year 1915, and the estimated revenue under the 28-cent rate. The table follows: Table No. 5, Kansas Natural Gas Company. Statement of Estimated Revenue, and Requirements for the Ensuing Year, Requirements. 25,671,445 M cubic feet gas at 4¢.... Operating expenses and taxes assigned to trans portation Receivership expenses. Uncollectable gas accounts.. Taxes Kansas City pipe line. Taxes Marnet Mining Company. .$1,026,857.80 $ 514,045.01 Maintaining organization Marnet Mining Company.. Total Present value of transportation property, $7,083,605.64; depreciation on basis of 12 years. Requirements exclusive of a return on property investment 1 Return on present value. Add for working capital. Total .$7,083,605.64 $1,626,652.83 590,300.00 268,468.44 2,216,952.83 1,048,738.01 .$ 437,016.35 $ 198,755.00 $2,653,969.18 $1,247,493.01 .$1,192,089.82 31,737.70 Gas Sales 1914...... Estimated Revenue. 2 Gas used in compressor stations (on basis of use). Which is equal to a return of 10.46% on the present value $3,312,- Less requirements including a 6% return. 1,395,341.15 1,247,493.01 147,848.14 The enlarged court, in its opinion in granting the preliminary injunction, pointed out wherein it thought the foregoing table should be revised. It said: "Turning now to the table of the Commission, quoted above, the result is that, laying aside other considerations, and conceding the substantial correctness of the Commission's other findings for the purpose of the decision of this application for injunction, its estimates of the requirements of the company and of the receiver for the first and the succeeding five years of The division of these items between Kansas and Missouri has been made on basis of use of property as shown in Table No. 1. This item is placed here to balance an equal sum included in the expenditures. It is a bookkeeping entry solely. the life of the gas company as a going concern were too low by the following amounts: On account of estimating 12 years instead of 6 years as the On account of lack of allowance for extensions by. Total .$ 590,300.00 247,916.00 513,428.90 145,672.10 .$1,497,317.00" Upon the final hearing counsel for the Commission has prepared a table, which is found on page 99 of their brief, which is a revision of the table set forth in the decision of the Commission, based "upon the assumption that the receiver will provide for his consumers 30,000,000,000 cubic feet, instead of 18,000,000,000 cubic feet, of gas per annum. This table thus prepared by counsel is as follows: Transportation. Kansas. 39,863,630 M cubic feet, at 6¢ (Kansas 50.06%), allowing for leakage and difference in pressure basis .$2,391,817.80 $1,197,343.98 Operating expenses and taxes assigned to transportation (increased 66% %). Receivership expenses... Uncollectable gas accounts (increased 66%%). Taxes Marnet Mining Company. Maintaining organization Marnet Mining Company Total ... Value of transportation property $7,083,605.64 depreciation on basis of 12 years from December 31, 1914 Add for extensions, $1,000,000 to be amortized in 10 years, 45.48% to Kansas. $4,030,605.45 $1,930,571.17 .$1,395,341.15 930,134.3S .$2,325,475.53 1,930,571.17 $394,904.36 .$7,083,605.64 200,000.00 $8,283,605.64 On which value estimated net revenue is an annual return of 10.48%. For the purpose of summarizing the conclusions reached by me as heretofore stated and putting them in concrete form, in order to show wherein they differ from the conclusions reached by counsel for the Commission, in the revised table above given, the table is again re produced, embodying the changes necessary to make it conform to the foregoing conclusions: Transportation. 39,863,630 M cubic feet, at 6¢ (Kansas 50.06%) allowing for leakage and difference in pressure basis Kansas. .$2,391,817.80 $1,197,343.98 Operating expenses and taxes assigned to transportation (increased 66%%).. Receivership expenses. Uncollectable gas accounts (increased 66%%). Taxes Marnet Mining Company.. Total Maintaining organization Marnet Mining Company .$3,340,305.43 $1,616,622.73 Value of transportation property less salvage $7,000,000-$1,050,000-$5,950,000. Depreciation on basis of 5 years from April 1917.....$1,190,000 541,312 20,000 90,960 4,730,305 2,248,794 Kansas proportion, 45.48%...... . $4,184,160 On which value estimated net revenue is an annual return of 1.8%. This falls short of producing 8 per cent. on the investment by $258,051. It falls short of producing 6 per cent. on the investment by $174,368. In this re-revised table no allowance for going value has been included, for the reasons heretofore stated. Furthermore, no valuation is included for leaseholds. The Commission made no allowance for these leaseholds in the valuation fixed by it for rate making, but it made an allowance of 4 cents per thousand cubic feet for whatever gas was obtained from wells covered by the leases. It is claimed on the part of the plaintiff that this method of dealing with the leaseholds was not only unscientific, but also worked a great detriment to the plaintiff. It must, I think, be conceded, if all gas required by the receiver could be bought at the price of 4 cents per 1,000 cubic feet, that it might be fairly argued that the receiver should not make use of gas obtained from the leaseholds upon a higher basis than 4 cents; but if, as the evidence shows, not only all the gas that could be purchased at 4 cents was needed, but also in addition thereto all the gas produced from the leaseholds, then it might or might not be fair and just to allow 4 cents for gas obtained from the leaseholds. If this last increment of gas from the leaseholds was needed to make up the supply, a reasonable return should be allowed for it, though this return exceeded the price paid for the rest of the gas. In other words, the leaseholds should logically be valued, and this value amortized, and the valuation added to the capital account upon which returns should be figured. In the present