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 H R. 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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tial feature. So far as we know, there has been up to this time no reason for its existence in this bill advanced publicly by its sponsors.

For the sake of discussion, however, and in order to be fair in this matter, let us assume that section 7 (c) has been written into this bill for a number of reasons. We can think of only three which might appear at all plausible.

The first for this is: Someone might argue that section 7 (c) would tend to prevent a needless duplication of investment in interstate gas transportation facilities, thereby imposing upon the ultimate gas consumer an unnecessary burden in the rate base.

The answer, gentlemen, in my opinion, is that it would be impossible for any independent pipe-line company to enter a naturalgas market and sell its gas unless its wholesale price to the local utility or local industry was low enough, on a strictly competitive basis, to afford substantial benefits through lower prices to ultimate

consumers.

If any such new competing independent pipe-line company offered gas at wholesale prices constituting cutthroat competition, the project would defeat itself before it ever was launched, because money for construction would not be available, due to a certainty of inadequate return. If, on the other hand, such a competing company drastically lowered its wholesale rate and still earned a reasonable profit, then the public might well regard prices charged by the established pipe-line company with genuine suspicion.

If this possibility of ruinous competition is advanced as a reason for including section 7 (c) in this bill, then may we not ask its sponsors to cite specific instances where such a competitive condition in the past has been detrimental to the public interest? On our past, we cannot think of such an instance.

The second reason: Let us assume that section 7 (c) has been incorporated in this bill to protect the industry's present legitimate interstate pipe-line investment against the period of so-called raids on occupied territory.

Our municipalities maintain that the restrictions of section 7 (c) are not required to defend entrenched monopolies against competitive raids, so-called. We contend that those powerful interests, which frequently control production, transportation, as well as distribution, are equipped only too well to protect themselves. It is easily possible for them today, and likely would still be possible under this bill, if enacted, to monopolize available gas acreage, dominate the sole means of financing an independent venture, and to hinder the rival project through their recognized political influence in city, county, and State, all the way from the gas well to the city limits. We do not admit that these great corporations need the strong arm of Uncle Sam to protect them.

The CHAIRMAN. Mr. Scheer, will you suspend for a moment?
Mr. SCHEER. Certainly.

The CHAIRMAN. Hon. Homer Hoch, for many years a member of this committee is present, and it is a pleasure personally as well as chairman of this committee to welcome Mr. Hoch this morning. Mr. HOCH. Thank you.

Mr. SCHEER. Mr. Hoch, in this discussion, we are advancing what might be termed objectionable reasons for inserting in the bill a section to which we are opposed, and for which there has been no

reasons offered, up to this time, and since the reasons for the section have not been suggested we are trying to argue the point first. The discussion is rather lengthy because we supported another bill, and we are here supporting this bill because we feel that this bill will meet the purposes provided certain changes are made. And we were assuming that the amendments were in the bill and are offering the reasons which might appear for them, and the suggestions why the section should not be contained in the bill.

The third reason: Let us assume that section 7 (c) is contained here because its purpose, at least, is incorporated in similar legis

lation.

Our cities cannot accept that offhand observation as a valid argument in support of section 7 (c). Such a remark merely betrays a habit of thought. Let us not be a slave to precedent in considering this legislation. Our municipal officials call upon the sponsors of section 7 (c) to prove to this committee that such provisions, incorporated in similar acts, have truly been helpful to the American people. Let them prove, furthermore, that the lack of such pro-visions in still other acts has been detrimental to the American. people. Furthermore, may we not ask the sponsors to show wherein. this particular legislation requires the type of restrictions which similar legislation has required?

We wish at this point, Mr. Chairman and gentlemen of the committee, to set forth 10 reasons why the Cities Alliance and the Natural Gas Committee of the United States Conference of Mayors is diametrically opposed to section 7 (c) of H. R. 4008.

First. We oppose the granting of such restricting authority to the Federal Power Commission because we do not believe that grant of authority is necessary to an effective administration of this act. As ordinary citizens of this Republic we have a fear of creating a towering bureaucracy that feeds upon itself. A desperately cold man on a winter night might be willing to sidle up for warmth against a big well-tamed bear, if the opportunity permitted, but he would very likely lay awake all night, fearful that the animal might roll upon him and crush him.

Second. We oppose the inclusion of section 7 (c) in this bill because we believe it would merely duplicate, for the Federal Power Commission, that type of authority which is already effectively vested in cities, counties, and States. We do not believe that the regular United States Army should be mobilized to direct traffic at Pumpkin Center on Saturday night. At the present time, any potential pipeline competitor for a natural-gas market is compelled to obtain first a State certificate of convenience and necessity, before it can obtain a right-of-way for its pipe line across the State. As an instance of the effective check that can be placed upon such a competitor, I might mention that the Panhandle Eastern Pipe Line Co., holding a contract to supply Detroit, had to delay construction nearly a year before it could obtain such a certificate from the Illinois Commerce Commission to cross this State.

Now, after a State certificate has been obtained, another permit to cross under highways must be obtained from county authorities. Such a permit was denied to an independent pipe-line company seeking to enter Terre Haute some years ago, until an appeal to a Federal court had been threshed out. Although the service was ultimately

established, we do not know whether the ultimate consumer received much benefit from the lower costs, inasmuch as approximately seven holding companies were at that time superimposed upon the local Terre Haute gas utility.

