^ 105 A45 ?66 1914 U.S. Ccnq^ Commt 8-t?i lo mpke OPS rite lines comirion carriers I ^^ ■'"i l^^^l i ^IH Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924092548183 r 'to make gas Pfffi LINES COMMOl, ■ ARRIERS .^ HEARINGS BEFORE THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE HOUSE OF EEPRESENTATIVES SIXTY-THIRD CONGRESS Second Session ON S. 3345 JULY 29, 1914 PART II m- CORNELL UNIVERSITY LIBRARY 3 1924 092 548 183 WASHINGTON • GOVERNMENT PRINTING OrPIOE 1914 E.v. Mr /osr K-^looffv^ COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE. House of Kbpeesentativbs, Sixtv-thied Congbbss. WILLIAM C. ADAMSON, Georgia, Chairman. THETtJS W. SIMS, Tennessee. J. HAREY COVINGTON, Maryland. WILLIAM A. CDLLOP, Indiana. FRANK E. DOREMUS, Micliigan. J. HENRY GOBKE, Ohio. GEORGE F. O'SHAUNESSY, Rhode Island. CHARLES A. TALCOTT, New York. DAN V. STEPHENS, Nebraska. RAYMOND B. STEVENS, New Hampshire. ALBEN W. BARKLEY, Kentucky. Willis J. SAM RAYBURN, Texas. ANDREW J. MONTAGUE, Virginia. PERL D. DECKER, Missouri. FREDERICK C. STEVENS, Minnesota. JOHN J. ESCH, Wisconsin. JOSEPH R. KN0WL.4.ND, California. EDWARD L. H.\MILTON. Michigan. EBEN W. MARTIN, South Dakota. FRANK B. WILLIS, Ohio. A. W. LAFFEETY, Oregon. Datis, tllerk. o^i:io48C TO MAKE GAS PIPE LINES COMMON CARRIERS. House of Representatives, Committee on Interstate and Foreign Commerce, Wednesday, July 29, 1911^. The committee met at 10.35 o'clock a. m., Hon. William C. Adam- son (chairman) presiding. The Chairman. I suppose you gentlemen are familiar with the bill you want to discuss. Senate bill 3345, to put gas-pipe lines under the Interstate Commerce Commission. Who is your first witness? STATEMENT OF MR. GEORGE HEARD. Mr. Heard. Mr. Chairman, if you will permit me, I wish to say that we represent the natural-gas industries in New York, Pennsyl- vania, Ohio, and West Virginia; that is, those of us who took up this matter when we found this bill had been passed by the Senate. We then had several meetings and we turned the management of our case over to the Natural Gas Association of America. The Natural Gas Association of America includes in its membership practically all of the individuals, firms, and corporations in the United States, but we of the East represent more particularly the business where it originated in Pennsylvania. In Pennsylvania and in the surround- ing States where the business originated The Chairman (interposing). Do you propose to make a state- ment to the committee? Mr. Heard. In just a moment I will be through. The Chairman. Well, give your name, residence, and business to the stenographer. Mr. Heard. George Heard. The Chairman. Of course, it is proper for a man to state who he is and what he represents, but the important thing is what he says, and what we want is for you to put on two or three witnesses and let them tell us why they think this bill ought not to be passed. That is all we want, and I do not think it is necessary for a great multitude of witnesses to come here and rehearse the same things. Mr. Heard. We have but a very few witnesses. Do you want my address ? The Chairman. Yes. Mr. Heard. No. 323 Fourth Avenue, Pittsburgh, Pa. We represent the natural-gas business as it stands in the United States to-day. Now, we are opposed to this bill. We can not see any good in it whatever. We want to give you our views as quickly as possible ; therefore I am going to present to you first Judge Doug- lass, of Mansfield, Ohio, and he will explain to you the principles upon which our opposition to this bill is based. 73 74 TO MAKE GAS PIPE LINES COMMON CAEKIEBS. STATEMENT OF MR. S. M. DOUGLASS, OF MANSFIELD, OHIO, COUNSEL FOR THE LOGAN NATURAL GAS & FUEL CO. The Chairman. Give us your name, residence, and what you represent. If you have something written to read, you can put it in the hearing and it will be printed. Mr. Douglass. That is what I will do. I represent the Natural Gas Association of America for the purposes of this bill, and directly 1 am and ha\e been for eight years counsel for the Logan Natural Gas & Fuel Co., an Ohio corporation. Shall I proceed? The Chairman. Yes. Mr. Douglass. The Natural Gas Association of America extend their thanks for your courtesy in giving us this opportunity to pre- sent our views to you. Now. we have here prepared, and it is on your desk, a statement in very succinct and terse form that sets forth the grounds upon which we oppose this bill M'ithout elaboration. The Chairman. You can elaborate it and give it to the stenog- rapher. Mr. Douglass. Yes, sir. I want to offer for the record, first. Ex- hibit