STATEMENT OF DOZIER A. DeVANE, SOLICITOR, FEDERAL POWER COMMISSION, WASHINGTON, D. C.

Mr. DEVANE. Mr. Chairman and members of the committee, my name is Dozier A. DeVane. I am solicitor for the Federal Power Commission and have been in that position now for approximately 22 years. I appear here this morning at the request of the chairman of your full committee and of your subcommittee, and that the record may be clear, may I also state that I do not appear in the capacity of a representative of the administration in connection with any legislation that it has submitted to the Congress.

This committee will recall that as a part of H. R. 5423 was title III, which had for its purpose the regulation of this industry.

Title III of that bill was substantially the same in language as the part of title II that related to the regulation of the electric industry.

Substantially the only difference was that gas was substituted for electricity in the language of the bill.

After the hearings upon that bill, titles II and III—when I refer to title II, I mean that part of the bill providing for an amendment to the Federal Water Power Act bringing under Federal regulation electric utilities-both that title and title III, which provided for the regulation of the natural-gas industry was referred to the same subcommittee and considered by the same subcommittee.

I suppose it is not out of place if I should say for the record here that title III, which related to the regulation of the gas industry was not reported out with title I and title II.

The bill that you have now, H. R. 11662, is in substantially all respects, insofar as it goes, similar to the provisions of the Federal Power Act with reference to the electric industry. The bill itself does not go quite as far as nor does not confer quite as much jurisdiction upon the Commission as does the Federal Power Act.

I shall not, in my presentation this morning, undertake to discuss the gas industry, as this committee knows an investigation with reference to that subject has been made by the Federal Trade Commission under Senate Resolution 83, Seventieth Congress, first session, and a representative of that Commission will appear and present to the committee factual data that were developed by that investigation.

I would like to state, however, briefly at the outset just a few facts with reference to the industry so as we talk about the provisions of this bill we may have in mind, to some extent, the picture of what the industry is. As you know, the gas industry as it is today, has developed primarily since 1926 with the invention of the seamless pipe.

Natural gas as such has been in use for 50 years or more in this country and there was some transportation in interstate commerce prior to 1926, but the substantial development in the industry has occurred since that time.

Now, with that in mind, you can get some idea as to how it has developed and as to the reasons and the necessities for some measure of Federal control by a very brief description of the industry as it is today.

In 1935 natural gas was being supplied to some 7,000,000 independent customers, representing a population of 32,400,000 people, in communities in 35 States of the Union.

There are five principal areas in the United States in which natural gas in produced in large quantities: The Appalachian, southern, midcontinent, Rocky Mountain, and California fields.

The Appalachian field is located in the States of New York, Pennsylvania, Ohio, West Virginia, and Kentucky. It includes the Tioga, Wayne-Dundee, the West Virginia, the eastern Ohio, the western Pennsylvania, and the Kentucky producing areas. There is pipe-line construction throughout this field which reaches the seaboard and the Great Lakes and connects in Indiana with lines from the Panhandle area in Texas.

The southern area is located in northern Louisiana, and the two main fields therein are the Monroe and Richland fields. Monroe is in northeast Louisiana and Richland some 25 miles southeast of that. There is pipe-line construction from this area to Atlanta, Ga.; Pensacola, Fla.; New Orleans, La.; Memphis, Tenn.; and St. Louis, Mo. There is also construction from this area into northeastern Arkansas and westward to the border of the Texas-Louisiana line, connecting with lines extending from the Texas Panhandle field. The southern area also includes small fields located in southern Texas, pipe lines from which extend to Monterey, Mexico.

The mid-continent field includes the Texas Panhandle field-the largest reserve of natural gas in the United States. There is pipeline construction from the Texas Panhandle extending as far northeastward as Minneapolis and St. Paul, Minn., and as far east as Chicago; and the Panhandle-eastern pipe line from the field extends as far as the Illinois-Indiana State line, where it connects with the Columbia Oil & Gasoline Corporation lines, that being a subsidiary of the Columbia Gas & Electric Corporation. To the northwest the Texas Panhandle pipe lines extend as far as Cheyenne, Wyo.