case, if this were done and the valuation used which was placed upon the leaseholds by the expert of the Commission, it will be found that the 4-cent allowance for gas from leaseholds was not equivalent to placing the valuation of the leaseholds in the capital account, and amortizing the same, and giving a fair return upon the capitalization. However, when, as in the foregoing table, 6 cents is allowed as the cost price of gas to the receiver, and this is made also the basis of return for gas obtained from the leaseholds, the difference between the two foregoing methods of handling the leaseholds becomes of very little importance. For this reason it is not thought necessary to make a change in the table of the Commission in this respect. Allowance has been made for salvage at the end of the fiveyear period-15 per cent. on the present valuation of $7,000,000 and 50 per cent. on the extensions and additions immediately necessary. The estimated cost of these immediate changes has been reduced by the value of new pipe recently bought by the receiver and not yet used, amounting to something over $200,000. The balance of the amount recently expended by the receiver under order of court, amounting to over $400,000, though unsuccessful as an investment, must nevertheless be provided for, either by being placed in capital account and amortized, or by being charged to maintenance; proper allowance to be made in either case for salvage. This would increase the deficit above shown. It is further to be noted that in the foregoing re-revised table no allowance is included for extensions after the large initial one. This omission is not due to a conclusion that no such expenditure would be necessary. On the contrary, the testimony shows that it would be necessary; but from the evidence I am unable to deduce any definite figure as to amount. Whatever sum would be necessary to be expended would, of course, increase the deficit to a still greater extent. Extensions to new gas pools do not stand on the same footing as new branch lines of railway. The one is normally short-lived; the other is normally enduring. The former are usually necessary to maintain the present business; the latter are usually built for the purpose of getting new and additional business. Whether extensions in such a business as the natural gas business should be charged to capital account and amount (less estimated salvage at the end of the life of the field) be amortized, or whether they should be charged immediately to maintenance (subtracting, however, from each installment of investment an amount for estimated salvage), makes very little difference, provided a return is allowed on the capital actually invested during the time it is tied up. In the first instance, however, the feasibility of attracting capital into the extensions may be a determining factor as to how the account should be made up. Finally, the experience of the receiver for the year 1916 is instructive and valuable. During the first 8 months of the year the 28-cent schedule was in force, the average return to the receiver on gas sold for domestic purposes was 18.27 cents. The total amount of gas sold during the year on the whole system for domestic consumption was 14,170,692,000 cubic feet. Applying the above rate to this amount, we have given an income of $2,608,824. Income derived from sale of boiler gas, gas for engines, etc., gives $523,700—a total income of $3,132,524. Against this were the following: Gas purchased..... Operating expenses. Depreciation or amortization, $7,083,605 on six-year basis adopted by court in June 1916..... 8 per cent. on investment of $7,083,605. Total necessary revenue... Deficit .$1.203.547 910,030 1,180,600 582.698 .$3,876.868 3,132,524 .$ 744,344 In fairness, owing to the abnormally large expenditures for extensions, the figures for operating expenses, $910,030, might well be reduced by $300,000, thus approximating a normal year, leaving a deficit of $444,344. The foregoing findings and conclusions, though perhaps containing errors, have nevertheless been reached after the most careful consideration of the evidence and the arguments of counsel that I have been able to give. It is accordingly held that the 28-cent rate is not and will not be compensatory, but, on the contrary, that it is unreasonably low and confiscatory, and violative of the Constitution of the United States. Interstate Commerce. [4] The question of interstate commerce remains to be considered. It is claimed by the plaintiff, and by several of the defendants who ask for similar relief, that the transactions carried on by the receiver, namely, the transportation of gas from Oklahoma to Kansas or Missouri, or from Kansas to Missouri, and the sale thereof, at points of destination, constitute interstate commerce, and, further, that under the facts disclosed by the record the Public Utilities Commission of Kansas, in fixing the 28-cent rate, has attempted to directly regulate and control this interstate commerce, and has imposed a substantial burden thereon, and for these reasons the enforcement of its order should be enjoined. On the other hand, counsel for the Commission state their position thus: "Our position is, however, that the receiver, being a public utility under the laws of Kansas, and actually engaged in a domestic and local business within the state, and employing local franchise in the local sale and distribution of gas, thereby commingling its property with the general property of the state is unquestionably engaged in intrastate commerce, and has unquestionably taken away from the transaction of importing gas into the state and the sale of the same to customers all of the interstate features which might have existed, had the company not employed local agencies for the sale of gas in said state." It is further claimed on the part of the Commission that the question of interstate commerce is res adjudicata, having been passed upon by |