the jurisdiction of the State. We have no objection to the Federal Power Commission exercising control over the interstate movement, and points outside the State which cannot be reached by the local utility commission, but we do not feel that they should come into the local jurisdiction or exercise any control that is now fully governed by the local utility commission; we feel that we have ample protection on that and that the public is adequately protected.

Suppose we wanted a competing pipe-line company in Detroit and we went to the Federal Power Commission and they said there should not be one; or that the Federal Power Commission should ask what the existing facilities were. It would be necessary for us, or for the people interested in the new pipe-line company, to come down to Washington, with the resulting loss of time, going into the question of rates, and so forth, to convince the Commission here an additional line was needed. This bill takes away from us the authority under the very theory of giving us something; we say we do not need that to assist us.

Mr. HALLECK. Just what way does it take away from you any authority?

Mr. SCHEER." It takes away from us the authority to say whether anyone can come into that market and sell natural gas, and the rate can be set because the pipe line crosses State lines.

Mr. BOREN. May I ask a question, Mr. Chairman!
The CHAIRMAN. Mr. Boren.

Mr. BOREN. Mr. Scheer, in relation to your statement a while ago that referred to the competition that broke the back of the small company of which you spoke. Would not this bill in effect help produce the very thing you have referred to here, if Congress passes This measure? Will it not help to maintain that situation especially where they are already established ?

Mr. SCHEER. It will, absolutely. This bill in its present form, if it is not amended, will help, continue to help do that very thing, if that is an answer to your question.

I think it is very vital where you have an industry dealing with a product such as we have of natural gas; we are in a new field, which is based upon exploration of a natural resource, which is exhaustible, and which when exhausted can never be replaced. You have a different situation from that involved in hydroelectric power on streams that will run for two generations, or may be for centuries, where you can build the plants on a permanent basis. But in the Texas Panhandle field if you waste the supply of natural gas, and it has and is being wasted, instead of getting it to a market which is a reasonable means of conserving that natural resource, you are wasting a resource that cannot be replaced. Conservation, as I understand it, is allowing the resource to be used and enjoyed without loss.

Mr. ÉICHER. You do not have the confidence that the Federal authority would give you the right that you say you want reserved ?

Mr. SCHEER. We say that section 7 (c) does not, and we say that we do not want to have to come down here and secure permission from a Federal agency when we believe that the State and local commissions are better qualified, more capable to deal with the matter within the State and that the industry itself is better qualified to regulate itself and we do not want a Federal commission making regulations for matters purely within the jurisdiction of the State. We are not objecting to the bill itself, but we do want these amendments.

Mr. PETTENGILL. Mr. Scheer, the natural-gas company already in the field does not have any Federal license or certificate of convenience and necessity, has it?

Mr. SCHEER. No; no.
Mr. PETTENGILL. Well, are you in doubt about it?

Mr. SCHEER. I am thinking of the little regulations that you have to comply with with respect to State commissions, for example, or the local utility commissions.

Mr. PETTENGILL. I am not talking about that. I am talking about the situation, so far as the Federal Government is concerned, as it affects natural gas and the marketing of natural gas; the company you referred to has no certificate of public convenience and necessity.

Mr. SCHEER. No; it has not,

Mr. PETTENGILL. And the bill in that respect, as far as affording the possibility of future competition is concerned, did not exist at the time?

Mr. SCHEER. That is true.

Mr. PETTENGILL. So that section 7 (c) as now proposed, to give you Government protection, did not exist at the time it made its investment?

Mr. SCHEER. No; that is not true.

Mr. SCHEER. Section 7 (c) really grants permission only to companies which seek to compete with another company.

Mr. PETTENGILL. I do not think you understood my question. I say that the existing company, by virtue of section 7 (c), if its purpose is to give protection, gives a protection which they did not have at the time of the construction of the pipe line.

Mr. SCHEER. It is giving a protection which I do not feel is needed, and in effect is imposing a monopoly upon the industry.

Mr. BOREN. Mr. Chairman.
The CHAIRMAN. Mr. Boren.

