1 Includes value of gas used at petroleum refineries and electric public utility power plants. Gas used in manufacture of carbon black included under "Other States" for United States total and under "Other industrial" for State total to avoid revealing figures of individual operators.

Prepared under the supervision of G. R Hopkins, Acting Chief Economist, Petroleum Economics Division, Oct. 29, 1935.

INTERSTATE TRANSPORTATION AND EXPORTS OF NATURAL GAS IN 1934

Mr. BATTLE. According to this United States Bureau of Mines report, 31 percent of the natural gas is used for field purposes, 16 percent by domestic consumers, 5 percent by commercial consumers, 13 percent by carbon-black manufacturers, 7 percent by electric publicutility power plants, 5 percent by petroleum refineries, 2 percent by cement plants, and 21 percent for other purposes. The other purposes are not defined, but I presume they include blast furnaces, glass works, Government buildings, hospitals, barracks, and so forth, brick and clay burning, general hospitals, hotels, and small manufacturing plants not otherwise described.

To analyze further these figures of the Bureau of Mines, 31 percent used in field production, as I construe the bill, would not be subject to any regulation; 53 percent would not be subject to regulation, as it is for industrial use. I cannot distinguish between industrial and commercial use. This leaves only 16 percent used for domestic consumers; and if I understand the general operation of the industry, by far the greater portion of this 16 percent would be distributed locally by local plants and not subject to this bill. Therefore, I repeat what I said at the outset, under the very provisions of the bill itself there is practically nothing left to regulate when the exceptions are taken into consideration.

The figures from the Bureau of Mines are for the year 1934 and are found in their Mineral Market Reports, No. M. M. S. 414, dated October 29, 1935. This same report points out that there has been a large increase in the production and use of natural gas in recent years and states that the major portion of the recovery in total distribution in 1934 was due to a material gain in demand for industrial purposes. The report likewise shows a large increase in the number of domestic and commercial consumers in 1934 over the previous year. Attention is called to the fact that the average value at wells per thousand cubic feet in 1934 was 6 cents, and the average value at point of consumption per thousand cubic feet was 22.3 cents. I take it from this report that this covers all of the gas, and I particularly call your attention to the fact that for domestic, including commercial distribution, which would account for only 21 percent of the total, the average value at point of consumption was 68.6 cents per thousand cubic feet. So it would seem that the domestic consumer is paying a very high price for gas and industrial users are paying very low prices.

Natural gas has displaced millions of tons of bituminous coal throughout the Nation. It is our opinion that natural gas is being sold for industrial purposes at prices that are unreasonably low, while at the same time the domestic and household users are paying prices that are several times greater than those for industrial users. Our industry is interested in this phase of the business-that is, the industrial use of natural gas-as it comes in direct competition with us and by practices that we question. We feel that the competition is unfair. It is reported to me that it is not an uncommon practice for the manufacturers of natural gas to call on an industrial plant and offer to furnish heat at 10 percent less than they are paying at the time without even ascertaining what their fuel bill is. I submit that this kind of competition is unfair and cannot be met on any business principle.

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There are only about 50,000 employees in the natural-gas industry throughout the country, according to the Bureau of Mines report for 1934. The bituminous coal industry employs around 500,000 men directly in the mines and as many more indirectly in transportation, distribution, and sales forces. Thus there are several million people entirely dependent for a livelihood on the bituminous coal industry and your attention is directed to the fact that some 60 to 65 cents out of every dollar paid for the mining of coal goes direct to labor. We do not know the labor cost in connection with natural gas, but it must be very small compared with coal. About 50 cents out of every dollar taken in by the railroads goes direct to the payment of wages. Taking into consideration those employed directly in the mining industry and those industries allied or associated with it, it is estimated that for each ton of coal displaced by some other fuel or form of energy, a person either directly or indirectly employed in the coal industry loses a day's work.

It is our information that gas is being sold to some industrial concerns in the city of Chicago for 122 cents per thousand cubic feet, whereas the household rate is about five times greater, and in this connection it must be borne in mind that natural gas has a higher B. t. u. value than manufactured gas. There are certain special rates, we understand, in effect in Chicago from March 1 to December 1, which will average about 18 cents per thousand cubic feet.

