courts have held that the same general principle of due process contained in the Fifth Amendment must be met by any national legislation.

When you have an independent producer who may be under this definition larger in assets and production and resources and share of market than an integrated producer or a nonintegrated producer with foreign production deemed not incidental to U.S. operation with the latter two not being exempt, it seems to me you have some very broad problems here.

The express justification for that system is to give independents more of the action, and I for one believe that is desirable, but I respectfully suggest that this kind of arbitrary device to undertake to bring about that result is bound to end in long, protracted litigation. I can't believe that we want to solve these serious emergency energy problems with results which are going unquestionably to bog us down in court.

Along that same line, you have a provision that an independent producer, if the FPC finds that he is engaged in anticompetitive behavior that he can be taken out. That is an incredible provision, Senator.

It is so vague and indefinite in providing standards

Senator STEVENSON. That language is taken from the Federal Trade Commission Act, and if we haven't made it clear, I think we could in the legislative history that we are trying to take with it the judicial history that interprets that legislation.

Mr. HILL. Senator, I submit that you can't do that legally. It is an unconstitutional delegation of congressional power to an administrative agency. You don't tie it either to the Sherman Act or the Clayton Act. Neither the Congress, the courts nor the public can ascertain whether the agency has conformed to any standard in denying the exemption.

Who could be expected to understand the limits of that statute?
Senator STEVENSON. What are you looking at?

Mr. HILL. Section 25-b, Senator. That should be in working paper

no. 2.

Senator STEVENSON. That is the language I thought you were referring to.

Mr. HILL. It just won't get there.

Section 112-A of Title I, that is another one I wish we could take a look at, just from a legal standpoint. That is aside from policy considerations. It gives the FTC power to set aside any rule, regulation or order of the State commission with respect to the transportation of oil or gas upon its own motion or upon petition of any interested party if it finds that any such rule, regulation or order constitutes an undue burden on interstate commerce.

Now, that is literally incredible to me, Senator.

Senator STEVENSON. That provision comes word for word right out of the Interstate Commerce Act.

Mr. HILL. Well, it is a blatant attempt to grant judicial power to the FPC, not to make quasijudicial findings, which they can, but here you are determining a power exercised by a State agency is a burden on commerce.

Now, if I understand anything about the United States governmental structure, that cannot be legally done. How in the world-I was so amazed by it that we briefed on it yesterday and last night. There is absolutely no legal support for such a sweeping grant of judicial power to an administrative agency. You might as well shut down State governments, if by a mere edict of an administrative agency you can declare a State agency rule as being an undue burden on commerce. It destroys the principle of separation of powers. It is probably in conflict with granting judicial power to the Supreme Court, it is probably in conflict with allowing three-judge courts to hear injunctive proceedings in connection with these mat

ters.

I would like to draw that to the committee's attention.

Senator STEVENSON. I appreciate all these suggestions. I just want to point out in this case as in the other, there is a history. In this case, you do have a similar situation in the rail and transportation industry with conflicting jurisdictions between the Federal Government and the State regulatory bodies, and it is resolved in that case with this language.

Maybe the staff knows what the judicial history is. I assume in all the years that has been on the books its constitutionality has been tested in the case of any finding by the Federal regulatory body. There would be a redress in the courts. It wouldn't be quite the fiat by regulatory body that you suggest. It would be an appeal.

Mr. HILL. As one who has faced many appeals under the Substantial Evidence Rule, it comes politely close to being a fiat at some times. It is not a sporting contest. I will say that.

In all events, undue burden on commerce, we all know, is a judicial question. It is just that simple. It can't be any other kind. It never has been thought to be any other kind. The FPC is not authorized to make those kinds of determinations about a State agency.

As far as the Corporation that is submitted under Title 3, the Federal Government Corporation, it just seems to me that the structure of the bill, again, creates-if we are going to say that we want a Federal Corporation to look after Federal lands, then let's say so and debate whether that is or isn't a solution to some of the serious problems. Or if we are going to say that we are really going to get a charter out and there will be the beginning of the charter for a national industry, why not say so and debate it publicly.

But what you have done here, it seems to me, is to put a favored -well, it is sort of an Alice in Wonderland corporation. It is really comparable to nothing in the real world of competition, and yet you assert in the bill that the reason for it is to stimulate competition and to have a yardstick to measure your costs.

Now, how is this corporation going to serve as a yardstick to see what it costs to produce oil when they have all sorts of favoritism in the bill itself? Federal tax takes, reliance upon the Federal treasury and the taxpayers for satisfaction of its debt-I think it would grow into a governmentally financed corporation with the strength to kill off competition and create possible a monopoly.

I think it turns loose a destructive economic force and does not solve problems.