After State and county certificates are obtained, a pipe-line company must obtain a permit from a municipal council before it can extend its lines into a city to supply industrial customers. There, again, this potential competitor is subject to harassment and delay. If, in addition to obtaining State, county, and city permits, this potential rival must soon obtain a Federal certificate, may we inquire whether ultimately he will be compelled to appear before the World Court or the League of Nations in a like cause?

Third. We ask the elimination of section 7 (c) for the reason that it improperly assumes that a Federal bureau here at Washington has a better knowledge of just what constitutes "public necessity and convenience" with respect to providing a competing natural-gas supply than do the cities, counties, or States which are directly affected. As mere citizens we like to believe that in future years we shall still be citizens and not "subjects", and that we shall not some day be reduced to the status of, lo, the poor Indians, who look to the Great White Father for a decent opportunity to exist.

Fourth. Our organizations are opposed to section 7 (c) because it can severely handicap a city's effort to contract for a competitive natural-gas supply as a basis for undertaking municipal ownership of a local gas utility or even the building of a competing distribution system, if the citizens, in the exercise of their sovereign rights, should so desire. At this point may we remind you gentlemen that establishment of a reasonable "city gate" price does not guarantee the passage of such benefits to the consumer in the form of reduced rates. Fifth. We contend that section 7 (c), if permitted to become law, would promote indirectly a waste of America's natural-gas resources, because it would shut the door of outlet to independent producers, who, in retaliation and self-protection, would continue to sell their gas to carbon-black plants and gasoline stripping plants, and for other wasteful commercial processing. We would like to emphasize the fact that in recent years that the only single instance wherein one great group of independent producers was provided with an independent outlet occurred in 1930, when the construction of the Panhandle Eastern Pipe Line Co. was started toward Detroit. That, of course, being an independent enterprise, was branded by the monopolists as a "raider." We want also to mention that, in the absence of another great pipe line from southwestern Kansas to Detroit, the carbon-black industry is locating its first plant in the Hugoton field at this time.

Mr. PETTENGILL. Where is the Hugoton field located?

Mr. SCHEER. In southwest Kansas, just north of the Texas Panhandle field.

Mr. PETTENGILL. Yes. I have been there.

Mr. SCHEER. Sixth. Our cities are opposed to section 7 (c) also because it would impose unfair and rigid requirements upon an industry which is still young, and growing lustily. Even under the best circumstances, the administration of this proposed act would require a maximum of good judgment, fair play, and flexibility in application. If this bill should be enacted, the Cities' Alliance expects to

offer every cooperation in getting a sound administration under way. If experience indicates that such authorities outlined in section 7 (c) are required, we shall be the first to recommend such extension of powers. In the meantime, is it wise to clothe a toddling youngster in an old man's pantaloons and expect him to run a race against his older brothers the oil, the coal, the electric-power industries?

Seventh. We oppose section 7 (c) because its unfair prohibitory nature conflicts with the American ideal of legitimate freedom of opportunity. Despite the fact that a combine of powerful holding corporations sought to destroy him, despite the failure of the Attorney General to enforce the Federal antitrust laws in his behalf, a young man of 34 years undertook the construction of the great Panhandle Eastern Pipe Line Co. back in 1930. His name was Frank P. Parish, and he finally succeeded in assuring its financial success in 1935 by negotiating a 15-year contract to sell natural gas to the Detroit City Gas Co. We need to keep such opportunities open to the young America of tomorrow.

Suppose, for example, Congressman Mapes, that Michigan's natural-gas fields were located along the Michigan-Ohio border. Do you realize, gentlemen, that before Michigan capital could transport such gas to a Michigan market-to Detroit, for example-the project's sponsors would be required by section 7 (c) to obtain a certificate at Washington, even though both the city of Detroit and the Detroit City Gas Co. favored the proposition? How would the people of Michigan, or of any other State-the farmers who owned the gas lands, the leaseholders, the drillers, the investors, the gas consumers— view such a situation?

Eighth. We ask the elimination of section 7 (c) for still another reason. It permits an established pipe-line company, serving a particular market for wholesaling gas to the local utility at the city limits it permits that pipe-line company to stave off threatened competition merely by expanding its facilities and bringing in additional natural gas. But secton 7 (c) does not require that such additional supply shall be brought in at a price in competition with the proposed independent supply.

Ninth. Our cities object to section 7 (c) because, even under a favorable administration of the act, independent pipe-line companies seeking to respond to our cities' demands for additional natural gas— a demand which the entrenched monopolies are ignoring-would be subjected to unfair hazards incident to the delay in obtaining a Federal certificate. During such a period of waiting his stronger rival, already in possession of the market, could attack the independent project by undermining his financing, by monopolizing available gas reserves, and by secretly alienating his potential or contracted customers. The fact that such activities might be in violation of the Federal antitrust laws would not, in our opinion, restrain the established pipe-line concern from this type of so-called self-defense against "raiding."

Tenth. The Cities Alliance and the Natural Gas Committee of the United States Conference of Mayors beseeches the elimination of section 7 (c) from H. R. 4008 for this tenth and final reason:

It offers to powerful and wealthy pipe-line companies an endless opportunity to frustrate independent enterprise, frustrate the commission, and frustrate the public's own rate-reduction efforts by re