winter. But it is clear that it will fall far short of satisfying their full demands.

In addition to the problem of pipe-line capacity, there has been the further difficulty, which usually arises when a much desired commodity is in short supply, of who is to get how much of what there is.

The Federal Power Commission has, and has sought to assert, no authority to nationalize, regiment, or otherwise dictate the fuel economy of the Nation. It has only very limited power to deal with the adequacy of pipe-line service. But, confronted with a situation and not a theory, just as the several State regulatory bodies have been, the Commission was, of course, willing to use its good offices in every proper way possible and to assume a role of leadership in a cooperative effort among all concerned to deal with that situation.

Thus, in determining where the Big Inch gas was to go last wintera matter over which the Commission was able to exercise control through a condition included in the certificate for operation-the Commission called in an industry advisory committee, which has continued to function as needed, consisting of representatives of the various companies most concerned. Although they were not always unanimous, the recommendations of this group, based on careful and cooperative study of the relative needs of their customers, were, with minor modifications, followed. The result was that, while no area received all the gas it wanted and could have used, all shared in the relief afforded. Through direct service or by substitutions and transfer of gas among connecting lines, these benefits extended from Missouri, on the west, to western Pennsylvania, on the east, and as far north as Detroit and Buffalo. This would not have been possible without the cooperation of the companies involved and the hard work done by their representatives in conjunction with our staff; full credit is due to all concerned.

Similarly, as the seriousness of the shortages developing in the Midwest areas served by the Panhandle Co. was appreciated, plans for the orderly curtailment of service and the equitable allotment of gas, when necessary, were worked out in cooperation with the State regulatory commissions of Illinois, Indiana, Michigan, Missouri, and Ohio, and with representatives of the Panhandle system and of the principal companies buying its gas for resale. In these cooperative conferences with the State commissions and the distributing companies invited by them, the Commission has recognized fully that the regulation of local distribution is within the province of the States, and therefore that the enforcement of curtailment schedules of the distributing companies is a function of the State authorities. Temporary emergency tariffs filed by Panhandle to cover these arrangements went into effect under the Commission's order of December 12, 1946. Subsequently, similar problems were dealt with in like fashion elsewhere-notably in the areas served by the Northern Natural Gas Co., the National Gas Pipeline Co. of America, and the Mississippi River Fuel Corp.

Looking ahead to conditions to be expected next winter, the Commission invited representatives of the regulatory commissions of the various gas producing and consuming States to meet and consider with us the problems encountered during the heating season just past and measures which might be taken to relieve as much as possible the gas shortages which will have to be faced. This conference on February

21, 1947, was attended by representatives of the commissions of Alabama, the District of Columbia, Georgia, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, Montana, New York, Ohio, Oklahoma, Pennsylvania, Texas, West Virginia, and the National Association of Railroad and Utilities Commissioners.

It was the consensus that shortages requiring curtailments are to be anticipated in the 1947-48 heating season, and that every appropriate measure should be taken by cooperative action to cope with them. By general agreement, it served a very useful purpose. State commissions having common problems are seeking to deal with them on a consistent basis, which is important because the immediate control of new gas applications and of any necessary curtailments is largely in their hands-by virtue of their regulation of rates, services, and practices in local distribution. The Federal Power Commission is assisting them in every way possible, and is continuing its endeavors, in cooperation with the pipe lines and their customers, both to bring about the best possible use of facilities, so that service interruptions may be minimized, and to provide that, when curtailments do become unavoidable, they will be applied equitably and with the least possible harm. In general, the pattern followed alike by the State and Federal Commissions is to give first consideration to existing customers and markets. Within these groups, domestic customers, hospitals, public institutions, and the like receive the highest priority of service. Because of the business losses and unemployment entailed, every effort is made to protect industrial uses which are wholly dependent upon gas. The first to suffer curtailment or interruption are uses in which conversion to substitute fuels is most feasible. No reasonable alternative to this approach has been discovered.

SOME PROVISIONS OF THE BILLS

Since it is our considered judgment that legislation at this time would be premature and unwise, we have not undertaken a detailed point-by-point analysis of the provisions and specific effects of these bills. As already stated, it may be that some of the proposals in the bills are aimed at matters which, after mature consideration of the Natural Gas Act and its administration as a whole, will be deemed to merit legislative action. We expect, if permitted to do so, to cover these, as well as other matters relating to the act, in our full report to the Congress on the natural-gas investigation.