Thank you very much.

Senator STEVENSON. Thank you, General. I understand that we accept your comments with the same sincerity as you offer them. We want to represent all the states, including the producing States.

Now, you have raised a number of good questions, and some perhaps deserve more consideration by the committee. They have all been considered, I think, including the constitutional questions which you have suggested, and as I have tried to indicate earlier, and I don't know if you were here for the earlier witnesses: We don't want more regulation. What we are doing is deregulating and hopefully headed off the way when the public, if not in Texas, then in a lot more States than there are producing States, demands some pretty drastic remedies against this vital industry. We are deregulating 99.8 percent of all producers in the country, and that definition is broad enough to include the State of Texas.

Your royalty gas won't be regulated, the price won't be regulated whether you sold it in the interstate or the intrastate market. You are going to have a bigger market for the gas than you have now. That is, unless the State of Texas is a vertically integrated oil and gas company.

Mr. HILL. No, we are not in the oil and gas business. It is so easy to say in this bill what you have said, Senator. If state royalty gas and oil is not to be included it should be a straightforward state

ment.

Senator STEVENSON. We thank you for making that clear.

Mr. HILL. The reason that we came here on State royalty oil with an exemption, but it didn't last very long.

Now, we have to go to court about it.

Senator STEVENSON. I am glad you raised the point. It was never our intention to regulate the sale by States of oil and gas, and to the extent we have really worked on it, we have assumed they would fall into that definition. If there is any doubt about it, we can easily clear up and eliminate that doubt.

I had said earlier that we would continue with the whole panel, and now I have got started on questions.

Mr. HILL. I enjoy it very much. Shall I go?

Senator STEVENSON. Stay here, if you have the time.

Mr. HILL. Thank you.

[The statement follows:]

STATEMENT OF JOHN L. HILL, ATTORNEY GENERAL, STATE OF TEXAS

First, I would like to express my gratitude to this distinguished Committee for this opportunity to share my views on certain provisions of the Consumer Energy Act.

Thus far, the various energy measures enacted by this Congress have built upon the basic structure of the oil and gas industry, as it now exists. While there have been some important changes in the system of allocation of pertoleum products required by the Arab oil embargo and some changes in the old Cost of Living Council pricing regulations for petroleum products, these changes, whether we agree with all of them or not, have basically occurred within the present regulatory structure of the oil industry. While we disagree strongly with the Federal Energy Office in its "flip-flop" order placing price controls on state royalty oil, and while we have expressed strong disagreement with the provisions of the energy emergency legislation giving the Secretary of

the Interior the right to set the maximum efficient rates of production (a job he is not equipped to do and should not be empowered to do), we realize that constructive solutions must be sought and found to the serious problems of energy shortages and accelerating consumer prices. To the extent we come to Washington from time to time to state our disagreements, it is because we sincerely do not feel that some of the solutions being offered up by our national government are really calculated to bring about meaningful solutions to those serious public problems.

Speaking now directly to the proposal before this Committee for F.P.C. regulation of intra-state sales of natural gas, I strongly oppose this section of the bill. First, in Texas, many of these sales include sales of state royalty gas, and the proceeds of such sales go into our public school and college and university permanent funds. We feel that such sales, being sales of exhaustable assets which the state holds in trust for its citizens, should be made at fair market value at the best price the market will provide. The national government and its institutions should not be in the business of depriving Texas, or any other state, of funds derived from sale of state-owned products and dedicated to public purposes. Further, a number of cities and other governmental entities in Texas depend upon intra-state sales of natural gas as a fuel source for heating and generation of electricity. Many such cities and entities badly need to augment this supply to forestall extreme hardship for a large number of Texas citizens. The F.P.C., under Sections 107, 108 and 112, of the proposed Act, could endanger the augmenting of supplies of gas to these intra-state purchasers. Such a policy would not serve the best interests of the nation and clearly it could be most harmful to many of our citizens. It would only create new problems without really solving any existing ones. Moreover, the basic approach toward more Federal regulation of prices rather than less is a step in the wrong direction and is hostile to our concepts of Federalism, particularly when it would extend into intra-state sales that have traditionally been free of such regulations.