The Government buys a considerable quantity of gas, the last report indicating that it purchased 2,385,389 cubic feet in 1930. It is noted that at some of its Army posts in sections far removed from the gas field it is sold as low as 20 cents per thousand cubic feet. In some buildings in Alabama the rate is as low as 16 cents; in Iowa, 14 cents, and in West Virginia, 15 cents. Even at Fort Sam Houston, Tex., where the price is 21 cents for industrial use, the domestic rate is 55 cents. In some instances there are sliding scales, the larger the quantity the lower the rate.

These instances are called to the attention of the committee merely to emphasize the fact that this is a competition that we feel is altogether unfair. Therefore, I say to you that if you are going to regulate the natural gas industry, why exempt the one class of business that destroys labor? Why exempt the industrial gas? Why take a chance on adding to the cost of gas for domestic use and leave industrial users free to buy at any price? Therefore, I repeat that the bill as drawn will accomplish very little good for anyone.

The history of all regulation of business is, I believe, that the ultimate cost of the commodity involved is increased.. There may be and probably are instances where that is desirable. But I raise the question: Is it desirable to increase the cost to one class of users and leave the larger class of users free to practice methods which as a competitor we feel are unfair in many instances, wasteful and generally speaking not helpful toward recovery? Specifically, gentlemen, I have to suggest that in the interest of fair play, insofar as it may be possible in this measure, that you strike out the following words in line 12 on page 2: "or for the sale of natural gas for industrial use only".

Mr. COLE. Do we understand from that statement that your industry would endorse the bill if amended as you have suggested?

Mr. BATTLE. I think it would be a much better bill, if the Federal Government is going to embark on this kind of legislation, I certainly would feel that that should come out, because otherwise I feel that you do not have any bill at all. And as I said at the outset in my discussion, I do not want to assume the attitude of one industry recommending the regulation of another industry. I do not want to take that position, but if you are going to have the Federal Government going into that realm I think that it ought to make a good job of it.

Mr. COLE. In the city of Chicago, where according to your statement, the industrial plants are paying about 12 cents per thousand, and the consumers five times that price, is gas, supplied to the public and the industrial plants, distributed through the same agency?

Mr. BATTLE. I do not know; I imagine it is. I think it is handled through the local gas company, but as to the details I do not know. I merely mentioned the price to call your attention to that situation or because we have lost a lot of business, particularly the packing houses.

Mr. COLE. Of course if that distribution all came through the local distributing plants it would be subject to the regulation of the city, would it not?

Mr. BATTLE. City regulation?

Mr. COLE. Yes.

Mr. BATTLE. Yes.

Mr. COLE. Do you mean that the regulatory agency in Chicago, or the State of Illinois, whether it is the city or the State, I do not know, would permit such a difference in rates?

Mr. BATTLE. Those are the facts, although those industrial plants may be getting their gas through outside connection; I do not know, but so far as the pipe is concerned that is correct, and that is the price that puts the coal out of those industrial plants.

Mr. COLE. If there are no further questions, we thank you, Mr. Battle.

Mr. BATTLE. Thank you.

Mr. COLE. We will next hear from Mr. McDonald. Mr. McDonald, give your full name and for whom you appear.

STATEMENT OF A. R. McDONALD, CHAIRMAN, COMMITTEE ON LEGISLATION OF THE NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS, MADISON, WIS.

Mr. McDONALD. Mr. Chairman and members of the committee: My name is Andrew R. McDonald. My address is Madison, Wis. I am a member of the Public Service Commission of Wisconsin, upon which I have served since my appointment in 1923. I appear here as chairman of the standing committee on legislation of the National Association of Railroad and Utilities Commissoners. I have acted as chairman of that committee continuously since 1929, except only for the year 1934, when, as first vice president of the association I became chairman of the executive committee, and the year 1935, when I served as president of the association.

The association represents in its membership the State commissions of all the States of the Union, except the State of Delaware,