Mr. BOREN. Also that the smaller company, as in the case you mentioned the district court may find there is need for extension, the need has grown up as a result of industrial activity and could come in as a competing company; and while, as you say, they need not be brought in, in an attempt to have competitive rates they may come in and force the smaller company out. Now, suppose, as you suggest, the committee should delete section 7 (c), just what safeguard would there be left against such competition?

Mr. SCHEER. It is safeguarded by the fact that the Federal Power Commission, by virtue of its control of rates, can keep that cutthroat composition under control. After all, this Power Commission can keep the company from selling the gas at too low a price. While it is true they have the right through granting the power to sell gas, they can refuse the certificate of convenience and necessity just as much because too low rates would result as could because the rates are too high. I think there is an effective control without the necessity of a certificate.

Mr. BOREN. You think the heart of the bill should be to give the Federal Power Commission the controlling basis for rate development in the interstate division of the traffic, and let that be the sole basis

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of its control rather than any idea that its control might affect the competitive question existing within the State?

Mr. SCHEER. That is right; and we feel further that the Federal Power Commission should have authority to make investigations which the local utilities might not be able to make, and in that way could serve the purpose just as well. For example, take the case which I mentioned a while ago, where the question arose as to the disclosure of how much gas acreage the company has that is not being operated and which the local commission might want to know in order to determine what should be a proper rate to be charged for the gas that is sold at retail. The local commission cannot go into another State and get that; but, if that can be supplied by the Federal Power Commission through its investigation, that would meet the purpose, and you would have to have that power because the gas is carried across State lines.

Mr. HALLECK. May I ask a question, Mr. Chairman?
The CHAIRMAN. Mir. Halleck.

Mr. HALLECK. Is it not true throughout the whole history of expanding, governmental regulation and control of public utilities that a provision similar to that set forth in section 7 (c) has been applied ?

Mr. SCHEER. I think that is generally true.

Mr. HALLECK. And has that not been justified, on the proposition referred to by Mr. Pettengill, to the effect that when additional restraints are placed upon a utility, in return for that, additional protection should be given?

Mr. SCHEER. Well, we mentioned, Mr. Halleck, the fact that in this instance it does not apply because there has been no showing that the regulation asked for is needed; they have not proven the point that it is necessary to give that power to the Federal Commission. I do not think we can compare natural gas with the production of electric power, for instance, by the use of water,

Mr. HALLECK. Well, fundamentally the natural gas industry seeks to supply power and light in the same manner as the electric industry seeks to supply power and light; is that not true?

Mr. SCHEER. Yes, sir; based upon this difference, if you take into consideration this difference, that basically natural gas is a resource which is exhaustible, and based upon the potentiality that nothing new will be brought in which can entirely and absolutely upset the status quo in any particular locality. There are a lot of things where it is entirely different from such regulations as have previously existed or been established.

Mr. HALLECK. Well, of course, in so far as electric energy is supplied by steam plants, there would be no difference, because the source of power is expandible.

Mr. SCHEER. It is much easier to determine how much coal costs in a locality, or any particular field than it is to find out how much gas, or how much surplus there is in the depths of the earth.

Mr. HALLECK. Are you a little suspicious of the effectiveness of the Federal Government in reducing rates to the proper point?

Mr. SCHEER. We think that the Federal Government can be of great help, but we think that occasions may arise where the local commission would be checked, under the provisions of this section, 7 (c) of this bill. That is why we are opposed to it.

The only change, important change we have asked is with reference to that particular section which we have discussed.

Mr. HALLECK. I want to say that my mind is open on it; I am simply trying to find out the situation.

Mr. ScHEER. The point is, gentlemen, we feel that the local commission is in better position to establish the facts with reference to rates on natural gas, or the need for allowing competition to come into a territory than can be known without bringing all the facts to the Commission in Washington. What possible advantage can come through such a provision if it is enacted for the purpose of seeing that the industry does give us proper rates? Why should it be necessary to come down to Washington, have a hearing here as to what should be done in this or that particular instance, with all the complicated data that would have to be presented.

Mr. PETTENGILL. One other question.
The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. My whole thought awhile ago in asking you the question regarding section 7 (c) was whether it tended to give an advantage in a monopoly that already existed. But my mind is open, and yet the problem as I see it is this: A company is already supplying the market, without either the benefits of section 7 (c) and also without the hazard of having to supply that gas at a rate which was fixed by the Federal Commission, but my question was that if the Federal Government assumed to impose a burden, by controlling the source of supply and the price charged for it then the question arises whether or not the Federal Government should then give the benefit of some degree of protection against further competition.