A, entitled " Objections to the enactment of United States Sen- ate bill No. 334") ; being the proposed law to make natural gas pipe lines ' common carriers.' " The CHAimrAN. Does that state all your objections and all your reasons for it? Mr. Douglass. That states in a very brief form, without elabora- tion, our objections. Our purpose will be served in 15 or 20 min- utes — say 15 minutes. I have here what might be marked " Exhibit B," entitled " S. M. Douglass, Mansfield, Ohio, representing the Nat- ural Gas Association of America. United States Senate bill No. 3345. Should natural gas lines become common carriers''? Now. gentlemen, I know your time is limited, and I will use my time to no jiurpose unless I cut the corners and go right to the heart of this proposition. I will not read anything in reference to why the association ojDposes this bill. The Chairman. The purpose is to print the hearings for the ben- efit of the Members of Congress; and whenever you have anything that is printed it can be printed. Mr. Douglass. Yes, sir. With a few observations as to those things that would be most in contention and which ought to be thoroughly understood, I will be done when these two exhibits are made a part of your ]iroceeclings. The duty of a common carrier is to receive from all persons alike, transport for hire, and deliver the identical goods intrusted to it by the consignor. We have a public utility created where, for a particular purpose, the public have a right to resort to our property or service and use the same. We are not here saying that we own this property, that we built it and it is ours, and we will do as we please with it, because when we devote our property, as you gentlemen well know, to the public use the public gets a certain interest in that use, and that is the ground and foundation for regulation and control, which we get most effectively by means of municipal authorities, State commissions, and by the courts. No gas company can discharge its legal duty to its domestic con- sumers by depending upon occasional producers for its supply; but TO MAKE GAS PIPE LINES COMMON CAEBIEKS. 75 experience has demonstrated that no satisfactory dependable service to the consumer can be secured or rendered except when production, transportation, and distributing features are properly linked to- gether, coordinated, and controlled by the same company. That is wherein it is differentiated from oil. The proposition is to get the gas all the time from the well to the consumer. The three essential features are the production, transportation, and distribution. Your pipe line is not a carrier except in the sense that it is the means or vehicle of distribution. That is not true of oil, nor any other com- modity which is stored at both ends of transit. We can not run gas on a wire or haul it on trains, but in order to distribute gas we must necessarily carry it on our own lines. The gas pipe line is simply a means of distribution. It can not be stored at one end and it can not be stored after delivery at the other end of the line. It must be simultaneoiTsly distributed to the consumer at delivery. It is not allied to oil or railroads or anything else ; that is, anything under the common-carriers act. Water service and electric-light service are in the same category with natural gas. It is astounding to every man who knows anything about the production, transportation, and dis- tribution of natural gas that everybody or anybody should be the parties who furnish you your production. You can not depend upon them. They could abuse your ser\ice in every way. You must take your own initiati\e. You must produce your own product, because the difference between the demands for your natural gas is more than the difference between July weather, which we had last week, and February weather. You must be prepared for your " peak load " demands and your winter service. You do not know whether the small, occasional producer will serve you, that you can depend on them at all, and therefore you must take care of yourself with your full complement of production before you can take care of your domestic consumer throughout the winter season or take care of the peak Load, which varies anywhere from 1,200 to 50 per cent of the normal supply. Mr. Baekley. Your theory is that the owner of the pipe line should also own the well in order to supply the demand ? Mr. Douglass. Absolutely so. The production, transmission, and distribution must be controlled as a unit and coordinated or you will go on the rocks. You can not do it in any other way. Another thing: There are any number of reasons that might not suggest themselves to a person who is not familiar or Avho is not ex- perienced in this line of work. The industrials form less than 1 per cent of all the consumers of the United States, and yet they consume more than 65 per cent of all the gas. It is the domestic consumer we must take care of. The Logan Natural Gas & Fuel Co. is an Ohio corporation. It has in its service 75 cities and towns scattered over Ohio. They must carry 500,000 acres of land under lease to back up their production. They must drill every year at least 100 wells, one-fourth of which Avill be dry holes, on an average. They can not depend upon anybody else to take the initiative, because they do not know how they will take care of the wells; they do not loiow the pressure of those wells, and you do not know whether in the wintertime the wells will be below the line pressure or how they will be, or whether you will get anything from them. 76 TO MAKE GAS PIPE LINES COMMON CAEBIBBS. Another thing: Should this act become a law they can butt into your line at any place and compel you to take on their product. They can go on and make their contract with large industrials, and that will take an immense consumption, and they will use up your pipe capacity. Suppose you need every inch and atom of your line in the winter season; they can make you deliver it and carry it to industrials, and the industrials will run right through the winter and rob the consumer ; and if you can not serve the consumer through the winter your business goes to ruin and your franchise is forfeited. You must give the consumer continuous service or it is of no value. Owners of large industrials and small, uncertain producers may own gas property, but do not desire to incur the expense of transporta- tion to their factories. Such manufacturers, therefore, would mo- nopolize the carrying capacity of adjacent pipe lines which serve a large number of domestic consumers, and would ruin their service. There is no getting away from that proposition, and I will say that nine-tenths of all natural-gas activities and energies in the United States have the three factors or items coordinated and take the initiative in all of them, namely, production in the field, transporta- tion to the point of distribution, and, third, distribution. No other thing is possible, if the highest interests of the consumer is sought, and I defy contradiction of that proposition. That being true, then, I say that it would be destructive — not crippling, but destructive — of the natural-gas interests of the United Steies. Mr. Talcott. Does any law make gas lines common carriers? Mr. Douglass. No, sir. We are controlled first by the municipal authorities. There is no monopoly in the natural-gas business. You can not have this, because the thing that concerns everybody, namely, the price, is absolutely fixed by the municipality or commis- sion, and you have got to accept it. When it is fixed it becomes the price under the contract for the time the rate franchise runs. The people do not want this bill. It arose out of a condition in which the people generally are not interested, but in which Senator Eeed was interested ; exceptional and local. That it should pass the Senate by unanimous consent without debate and be thrust upon the House in this manner is surprising. Now, I have not finished answering your question. We are con- trolled first by the municipal authorities and then by the commis- sions of the States. If we did not furnish good service that is just what would happen — we would be controlled by those authori- ties. The difference between your summer consumption and winter consumption, your "peak-load" consumption, is 1,200 per cent. You must have your hand right on the lever. Mr. Talcott. Are you under the public-utility commission of your State? Mr. Douglass. Yes, sir. Mr. Talcott. On what theory ? Mr. Douglass. Because they have the absolute regulation and con- trol of our service and everything that belongs to it. Every person that is aggrieved, in every State in the Union — Ohio, Wisconsin, Pennsy Ivani a Mr. Heard (interposing). And West Virginia. Mr. Douglass. I think there is not a single State in the Union in which they have not a commission with power to control the price TO MAKE GAS PIPE LINES COMMON CAEEIEKS. 