There are, however, some features of these bills whose implications are so important, and so uncertain, that they should be mentioned specifically.

1. I have referred earlier to section 1 (b) of the act, and to the reasons why it seems to us unwise to adopt any legislation on this matter now before it is known whether there is really any need for such legislation. If it should finally be concluded, however, when all the pertinent considerations are before you, that amendatory action is required to make still more unmistakable than we think it already is the congressional intent to exempt sales made to pipe lines by those who independently produce and gather gas, we would hope that this would be done in clear terms which would not simply serve as a basis for possible future confusion and fresh controversy.

We are aware that the industry representatives seem satisfied with the definitions of "production,"" "gathering," "transportation," and

the like, contained in the gas bill. The coal bill, on the other hand, attempts nothing in the way of definitions. The gas bill seeks to draw a dividing line in terms of "trunk transmission facilities" and "main receiving points." A somewhat similar effort to establish a sharp line of demarcation between transmission and distribution was 'contained in the original Lea bill in terms of "high-pressure mains" and "low-pressure mains," but was rejected after the State commissions, through Mr. Benton and others, had shown that it could not be applied satisfactorily to accomplish the desired purpose.

The difficulty of stating so clearly statutory definitions in technical fields in terms which will avoid all future uncertainty and controversy is well known. It is particularly apparent in the field with which we are here concerned, where analysis of the particular situation is so often required to determine the real function of the facility in question.

In stating this fact I do not mean to imply that all the wisdom on the subject lies within the Federal Power Commission

Senator MOORE. Thank you.

Mr. SMITH. Yes, sir; or that we alone should be allowed to either "prescribe" or "proscribe" all remedies. We simply wish to point out that the border-line cases, whether at the beginning or at the end of the line, calling for the sensible exercise of informed judgment, are bound to arise under almost any conceivable set of definitions. And I am sure that I do not need to assure this committee that, if you should conclude that such definitions are necessary to clearly express your intentions, it would be the sincere purpose of the Commission to assist in every way possible in any effort to find terms which will be clear and satisfactory-just as it will, of course, continue to be our aim to give full effect to the policies declared by the Congress.

2. It must be obvious, however, that the whole intent of both section (8) of the coal bill and the jurisdictional sections of the gas bill arealthough for different reasons-to go far beyond anything which might be thought necessary to reassure or protect against any possible threat of Federal regulation of the independent gas or oil producer. The purpose, clearly, is to extend the exemption to interstate naturalgas companies, insofar as their own produced gas is concerned. Without going at this time into the relative merits of the "field price" and "cost" standards in rate making-which, as pointed out earlier, is a matter that was much discussed on the record of the natural-gas investigation and one that the Commission intends to cover thoroughly in its report-it is significant that section 52 of the gas bill leaves the natural-gas company free to select, at its option, whichever of these methods might be to its greater advantage under its own particular circumstances, and without, as has already been shown, any assurance of advantage to the independent producers, many of whom are already under contract for the life of their gas.

This option would be a most unusual provision to find in a regulatory measure. In thinking of this proposal, I am reminded of the language of Mr. R. H. Hargrove, vice president of the United Gas Pipe Line Co. and now president of the American Gas Association, when, in response to a question about this proposal during the hearings on the natural-gas investigation, he said:

I can't quite justify in my mind an election in the matter on the part of the pipe-line company.

3. The first six policy declarations included in the "coal bill" are stated in such general terms that, quite apart from any questions about their objectives, it seems reasonably certain that any administrative agency which sought to apply them would find itself embroiled in almost endless controversy as to the meaning of the various elements enumerated and the relative weights to be given them in determining the public interest in a particular case. I would hate to think of trying to conduct, or to bring to a conclusion, certificate proceedings conducted under the standards set forth.

On the other hand, section 1 (b) of the act if amended by the gas bill would state that

nothing in this chapter shall be construed as authorizing the Commission to prohibit or restrict the transportation or sale in interstate commerce of gas for utilization for any purpose for which such gas may lawfully be used.

