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SHIPMENT OF PETROLEUM
Mar 14, 1937.-Committed to the Committee of the Whole House on the state of
the Union and ordered to be printed
Mr. Cole of Maryland, from the Committee on Interstate and Foreign
Commerce, submitted the following
[To accompany H. R. 5366)
The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H. R. 5366) to repeal section 13 of the act entitled "An act to regulate interstate and foreign commerce in petroleum and its products by prohibiting the shipment in such commerce of petroleum and its products produced in violation of State law, and for other purposes”, approved February 22, 1935, having considered and amended the same, report thereon with a recommendation that it pass with the following amendments:
Page 1, line 8, strike out "hereby repealed” and insert in lieu thereof the following: amended by striking out "June 16, 1937" and inserting in lieu thereof "June 30, 1939”.
Amend the title so as to read: “An act to continue in effect until June 30, 1939, the Act entitled 'An act to regulate interstate and foreign commerce in petroleum and its products by prohibiting the shipment in such commerce of petroleum and its products produced in violation of State law, and for other purposes', approved February 22, 1935."
The bill has the approval of the Interstate Commerce Commission and the Interior Department, as will appear by the letters attached.
INTERSTATE COMMERCE COMMISSION,
Washington, March 24, 1937. Hon. CLARENCE F. LEA, Chairman, Committee on Interstate and Foreign core merepresentatives.
Commerce, MY DEAR MR. CHAIRMAN: The chairman of the Commission has referred to our legislative committee your communication of March 9, 1937, requesting comments on H. R. 5366, introduced by Congressman Dies "To repeal section 13 of the act entitled 'An act to regulate interstate and foreign commerce in petroleum and its products by prohibiting the shipment in such commerce of petroleum and its products produced in violation of State laws, and for other purposes', approved February 22, 1935.” This bill has had the careful consideration of the legislative committee, and I am authorized to submit the following comments in its behalf.
The substance of H. R. 5366 is indicated by its title. Section 13 of the act of February 22, 1935, is in one sentence reading, “This act shall cease to be in effect on June 16, 1937.” Thus the bill changes the act of February 22, 1935, from temporary into permanent legislation. The act in question is one regulating the oil industry rather than transportation, and neither enlarges nor reduces nor affects the duties of this Commission under the various statutes it administers. From our point of view we have no objection to it, and we have no information which would enable us otherwise to give helpful advice in regard to it. Respectfully submitted.
JOSEPH B. EASTMAN, Chairman, Legislative Committee.
THE SECRETARY OF THE INTERIOR,
Washington, March 19, 1937. Hon. CLARENCE F. LEA,
House of Representatives. MY DEAR MR. LEA: Replying to your letter of March 9, 1937, requesting a report on H. R. 5366, proposing to make permanent the law of February 22, 1935, which regulates interstate and foreign commerce in petroleum and its products by prohibiting the shipment in such commerce of petroleum and its products produced in violation of State law:
By giving strong support to the oil and gas conservation laws of the oil-producing States, the law of February 22, 1935, generally known as the Connally Act, has contributed materially to the advances made during the past few years in the prevention of avoidable physical waste in oil and gas production and to the resulting increased ultimate recovery of oil.
By eliminating contraban oil products from interstate commerce, the law has been one of the principal factors which have made it possible for nearly all independent and nonintegrated petroleum refiners to operate without incurring the substantial losses which threatened their existence immediately prior to the enactment of that legislation.
The law also has removed one of the most persistent elements in the vicious "price wars” which were prevalent prior to the enactment of the legislation and which threatened the existence in business of numerous independent retailers of petroleum products.
The law has made this contribution to the conservation of the Nation's oil and gas resources and to the economic stability of the petroleum industry without causing any material increase in the retail prices, ex taxes, of gasoline and other petroleum products.
The law has been supported with uniform success in the Federal Courts in Texas and Louisiana.
In administering this law during the past 2 years, I have received full cooperation from the oil and gas conservation authorities of the several States and from the petroleum industry.
The need for the conservation of the Nation's oil and gas resources is of equal importance in periods of scarcity as in periods of excess supply and, in my opinion the legislation which supports the State oil and gas conservation laws should be made permanent by eliminating section 13 of the law of February 22, 1935.
The Bureau of the Budget has advised that it has no objection to the enactment of S. 790, a like bill introduced in the United States Senate by Senator Tom Connally. Hearings on S. 790 were held on February 12, 15, 16, and 17, before a subcommittee of the Committee on Finance of the United States Senate. The enactment of H. R. 5366 is recommended. Sincerely yours,
CHARLES WEST, Acting Secretary of the Interior.
CHANGES IN EXISTING LAW
In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, section 13 of the act of February 22, 1935, proposed to be repealed by the bill as introduced is set forth below, and, for the information of the House, the change proposed to be made in such section by the bill as reported is shown by enclosing the matter to be omitted in black brackets and printing the new matter in italics. Sec. 18. This Act shall cease to be in effect on (June 16, 1937] June 30, 1999.