77 and service of natural gas. I think there are 21 States in which natural gas is used. Mr. Talcott. You are not under the jurisdiction of a commission by reason of being a common carrier ? Mr. Douglass. Oh, no. We are under their control because we are a public utility. As I define a common carrier, the definition does not fit the natural-gas business at all. Our service is like that of serving electricity. It must be generated and brought to the place and inmaediately sent forward on its errand. The telegraph service would be more likely to be put under the regulation of common car- riers, but it is not, wholly. The Chairman .1 think you are badly mistaken. Both telegraph and telephone lines are controlled as common carriers. Mr. Douglass. The telephone is, I understand. Mr. CuLLOP. And the telegraph also. The Chairman. They are both held as common carriers; they are public utilities, the same as water and natural gas. Mr. CuLLOP. What is the name of your company? Mr. Douglass. The Logan Natural Gas & Fuel Co. Mr. CuLLOP. You serve Ohio? Mr. Douglass. Yes, sir. Mr. CuLLOP. Ohio only? Mr. Douglass. Yes, sir. Mr. CuLLOP. Then this bill would not affect you. Mr. Douglass. Well, within the last year Mr. CuLLOP (interposing). It is only where it is transported from one State to another that this bill would apply, where the public- utility commission of the State could not regulate it. That is the purpose of this measure precisely. [ Mr. Dou(;lass. We did ser^e Ohio only, until the past year Mr. CuLLOP (interposing). Because it then becomes an article of interstate commerce. Mr. Douglass. Sure; I recognize that. Mr. CuLLOP. And not an article of intrastate commerce. Mr. Douglass. Yes. Mr. CuLLOP. And Congress has the right to regulate anything in interstate commerce. Mr. Douglass. I am not questioning your right to regulate any- thing in interstate commerce. But as to natural gas, water, elec- tricity, etc., I would regard it extremely unwise. Mr. CuLLOP. Your company has no complaint here. Mr. Douglass. Well, I made a mistake. I should have said that last year we did cross the line into Indiana, and therefore it would affect us there, and in the future. Mr. CuLLOP. Well, just now you are talking about the duty and propriety of the same person and corporation using the wells and the lines. Mr. Douglass. Yes, sir. The Chairman. That would be mighty nice. Is not that your condition? Do you not buy gas from somebody and transport it to somebody else? Mr. Douglass. Not at all. More than four-fifths of the gas activities in the United States — and that covers everything repre- 78 TO MAKE GAS PIPE LINES COMMON CAEEIEES. sented by this natural-gas association from ocean to ocean — is carried forward by those things all coordinated and united in the same com- pany ; that is, the production, the transportation — which is only the means — and the distribution. The only means of distribution is the pipe line. The production, transportation, and distribution are all united in the same governing hand by the very necessity of the case. The Chairman. Now, the principal industry is in the product, and you have a pipe line of facilities for your convenience. Jkir. Douglass. Yes, sir. The Chairman. And you do not buy and sell for other people ? Mr. Douglass. No, sir. The Chairman. Then you are all right under your proposition, but the very minute your line crosses a State line and you sell gas in another State you are doing business in interstate commerce. I do not see how you get around bringing that under the interstate- commerce law. Mr. Douglass. The point about that is that you have only a few isolated instances. If you bought at one end and sold at the other end, then you would have a case of that kind ; but so far as consider- ing that in passing this bill, it is merely a small fraction. You may Jiave your exceptional instances wliere they may buy at one and sell {it the other end, but I know of no such instance, and in that case it would be your own product. The Chairjian. Do you ever buy for transmission gas belonging to other people? Mr. Douglass. That is possible in a few occasional instances. We inight buy from some farmer or small producer who has been ener- {fetic enough to drill a well, but it is only an incident ; it is only a ittle incident of the business and at once becomes the company's gas and transported as such. The Chaiejian. Whenever you accept that gas to be transmitted from one State to another you are in interstate commerce, because you are going beyond the State line. Mr. Douglass. They buy the product right then and there from the party who has it, and it becomes their property, and it is sent as their property. The fact that they buy it from his well would not change the principle. The CHArE3[Ax. You never send it through as, the property of the pther man? Mr. Douglass. Oh, never; because