that no competing lines come into new territory. This is simply uneconomical, when there is no reason for it, and I certainly would feel that the Federal Power Commission would act with fairness in the consideration of any company where there was a need to serve.

That is all I have to say unless there are some questions.
Mr. BOREN. Mr. Chairman.
The CHAIRMAN. Mr. Boren.

Mr. Borex. I just want to ask one question on that point. You have stated your opinion about the Commission's attitude. Do you not think though that such provision would handicap the small concern wherein there might be some doubt in the mind of the Commission as to the small concern's ability to deliver immediately?

Mr. DOUGHERTY. Well, these hypothetical questions are difficult to foresee, but if a small group of people who had small resources wanted to build a line into a competing territory, one where there already was service being rendered, what they would do would be to go to somebody who had the money to lend and get a commitment that if they could get a certificate they would finance it, and my judgment is that if it were sound and they could find somebody who thought that that money would be paid back, that they could bring to the Commission that type of a commitment, and the Commission would consider it. I do not believe you would be in a circle, with a thing that you cannot get the money unless you got the order, and you could not get the order unless you got the money.

Mr. BOREN. I am raising that point partly from my personal experience, not in the field of delivering gas to utilities, but in the field of oil operations, dealing as an independent driller and that, sort of thing.

In our own State we often run up against what I suppose is a general situation, of what I conceive to be the feeling of the powers that be, that it is unconstitutional to try to do anything the first time.

I am just wondering if there might not be a situation where a new

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