The Rocky Mountain area includes individual fields located in Montana, Wyoming, and Utah, and some in the State of New Mexico.

The California field is situated in the southwestern section of California and generally parallels the coast line. Pipe lines from that field extend to San Francisco and Sacramento in the north and as far south as San Diego.

As before stated, the Texas Panhandle is the largest of the producing fields. It is located in the northwestern part of the State. The first well as drilled in 1918. Thereafter development was not carried on very actively for some time, but it became active in 1925. The field contains more than 1,000,000 acres and extends more than 100 miles in the southeasterly direction in the Panhandle section of the State through seven counties. The volume of recoverable gas is estimated at from 14 to 20 trillion feet.

There are today slightly in excess of 50,000 miles of pipe line. There are 11 holding-company groups interested in natural-gas pipe lines in the United States.

Mr. MERRITT. Is that 50,000 miles from the Texas field, or all?
Mr. DEVANE. No, sir; that is all of it.

Mr. MERRITT. In the whole United States?

Mr. DEVANE. Yes, sir. These 11 companies own 38,093.63 miles out of the 50,000 total mileage of pipe-line construction in the United States-about 76 percent.

The Columbia Gas & Electric Corporation owns the largest percentage-12,347 miles, or more than 24 percent. The next largest in point of ownership is the Cities Service Co., with 7,009 miles, or 14.02 percent. Next comes the Electric Bond & Share group, with 5,331 miles, or 10.66 percent, this being the combined mileage ownership of the Electric Power & Light Corporation and American Power & Light Co., subholding companies. The next largest owner is the Standard Oil Co. of New Jersey, with 4,419.57 miles. The four groups, above named, own 58.21 percent of the total pipe-line mileage in the United States, as of the end of 1931. In addition to this 58 percent, Cities Service Co. and Standard Oil Co. of New Jersey, have an interest in the jointly owned pipe line which runs to Chicago and is owned by the Natural Gas Pipe Line Co. of America. Cities Service owns 26.62 percent of this line, and Standard Oil, 13.31 percent.

After these four holding companies the next largest pipe-line owner is the Lone Star Gas Co., with 4.121.17 miles, or 8.24 percent. The next largest in point of ownership in pipe line is the North American Light & Power Co., and after that comes Minnesota Northern Power Co. with 1,005 miles.

The Electric Bond & Share Co. group produced 25.32 percent of the total available natural gas in the United States produced by all companies reporting to the Federal Trade Commission under Senate Resolution 83, Cities Service produced 18.15 percent, Columbia Gas & Electric Corporation 14.79 percent, and Standard Oil Co. of New Jersey produced 8.53 percent. These four holding company systems thus produced 66.7 percent of the production of natural gas by companies reporting to the Federal Trade Commission.

In 1930, 380,601,000,000 cubic feet of natural gas went across State or international boundary lines. Of this amount, 280,000,000,000 came from seven companies, and the four holding company systems named above-Cities Service, Electric Bond & Share, Columbia, and Standard Oil-transported 240,000,000,000 feet.

Now, I have caused to be placed before each member of the committee a brief I have prepared upon the constitutionality of this bill.

(The brief referred to is as follows:)

H. R. 11662-A BILL TO REGULATE THE TRANSPORTATION AND SALE OF NATURAL GAS IN INTERSTATE COMMERCE, AND FOR OTHER PURPOSES

BRIEF IN SUPPORT OF CONSTITUTIONALITY (APR. 2, 1936)

(Dozier A. DeVane, solicitor, Thomas J. Tingley, assistant solicitor, Federal Power Commission)

I. INTRODUCTION

H. R. 11662, introduced by Mr. Lea of California on March 6, 1936, proposes to bring under Federal regulation the transportation of natural gas in highpressure mains in interstate commerce, its sale for ultimate distribution to the public in interstate commerce, and persons engaged in such transportation and sale. This brief is submitted in support of the constitutionality of the bill.

II. THE POWER OF CONGRESS TO REGULATE INTERSTATE COMMERCE

By article 1, section 8, clause 3, of the Constitution of the United States, the Congress is given the power—

66* * * To regulate commerce with foreign nations, and among the several States, and with the Indian tribes."