it is very expensive to measure the gas in small quantities. It is too expensive for all the profit in it. There are several kinds of gas. There is sulphur gas, and it fulfills the Scripture in this, that if you put a very little of it in real gas it will leaven the whole lump and destroy the whole output. Then, there is a difference in heat units; there is a difference between one gas territory and another. Mr. CuLLOP. You say your company owns those wells? Mr. Douglass. Yes, sir. Mr. CuLLOP. Is that true of all companies transmitting gas? Mr. Douglass. Four-fifths of all the business of the country, and jnore, is done just exactly that way — production, transportation Mr. CuLLOP (interposing). Well, this bill was drawn to meet a condition that is not like this at all. TO MAKE GAS PIPE LINES COMMON CAKEIEKS. 79 Mr. Douglass. But it meets the condition of nine-tenths of the en- tire natural-gas business of the country. Mr. CuLLOP. It was intended to relieve a condition like that in Kansas Citj', to relieve the people there from the exploitation of a monopoly in an article in interstate commerce. Now, there ought not to be anj^ complaint against that, and the people there ought not to be burdened in the manner which has been described. The oil lines are all under the same supervision. Oil lines are under the same super\'ision, and I presume it was intended at that time, when the oil lines were put under the Interstate Commerce Commission, to take in the gas lines and make them interstate carriers. Xow, the condi- tion is not alone confined to Kansas City, because Missouri does not produce the gas. It comes from Kansas and Oklahoma. This bill was drawn to relieve what was shown there to be a burden upon the consumer of gas, and the same burden, if not in some way regulated by an act of this kind, could be imposed upon other citizens of the country. Xow, surely there could not be an objection to regulating a condition of that kind. In the State of Illinois gas is transmitted into another State, not all of it owned by the men who have the line, but they hire it from the wells that other companies own. That is done to-day in many other instances, just as it is done in the Kansas City case. Consequently in cases of that kind there ought not to be any serious objection, because it is an article in interstate commerce. Mr. Talcott. Well, you differentiate natural gas from oil and other commodities, do you not, Judge? Mr. Douglass. Very decidedly. Mr. Taloott. You say that natural gas is so affected by the tem- perature that it changes in volume, and the unit of measurement being the cubic foot, one quantity may be delivered to the company and another quantity may be delivered to the consumer. Is that your position? Mr. Douglass. Now, I will go back to your question, Mr. CuUop, in a moment. The essential difference, Mr. Talcott, between making common carriers of gas pipe lines and oil lines is this : First, oil can be and is stored at the beginning and end of the transit. Gas must be used contemporaneously with its transportation, without storage, because storage is not feasible. Oil is not the subject matter of a public service in its distribution to the ultimate purchaser. The amount of oil to be transported is comparatively uniform throughout the day and the seasons. Oil is susceptible of inexpensive measure- ment. In case of gas, in order to determine the volume of gas you must knoAv. first, the specific gravity; second, the pressure; and, third, the temperature of gas. Mr. CuLLOP. You did not mean literally what you said just now, that oil is not the subject of use in public utility. Mr. Douglass. I say it is not the subject of immediate distribution. It is stored at both ends. Mr. CuLLOP. Well, you said something about not being subject to a public utility. Mr. Douglass. I said that oil is not the subject matter of a public service in its distribution to the ultimate purchaser. That is, it goes to the other end of the tiansit and is stored or it is turned over to somebody else. That is all I mean by that. As to quality, one well 80 TO MAKE GAS PIPE LINES COMMON CAREIEKS. of sulphur gas would contaminate the whole product. The heating value differs. The moisture or dryness likewise is to be considered. All those things are to be considered. Now, Mr. Cullop, I want to go back to your proposition, and then I must close, because I am taking up all this time. I am not familiar with the Kansas Citv proposition, except that I do know that this whole situation, in a'general way, could be cured if two things were done. They have