This bill was considered by a subcommittee and hearings were conducted thereon. As the bill, in the form amended by the committee, presents solely the question as to whether Public Law No. 14, Seventyfourth Congress, which was S. 1190, shall become permanent law or extended for a temporary period beyond its present expiration date, June 16, 1937, and that question cannot be intelligently met without knowledge as to what the law in question is, we set forth at this point in the report Public Law No. 14:
(PUBLIQNo. 1474TH CONGRESS)
[8. 1190] AN AOT To regulate interstate and foreign commerce in petroleum and its products by prohibiting tho
shipment in such commerce of petroleum and its products produced in violation of State law, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it is hereby declared to be the policy of Congress to protect interstate and foreign commerce from the diversion and obstruction of, and the burden and harmful effect upon, such commerce caused by contraband oil as herein defined, and to encourage the conservation of deposits of crude oil situated within the United States.
SEC. 2. As used in this Act,
(1) The term "contraband oil” means petroleum which, or any constituent part of which, was produced, transported, or withdrawn from storage in excess of the amounts permitted to be produced, transported, or withdrawn from storage under the laws of a State or under any regulation or order prescribed thereunder by any board, commission, officer, or other duly authorized agency of such State, or any of the products of such petroleum.
(2) The term "products" or "petroleum products" includes any article produced or derived in whole or in part from petroleum or any product thereof by refining, processing, manufacturing, or otherwise.
(3) The term “interstate commerce” means commerce between any point in a State and any point outside thereof, or between points within the same State but through any place outside thereof, or from any place in the United States to a foreign country, but only insofar as such commerce takes place within the United States.
(4) The term “person” includes an individual, partnership, corporation, or joint-stock company.
SEC. 3. The shipment or transportation in interstate commerce from any State of contraband oil produced in such State is hereby prohibited. For the purposes of this section contraband oil shall not be deemed to have been produced in a State if none of the petroleum constituting such contraband oil, or from which it was produced or derived, was produced, transported, or withdrawn from storage in excess of the amounts permitted to be produced, transported, or withdrawn from storage under the laws of such State or under any regulation or order prescribed thereunder by any board, commission, officer, or other duly authorized agency of such State.
Sec. 4. Whenever the President finds that the amount of petroleum and petroleum products moving in interstate commerce is so limited as to be the cause, in whole or in part, of a lack of parity between supply (including imports and reasonable withdrawals from storage) and consumptive demand (including exports and reasonable additions to storage) resulting in an undue burden on or restriction of interstate commerce in petroleum and petroleum products, he shall by proclamation declare such finding, and thereupon the provisions of section 3 shall be inoperative until such time as the President shall find and by proclamation declare that the conditions which gave rise to the suspension of the operation of the provisions of such section no longer exist. If any provision of this section or the application thereof shall be held to be invalid, the validity or application of section 3 shall not be affected thereby.
Sec. 5. (a) The President shall prescribe such regulations as he finds necessary or appropriate for the enforcement of the provisions of this Act, including but not limited to regulations requiring reports, maps, affidavits, and other documents relating to the production, storage, refining, processing, transporting, or handling of petroleum and petroleum products, and providing for the keeping of books and records, and for the inspection of such books, and records and of properties and facilities.
(b) Whenever the President finds it necessary or appropriate for the enforcement of the provisions of this act he shall require certificates of clearance for petroleum and petroleum products moving or to be moved in interstate commerce from any particular area, and shall establish a board or boards for the issuance of such certificates. A certificate of clearance shall be issued by a board so established in any case where such board determines that the petroleum or petroleum products in question does not constitute contraband oil. Denial of any such certificate shall be by order of the board, and only after reasonable opportunity for hearing. Whenever a certificate of clearance is required for any area in any State, it shall be unlawful to ship or transport petroleum or petroleum products in interstate commerce from such area unless a certificate has been obtained therefor.
(c) Any person whose application for a certificate of clearance is denied may obtain a review of the order denying such application in the United States District Court for the district wherein the board is sitting by filing in such court within thirty days after the entry of such order a written petition praying that the order of the board be modified or set aside, in whole or in part. A copy of such petition shall be forthwith served upon the board, and thereupon the board shall certify and file in the court a transcript of the record upon which the order complained of was entered. Upon the filing of such transcript, such court shall have jurisdiction to affirm, modify, or set aside such order, in whole or in part. No objection to the order of the board shall be considered by the court unless such objection shall have been urged before the board. The finding of the board as to the facts, if supported by evidence, shall be conclusive. The judgment and decree of the court shall be final, subject to review as provided in sections 128 and 240 of the Judicial Code, as amended (U. S. C., title 28, secs. 225 and 347).
Sec. 6. Any person knowingly violating any provision of this Act or any regulation prescribed thereunder shall upon conviction be punished by a fine of not to exceed $2,000 or by imprisonment for not to exceed six months, or by both such fine and imprisonment.