This clause was construed by Chief Justice Marshall in the leading case of

Gibbons v. Ogden (9 Wheat. 1, 196) as conferring upon Congress the

中 * power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitation, other than are prescribed in the Constitution."

Where the activities of an enterprise extend beyond the confines of a single State and the character of the business is interstate commerce, the authorities are numerous sustaining its subjection to Federal, and under certain conditions its immunity from State, regulation. See Gibbons v. Ogden, supra; Pensacola Tel. Co. v. Western Union Tel. Co., 96 U. S. 1, 9; Western Union Tel. Co. v. Pendleton, 122 U. S. 347; Champion v. Ames, 188 U. S. 321; International Text Book Co. v. Pigg, 217 U. S. 91; Western Union Tel. Co. v. Foster, 247 U. S. 105; Dahnke-Walker Co. v. Bondurant, 257 U. S. 282; Binderup v. Pathe Exchange, 263 U. S. 291; Missouri v. Kansas Natural Gas Co., 265 U. S. 298; Public Utilities Comm. v. Attleboro Steam and Electric Co., 273 U. S. 83.

It has been definitely settled by the Supreme Court of the United States that the transmission of electricity from one State to another is interstate commerce within the meaning of the Constitution (Public Utilities Commission v. Attleboro Steam and Electric Co., supra). Similarly, the interstate transportation of gas from one State to another has been held to be interstate commerce (Pennsylvania Gas Co. v. Public Service Comm., 252 U. S. 23; East Ohio Gas Co. v. Tax Commission of Ohio, 283 U. S. 465; Public Utility Commission of Kansas v. Landon, 249 U. S. 236; Missouri v. Kansas Natural Gas Co., supra). It is well established that Congress, acting in the scope of its delegated authority, has the same plenary power that the States enjoy to employ any regulatory device which it deems reasonably adapted to the public welfare. As Mr. Justice Brandeis said in his opinion in Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U. S. 146, 156:

"That the United States lacks the police power, and that this was reserved to the States by the tenth amendment, is true, but it is none the less true that when the United States exerts any of the powers conferred upon it by the Constitution, no valid objection can be based upon the fact that such exercise may be attended by the same incidents which attend the exercise by a State of its police power, or that it may tend to accomplish a similar purpose."

In subsequent decisions involving the power of Congress to regulate interstate commerce, the Court has spoken of a "police power * * within the field of interstate commerce" (Brooks v. United States, 267 U. S. 432-437), and of business "affected by a public use of a national character and subject to national regulation." (Stafford v. Wallace, 258 U. S. 495, 516; Chicago Board of Trade v. Olsen, 262 U. S. 1, 41). Clearly the power of Congress over interstate commerce may be exercised to the same extent and for the same purposes as the power of a State over commerce wholly within its borders.

In this connection, the following cases also may be cited: Hamilton v. Kentucky Distilleries & Warehouse Co., supra; Brooks v. U. S., supra; Stafford v. Wallace, supra; Chicago Board of Trade v. Olsen, supra; Champion v. Ames, supra; Missouri, Kansas & T. Railroad Co. v. Haber, 169 U. S. 613, 621; Reid v. Colorado, 187 U. S. 137, 149-150; Hoke v. U. S., 227 U. S. 308; Caminetti v. U. S., 242 U. S. 470; Weber v. Freed, 239 U. S. 325; In re Rahrer, 140 U. S. 545; Clark Distilling Co. v. Western Maryland Railway Co., 242 U. S. 311; Alabama v. Arizona, 291 U. S. 286; Panama Refining Co. v. Ryan, 293 U. S. 388; Hippolite Egg Co. v. U. S., 220 U. S. 45; Weeks v. U. S., 245 U. S. 618; Seven Cases v. U. S., 239 U. S. 510; Public Utilities Comm. v. Attleboro Steam and Electric Co., supra; Missouri v. Kansas Natural Gas Co., supra; Federal Radio Commission v. Nelson Brothers Bond and Mortgage Co., 289 U. S. 266; Railroad Retirement Board v. Alton R. R. Co., 295 U. S. 330.