I think Congressman Rizley referred to "moonshine" in that connection this morning.

Just what does this provision mean, particularly in relation to section 7 of the present act, which requires that a certificate of public convenience and necessity must be obtained from the Commission before pipe-line facilities may be constructed or operated? And what, if any, authority would this, as well as other provisions of the gas bill, confer upon State agencies in the field of interstate commerce.

From the language of the proposal it appears that the Commission should give no consideration whatever to the nature and extent of the markets proposed to be served under authorization granted by a certificate. Just how public convenience and necessity could be determined without any consideration of the market and the nature of the demand for gas is hard to see.

4. The last provision of the gas bill states that—

any natural-gas company may, without obtaining such certificate, maintain, extend, or enlarge those facilities for any transportation or sale of natural gas for which a certificate has been issued, for the purpose of maintaining continuity of service, or of supplying increased demands in its existing markets.

Evidently, what is proposed here is that natural-gas companies should be authorized by law without any limitation to enlarge or extend their facilities for transmitting increasing amounts of gas into areas which they now serve.

I wonder whether this is really what the interstate pipe-line companies want to accomplish, or whether they have considered the full implications of this proposal. If such a provision were to be enacted there would seem to be no need for a certificate except when a pipe line proposes to enter a new market. Once in such a market, it would be free to expand as it wished, but its corresponding obligation to the public might be by no means so clear.

While we have tried to flag here a few matters for your attention, there are other questions of high importance involved in these bills, all of which require careful and balanced consideration with regard to the public interest. We recognize the very useful purpose served by this hearing in helping to focus further attention on some of the issues presented, and with which we have been struggling in our own investigation of the Natural Gas Act and its administration. But we do not suppose that this committee will want to act hastily, under pressure and in the atmosphere of urgency which has been aroused by some of

those seeking the enactment of these bills, or without having the full record before it.

At about the time our hearings began, the same Mr. Hargrove to whom I referred earlier, then writing in the American Gas Association Monthly, as chairman of the natural gas department of that organization, had this to say:

As further evidence of its willingness to cooperate, the steering committee of the natural-gas industry should consider itself in continuous session to advise with the Commission during whatever time is required for the complete investigation.

It is obvious that the Federal Power Commission has a monumental task ahead if it proposes to do a thorough and exhaustive job. The implications of the investigation are too far-reaching for the natural-gas industry to adopt a complacent attitude. On the contrary, it should see that a complete and detailed examination of every important phase and factor of the industry which may be placed under scrutiny is presented in its proper light.

The industry has a right to insist and a duty to see that the inquiry be limited to practical objectives and that every pertinent fact be read into the record before a single legislative recommendation is made.

That sound admonition, intended apparently alike for the Federal Power Commission and for the natural-gas industry, has been followed by the Commission. It is unfortunate that it seems to have been abandoned at this juncture by some groups within the industry who are now urging partial legislation before all the pertinent facts can be placed before this committee.

CONCLUSION

The position of the Federal Power Commission on these matters may be summarized as follows:

1. We are not stubbornly opposing any and all attempts to amend the Natural Gas Act, either to clarify its meaning or to insure that its administration will be wholly in accord with the congressional intent. If we held any such smug view we would never have undertaken the evaluation of Federal policy and the self-appraisal which is the purpose of the natural gas investigation. If that investigation had been designed simply to support some preconceived objectives, we certainly would not have followed the procedure of sending the tentative reports of our staff for comment and criticism by all interested parties before submitting our conclusions and recommendations to the Congress.

2. We believe, however, that questions of Federal policy regarding the natural-gas industry should be dealt with comprehensively on a firm and rounded basis. Any needed legislation should deal fairly with the problems as a whole, rather than in piecemeal fashion, with priority to some measures pressed by those having a special interest in certain changes. We expect that our full report on the investigation-upon which so much effort has been expended, not only by the Commission but also by the others who have participated-will within a few months give you a sound and helpful basis for your decisions regarding all these questions in terms of the public interest.

3. We cannot see how anyone will be harmed if further consideration of these bills is deferred until the report on the investigation can be completed and laid before you. In view of the care with which the Committee on Interstate and Foreign Commerce is accustomed

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