Sec. 7. (a) Contraband oil shipped or transported in interstate commerce in violation of the provisions of this Act shall be liable to be proceeded against in any district court of the United States within the jurisdiction of which the same may be found, and seized for forfeiture to the United States by a process of libel for condemnation; but in any such case the court may in its discretion, and under such terms and conditions as it shall prescribe, order the return of such contraband oil to the owner thereof where undue hardship would result from such forfeiture. The proceedings in such cases shall conforın as nearly as may be to proceedings in rem in admiralty, except that either party may demand a trial by jury of any issue of fact joined in any such case, and all such proceedings shall be at the suit of and in the name of the United States. Contraband oil forfeited to the United States as provided in this section shall be used or disposed of pursuant to such rules and regulations as the President shall prescribe.
(b) No such forfeiture shall be made in the case of contraband oil owned by any person (other than a person shipping such contraband oil in violation of the provisions of this Act) who has with respect to such contraband oil a certificate of clearance which on its face appears to be valid and to have been issued by a board created under authority of section 5, certifying that the shipment in question is not contraband oil, and such person had no reasonable ground for believing such certificate to be invalid or to have been issued as a result of fraud or misrepresen tation of fact.
SEC. 8. No common carrier who shall refuse to accept petroleum or petroleum products from any area in which certificates of clearance are required under authority of this Act, by reason of the failure of the shipper to deliver such a certificate to such carrier, or who shall refuse to accept any petroleum or petroleum products when having reasonable ground for believing that such petroleum or petroleum products constitute contraband oil, shall be liable on account of such refusal for any penalties or damages. No common carrier shall be subject to any penalty under section 6 in any case where (1) such carrier has a certificate of clearance whic on its face appears to be valid and to have been issued by a beard created under authority of section 5, certifying that the shipment in question is not contraband
oil, and such carrier had no reasonable ground for believing such certificate to be invalid or to have been issued as a result of fraud or misrepresentation of fact, or (2) such carrier, as respects any shipment originating in any area where certificates of clearance are not required under authority of this Act, had no reasonable ground for believing such petroleum or petroleum products to constitute contraband oil.
Sec. 9. (a) Any board established under authority of section 5, and any agency designated under authority of section 11, may hold and conduct such hearings, investigations, and proceedings as may be necessary for the purposes of this Act, and for such purposes those provisions of section 21 of the Securities Exchange Act of 1934 relating to the administering of oaths and affirmations, and to the attendance and testimony of witnesses and the production of evidence (including penalties), shall apply.
(b) The members of any board established under authority of section 5 shall be appointed by the President, without regard to the civil-service laws but subject to the Classification Act of 1923, as amended; and any such board may appoint, without regard to the civil-service laws but subject to the Classification Act of 1923, as amended, such employees as may be necessary for the execution of its functions under this Act.
Sec. 10. (a) Upon application of the President, by the Attorney General, the United States District Courts shall have jurisdiction to issue mandatory injunctions commanding any person to comply with the provisions of this Act or any regulation issued thereunder.
(b) Whenever it shall appear to the President that any person is engaged or about to engage in any acts or practices that constitute or will constitute a violation of any provision of this Act or of any regulation thereunder, he may in his discretion, by the Attorney General, bring an action in the proper United States District Court to enjoin such acts or practices, and upon a proper showing a permanent or temporary injunction or restraining order shall be granted without bond.
(c) The United States District Courts shall have exclusive jurisdiction of violations of this Act or the regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, this Act or the regulations thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by this Act or regulations thereunder, or to enjoin any violation of this Act or any regulations thereunder, may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as provided in sections 128 and 240 of the Judicial Code, as amended (U. S. C., title 28, secs. 225 and 347).
Sec. 11. Wherever reference is made in this Act to the President such reference shall be held to include, in addition to the President, any agency, officer, or employee who may be designated by the President for the execution of any of the powers and functions vested in the President under this Act.
Sec. 12. If any provision of this Act, or the application thereof to any person or circumstance, shall be held invalid, the validity of the remainder of the Act and the application of such provision to other persons or circumstances shall not be affected thereby.
Sec. 13. This Act shall cease to be in effect on June 16, 1937.
The aforegoing temporary law, known as the Connally Act, had its birth as to the purpose thereof, in the National Industrial Recovery Act, being section 9-C thereof. This section was declared unconstitutional by the Supreme Court in the Panama and Amazon cases, decided on January 7, 1935, and reported in 293 United States 388. The question as to whether Congress can legally, under the interstate clause of the Constitution, prohibit shipments in interstate commerce, such as provided in the bill before us, was not determined by the Supreme Court in these cases. The sole reason for the rejection of 9-C being the invalid delegation of authority by Congress to the Executive. The existing law, which we now recommend be extended to June 30, 1939, it is believed meets the objections raised by the
H, Repts., 75-1, vol. 2---27