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III. THE POWER OF CONGRESS TO REGULATE THE TRANSPORTATION OF NATURAL GAS IN INTERSTATE COMMERCE

The regulatory power of the Congress over the transportation of natural gas from within the borders of a State to another State is conclusively established by the following authorities: West v. Kansas Natural Gas Co., 221 U. S. 229; Pennsylvania v. West Virginia, 262 U. S. 553; Pennsylvania Gas Co. v. Public Service Commission, supra; East Ohio Gas Co. v. Tax Comm. of Ohio, supra; Missouri v. Kansas Natural Gas Co., supra; Public Utilities Commission of Kansas v. Landon, supra; Peoples Natural Gas Co. v. Public Service Commission of Penna., 270 U. S. 550.

In West v. Kansas Natural Gas Co., supra, it was held that natural gas, when reduced to possession, is a commodity which belongs to the owner of the land, and may be the subject of both intrastate and interstate commerce. It was further held that prohibiting the construction of pipe lines for natural gas, or the transportaition of the gas by such lines, except by domestic corporations whose charters provide that the gas shall only be transported between points in the State, and shall not be transported to or delivered to any person or corporation engaged in transporting or furnishing gas to points outside of the State, and giving to such domestic corporations the exclusive right of eminent domain in the use of the highways, as attempted by Oklahoma Laws of 1907, chapter 67, unconstitutionally interfered with interstate commerce, and could not be justified as an exercise of the police power of the State to conserve its natural resources.

In Pennsylvania v. West Virginia, supra, the Supreme Court held that a justiciable controversy between States in the sense of the judiciary article is presented when the plaintiff State, relying on the commerce clause of the Constitution, seeks to enjoin the defendant State from consummating a purpose evinced by statutory enactment and about to be carried out by her officials, of withdrawing natural gas from an established current of commerce moving from her territory into that of the plaintiff, when such withdrawal is likely to be productive of injury to the interests of the plaintiff as the proprietor of public institutions and schools in which the gas was largely used, and to private consumers, including inhabitants of many urban communities and a substantial part of the population of the plaintiff State, whose health, comfort, and welfare would be seriously jeopardized by withdrawal of the gas from the interstate stream.

The Court held that the transmission of natural gas from one State to another, for sale and consumption in the latter, is interstate commerce and not subject to restraint on the part of the States, in the following language (p. 596):

"By the Constitution, article I, section 8, clause 3, the power to regulate interstate commerce is expressly committed to Congress and therefore impliedly forbidden to the States. The purpose in this is to protect commercial intercourse from invidious restraints, to prevent interference through conflicting or hostile State laws and to insure uniformity in regulation. It means that in the matter of interstate commerce we are a single nation, one and the same people. All of the States have assented to it; all are alike bound by it; all are equally protected by it."

In Pennsylvania Gas Co. v. Public Service Commission, supra, it was held that the direct transmission of natural gas from the source of supply outside the State to local consumers and municipalities is interstate commerce; but until Congress acts under its superior authority by regulating the subject matter for itself the exercise of authority conferred by a State upon the public-service commission to regulate rates for natural gas transmitted directly from a source of supply outside the State to local consumers and municipalities within the State does not offend against the commerce clause of the Federal Constitution.

However, Pennsylvania Gas Co. v. Public Service Commission was modified in East Ohio Gas Co. v. Tax Commission of Ohio, supra, and distinguished in Missouri v. Kansas Natural Gas Co., supra, in both of which cases interstate commerce was held to terminate with the delivery of the gas into local supply mains, whether sold locally by the transporting company or sold to a distributing company for local distribution.

In Public Utilities Commission of Kansas v. Landon, supra, natural gas was piped from Oklahoma into Kansas and there sold at wholesale to local companies which distributed to consumers. The Supreme Court, speaking through Mr. Justice McReynolds, unanimously held that the Kansas commission could regulate rates for local distribution, even though the gas was transported in pipe lines across State lines in interstate commerce. The Court said (p. 245):