got the full complement of courts in those two States ; they have their commissions and they have their local munic- ipal government that takes care of their price. The transportation lines— the size of them and the distance— make their price in Kansas City utterly impossible. Now, there is a gentleman here who will take up that proposition. But, to go further with your question, which is a perfectly fair one, I will say that if that condition existed and was as you have had it portrayed to you and as I have heard it — and however it may have been colored is not for me to say — but if that were true, the passage of this bill would ruin nine-tenths of all the natural-gas industries in the United States, so far as the domestic consumer is concerned, sim- ply to take care of that one looal condition in which there is an abuse. The CiiAiiniAN. Why do you assume that the Interstate Commerce Commission would make arbitrary regulations that would ruin the business of all these companies? Is it not fairer to assume that the Interstate Commerce Commission will make regulations to conform to the nature of the business '( Mr. Douglass. If this bill in its present shape were passed, and a person applied to a company doing business in interstate commerce, the com]iany would be compelled to take his product, no matter whether he wanted to send it 5 miles or less, and deliver it. Besides, the Interstate Commerce Commission can make regulations within the law but can not abrogate the law by rules and regulations. The Chairman. "Well, it is not assumed that the regulation would ruin the companies, when the very purpose of the regulation is to benefit the company. Of course it would be foolish to put under the Interstate Commerce Commission a business with a certainty that you were going to destroy that business. You might just as well outlaw it at once. Mr. Douglass. This is the point that I am trying to impress upon you. Although the Kansas company might have done something, wrong, which I do not know about, and needs correction, nevertheless they have tlieir remedy outside of this. If they get this bill passed to correct this one thing, which is a mere bagatelle in the gas busi- ness, then we become amenable to a law that we can not avoid; we have got to subscribe to it. The Chairman. If you become amenable to a law that is so en- forced under such regulation as not to hurt you and you do not vio- late it, I do not see why you would go out of business. Mr. Douglass. Well, if we do not violate it we would have law- suits on our hands and we would be jacked up before the commis- ^^°\]r T^^^ proposed law is mandatory— no exceptions or provisos. Mr. CuLLOP. Is not the experience of those who have to deal most with the Interstate Commerce Commission a very pleasant and prontable experience? TO MAKE GAS PIPE LINES COMMON CABBIEES. 81 Mr. Douglass. So far as I have had anything to do with it, which was only once, it was all right. Mr. Ctjllop. And there is no serious apprehension of danger from committing the regulation of any article in interstate commerce to the Interstate Commerce Commission, is there? Mr. Douglass. I could not subscribe to your view of that, because we would be directly under that law, and we would be violating the law in many instances, no matter how small or how great. We do not subscribe to that law as it is now contemplated to be passed. We have franchises in our municipalities, and our service to the con- sumer must be adequate or forfeiture results. Mr. CuLLOP. But in your Ohio business this would not bother you. Mr. DouGi^ss. I know, but we have any number of large companies that are interested in crossing the line, and it strikes every one of those companies. We cross the line now. Mr. CxiLLOP. Now, the administration of the Interstate Commerce Commission is almost universally conceded to be fair and just. I think that is the consensus of opinion of the country. Now, what apprehension have you if this bill is passed and you are put under its regulation ? Mr. Douglass. Why, people would be eternally coming to the com- mission and making complaints that we did not take their gas. It would be one endless belt of hearings between far distant commis- sions that would be disastrous. Mr. CuLLOP. Now, is not that more a fear than a reality? That has not been the experience of the commission. Mr. Douglass. If the law is passed, why should we go up against a thing of that kind simply because we might apprehend that the law might not be construed against us? Mr. CuLLOP. Well, I will tell you. Here is one company against which there