Mr. SCHEER. Let me answer the question in this way. I think the question itself is based upon a theory, but statements which we have made here are based upon our actual experience of what has happened, and we say that there has been no occasion for requiring a certificate of convenience and necessity. We say that this can be done without this provision in the bill, and without requiring such a certificate. Our position, from our experience, is that we do not need this provision in the bill. We feel that the local commission can more readily determine whether a new gas line is needed in a particular field.

Mr. COLE. May I ask a question there?
The CHAIRMAN. Mr. Cole.

Mr. COLE. You are speaking of the city of Detroit, where I understand you to say there is one interstate line delivering the gas to the city gates?

Mr. SCHEER. That is right.

Mr. COLE. If this bill passes it would have the effect of giving that company, the existing line, a certificate of necessity, and from then on the rates charged at the city gate would be a just and reasonable rate, as required by this commission, would it not?

Mr. SCHEER. Yes.

Mr. COLE. Then what more could you expect; assuming now that that company would be required to furnish gas at the city gate, based upon rates fixed by the Power Commission, under the authority of this bill, fixing a reasonable rate. What could you hope to accomplish by bringing in competition with that company, if the charge made by the company now serving the city is reasonable and fair?

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Mr. SCHEER. Well, in this case, Mr. Cole, while there is no competition, another pipe line could supply additional gas which the present company is not supplying. There is no competition inside the city. But we might need another pipe line to supply the industrial enterprises that may want to increase their usage of gas; and besides that, no one can say that in the future the local commission would not be justified in taking into determination the facts, in fixing a rate, and enter into the cost of building a new pipe line, or the consumers may want to increase their supply, or we may want to take advantage of the new development in pipe-line construction and the lesser cost in bringing gas to the city gates, which would have their effect upon a charge at the gates.

Mr. COLE. Well, is it not provided in this bill that the Federal Power Commission, in determining what is a just and reasonable rate at the city gate, could require the existing company to furnish that information, improve its facilities, or do anything else in reason that might reduce the cost of gas; that could be done under the provisions of this bill, could it not?

Mr. SCHEER. Well, I know, but Mr. Cole, there is a certain physical limit; a certain proper and honest limit to which the Commission can go in organizing an extensive facility. I say this, for example: Here is a line which comes to Detroit, which is 24 inches, from Texas to southeastern Kansas; 22 inches from there to the middle of Illinois; it is 20 inches from there to about the middle of Indiana, and 22 inches again on up to Detroit.

Now, to bring in more gas to Detroit and expand those facilities, it might be necessary to lay loops of pipe line from the end of the 24inch line up to the end of the 22-inch line in central Indiana. And, to bring in more gas, that may not be, from an engineering standpoint the smartest thing to do. It may be better to build an entirely new line, because you are just piling investment on top of investment and the same ratio of producing more gas and producing more earnings in the case of that kind may not obtain.

Mr. COLE. And there would be the necessity for the Federal Power Commission investigating it, to determine whether that should be done.

Mr. SCHERR. Or, whether a new line should be built.
Mr. COLE. Yes.

Mr. SCHEER. Yes; but why say to that pipe line, “You shall bring in a new line.”

Mr. COLE. It seems to me that you want a great deal of help in your existing situation; really, that is what you are advocating. Mr. SCHEER. We do not need it at Detroit. Mr. COLE. At the hands of the Federal Power Commission.

Mr. SCHEER. We do not need it at Detroit. We are speaking for the rest of the cities, because we took the leadership.

Mr. COLE. You are satisfied with the rate now charged in Detroit ?

Mr. SCHEER. We are getting gas in Detroit for 3312 cents a thousand cubic feet as against 44 at Kansas City; from the same field, or approximately the same field.

Mr. COLE. And you want that situation corrected, the only effective way being by a law of this type.

Mr. SCHEER. Yes; to help the other cities. Let me point this out, gentlemen. In Detroit we have a provision in the contract whereby

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