In addition to the policy arguments which I have made against Title I of the proposed Act, there are serious legal questions which can be raised against certain specific provisions of the Act. The definition of independent producer" in Section 3(8) of the Act is so discriminatory in its effect as to be questionable under the due process requirements contained in the Fifth Amendment. See Schneider v. Rush, 377 U.S. 163 (1964); Bolling v. Sharpe, 347 U.S. 497, 499 (1954). Likewise, Section 25(b), giving the F.P.C. the power to deny a company classification as an independent producer for anti-competitive behavior or unfair or deceptive acts or practices in commerce", is so vague and indefinite in providing standards that it constitutes an unconstitutional delegation of congressional powers to an administrative agency. See Opp Cotton Mills v. Administrator of Wage and Hour Division of Department of Labor, 312 U.S. 126 (1941). The vague standard provided is not tied to either the Sherman Act or the Clayton Act, and neither the Congress, the courts or the public can ascertain whether the agency has conformed to such a standard in denying an exemption. No one could be expected to understand the limits of such a standard, and it almost certainly would be found wanting if ever tested in the Courts. See United States v. Rock Royal Co-op, 307 U.S. 533 (1939).

Section 112 (a) of Title I gives the F.P.C. power to set aside any rule, regulation, or order of a state commission with respect to the transportation of oil or gas, upon its own motion or upon petition of any interested party, if it finds, after a proceeding in accordance with Section 554 of Title V of the United States Code, that any such rule, regulation, or order constitutes an "undue burden on interstate commerce".

This provision is a blatant attempt to grant judicial power to F.P.C., not to make quasi-judicial findings and determinations in carrying out its own powers, but to determine that powers exercised by a state agency are a burden on commerce. Exhaustive legal research fails to reveal any legal support for such a sweeping grant of judicial power to an administrative agency. This points to the novelty and unprecedented nature of such a grant of power, which is destructive to the principle of separation of powers and may be in conflict with both Article 3. Section 1 of the Constitution, granting the judicial power to the Supreme Court and such inferior courts as Congress may establish, and 28 U.S.C. 2881, granting three-judge courts the power to hear injunctive proceedings restraining the action of any officer of a state in the enforcement of an order of an administrative board or commission acting under state statutes.

In addition to my basic opposition to a precipitous decision to create power in the F.P.C. to regulate the price of oil and intra-state natural gas, I am also strongly opposed to the creation of the national petroleum corporation set out in Title III of the Consumer Energy Act. The purposes of this proposed Government Corporation as stated on pages VII and VIII of Working Paper No. 1, are as follows:

"Title III would establish a Federal Oil and Gas Corporation to explore, develop, and produce natural gas and oil from publicly owned lands. The Corporation is intended to satisfy national energy needs, stimulate competition in the petroleum business, and provide the public with knowledge of the actual cost of producing oil and gas so that public policy can be geared to the Nation's interests. It would give the Nation a yardstick against which to judge the performance and pricing of the private oil companies.

Thus, the structure of the bill creates a corporation which would be given an unfair advantage, rather than a competitive equality, despite the disclaimer of Section 51 (h) contained in Section 301 of the proposed bill. The priority given to the corporation in its choice of leases, the exemption of the corporation from federal taxation, the command of support from other federal agencies, and the ultimate reliance on the federal treasury and the taxpayer for satisfaction of its debts create an Alice-in-Wonderland corporation comparable to nothing in the real world of competition. Such a corporation could not serve as a yardstick for the cost of any operation in the market. Further, such a corporation could grow into a governmentally financed corporation with the strength to kill all competition and create a uncontrollable monopoly. To create such a destructive economic force would just create new problems without solving any of our existing ones.

Thank you for this opportunity to comment on the Consumer Energy Act. I have appreciated your courteous attention to my views. My best wishes are extended to you as you continue the difficult task of formulating wise public policy to meet the energy requirements for all of the people of the United States. Senator STEVENSON. There is no particular order here. Commissioner Sutton, would you like to go next?

STATEMENT OF RAY T. SUTTON, COMMISSIONER OF CONSERVATION, STATE OF LOUISIANA

Mr. SUTTON. All right, sir.

Mr. Chairman, my name is Ray T. Sutton. I am the commissioner of conservation of the State of Louisiana and as such I am the director of the Louisiana Department of Conservation, the agency charged with the responsibility for the regulation of the State's oil and gas industry.

The State of Louisiana strongly opposes the extension of the FPC's authority to regulate the transportation or sale of natural gas in intrastate commerce. We further urge this committee and the Congress to refrain from the extension of Federal regulation over the oil industry, particularly as proposed by this committee's Consumer Energy Act of 1974, the "act."

I would first like to dispell two prevailing notions relative to the posture of the principal oil- and gas-producing States, particularly Louisiana, in connection with the energy crisis.

First, anyone who assumes that there is now, or has been, an ongoing love affair between the producing States and the so-called "majors," is simply misinformed. We have been regulating this industry for several generations and indeed urged the Congress to enact the Natural Gas Act of 1938.

On the other hand, neither the Congress nor the producing States had anything to do with the extension of FPC jurisdiction to the regulation of wellhead producer prices in 1954.