is a serious complaint in regard to its manipulations. Now. if your company is doing right it will give you no trouble, and yet the public ought to be protected from the operations of that company and to avoid a repetition by any other company in the country'^ of such manipulations. If you are doing right you have nothing to fear. Mr. Douglass. Except an endless chain of lawsuits. Mr. CuLLOP. Why, no ; it could not be. Mr. Douglass. It would be ; constantly so. The Chairman. You say it is impossible for you to accept another man's gas and transmit it and deliver that man's gas somewhere else to another consumer? Mr. Douglass. It is not impossible. The Chairman. Then the only difference would be that it would be a little more expensive. Mr. Douglass. Oh, no; if that was all we would be out of this trouble, but this act is disastrous to the kind of service to be per- formed. The Chairman. What is the other ground? Mr. Douglass. Because you can not trust another uncertain source with your production. You must drill your own wells or control your own product or supply. The Chairman. Then every man who owns cotton ought to own the steamship lines and trains that haul it. 82 TO MAKE GAS PIPE LINES COMMON CAREIEKS. Mr. Douglass. No; because you have a contract with the munici- pality. Your pipe line is determined by the course and capacity of your consumption at the end of that line, and you must take care of your production, because you do not know how long the uncertain producers are going to deal with you, and you do not know how long it will last. The Chaiejian. They are prosecuting some man in the United States court to-day for trying to help the cotton raisers take care of their products. Mr. Douglass. Therefore the initiative must be taken by you. You can not stop up your own wells because another fellow wUl steal all your property from you by draining your property ; you have got to take the initiative or you will go on the rocks before the season is oyer. The Chairman. Then you do not want to be put under the Inter- state Commerce Commission because you have got as much gas as you can transport? Mr. Douglass. We buy gas from others, but not in such quantities as makes our production in any way complete. It is an incident. The Chairman. The difference is Mr. Douglass (interposing). If I can make a side contract with a person who has a few wells, that is a thing that is done univer- sally. It is then our own and transported as such. The Chairman. Then the difference is that if you either produce it or buy it and you have no competitor at the other end of the line you would not be subject to interstate-commerce regulation, whereas if you accept their gas, their gas at the point of delivery would com- pete with your gas. You think you would make more competition if you hauled your competitor's gas. Mr. Douglass. Well, in the first place, the first thing is to secure your territory, ample and complete. The Chairman. That is what you call a perfect monopoly — when you secure territory " ample and complete." Mr. Douglass. No ; you compete with every other company in the country. Taking, for instance, the State I Imow about, there is not one of the gas fields but that there are six or eight well-equipped gas companies each working its level best to get the best territory to be developed. The Chairman. Has each one of them a pipe line? Mr. Douglass. Each one of them takes care of the particular town in which it has a franchise to pipe the streets and install service pipes and curb boxes and meters. The Chairman. It has its own pipe line ? Mr. Douglass. Yes, sir; but the pipe line is only a method of dis- tribution. It is not a pipe line in the sense that we are buying gas as a commercial proposition and selling it. That is not the "natural- gas business. The Chairman. Now, while one of those little systems is entirely within a State we can not reach it. Mr. Douglass. I understand that. The Chairman. But if you have the only pipe line between Okla- homa and St. Louis — let us suppose a case Mr. Douglass. Yes. TO MAKE GAS PIPE LINES COMMON CABEIEKS. 83 The Chairman. And there are other people who own gas wells and you say you will buy theh' gas from them at their own price, and they say, " If you will carry it for us we will get more for it in St. Louis than you will buy it for." Now, you are doing interstate com^ merce if you do that. Now, by putting you under the regulation of the commission you control their product and your own, which gives you a monopoly to that extent, although some other company in St. Jjouis may compete with you. They say that your scheme is not fair; that you have no right to do your business in Oklahoma in such a way as to control their property entirely ; that you ha\'e got to give them an opportunity to sell their property in the open market. Mr. Douglass. Now, suppose that in Kansas City they had 200,000 consumers and the production of the companies serving them — they have taken the initiative and they have their production — and they lay their line and its direction and capacity is determined absolutely by the city to which they are going to send it and the amount of their consumption. Theii- jfirst duty under their franchise is to furnish those 200,000 consumers. In the summer time they will take on a lot of industrials, but they will cut all those out in the wintertime be- cause they will need every inch of their pipe capacity in the winter- time when they must serve all those 200,000 consumers. Mr. Baekley. Is the supply of gas from the wells owned by your company sufficient to keep the pipes full all the time in transporting this gas from the wells to the consumers ? Mr. Douglass. Not in the summer time, but in the winter time, absolutely yes. And then sometimes Mr. Barklet (interposing). And in the winter time the pipes are full? Mr. Douglass. Yes, sir. Mr. Barkjj;t. Now, if this law should be in effect and some inde- pendent gas wells should demand that you transmit their gas to some part of the city, would it be necessary for you to empty the pipes in order to transport their gas? In other words, you could not mix the two gases together? . Mr. Douglass. You have got to mix them, yes. There is no other way to do it. Mr. Baekley. Well, if you mix them, would not that be equal to buying it from them? How could you transport that gas inde- pendently unless you emptied your gas out of the pipes? Mr. Douglass. Well, we might put it in Mr. Baekley (interposing). I do not want to display my ignor- ance of gas matters, but I want to get this clear. Mr. Douglass. That is all right. There is no way to transport it unless we take it and mix it with our own. Mr. Baekley. Then how can you ever identify it after it has been mixed ? Mr. Douglass. You can not. Mr. Baekley. How can the independent gas manufacturer sell his gas ? Mr. Douglass. He can not. Mr. Baekley. Then the final result of your theory would be that you would have to buy his gas outright or you would lose it in shipping it because it can not be identified and separated? 84 TO MAKE GAS PIPE LINES COMMON CABEIEKS. Mr. Douglass. Yes; it can not be identified and separated. _ Mr. Barkley. Now, is there any such monopoly m the gas busi- ness as to enable the gas-pipe companies to fix an arbitrary price detrimental to the independent well companies? Mr. Douglass. No, sir. z^i i i Mr. Babklbt. We have had some testimony about the Oklahoma oil wells showing that the independent companies can not transport their oil except by these pipe lines, in some instances at a cost of 100 per cent over the original cost, and I was wondering whether there was any possibility of that kind in the gas business. Mr. Douglass. No, sir; there is no tendency like that in the gas business, because the price of gas is changing all the time and the consumption is going up. The Chairman. Now, the gas that you can transmit through the same pipes, taken from the same wells, must be of the same char- acter ? Mr. Douglass. Not necessarily. There are different kinds of gases. Sometimes the saltwater will get into it The Chairman (interposing). I say that gas that can be trans- mitted in the same pipe must necessarily be of the same character. Mr. Douglass. That ought to be, but it is not the same. There is sulphur gas The Chairman (interposing). Well, that is not my question. If you accept a certain quantity of gas by gas measurement, would it not be substantial justice to deliver it to the other end of the line, the same quantity of gas out of the pipe as was put into it ? Mr. Douglass. Well, that is the only way you could do it. You would be compelled to do it that way, no matter whether it was con- taminated with sulphur gas or whether it was wet gas or salt-water gas or moist gas, and you would raise Cain with all your consumers. The Chairman. That would be the same situation as if you bought the gas. Mr. Douglass. Well, we do not buy that kind, because our con- tracts say " dry gas," etc. The Chairman. Well, you are evading the question. You are not trying to answer it. What I asked you was : Gas which can properly be transmitted together in the same pipe. Mr. Douglass. Oh, sure; I yield to you that it has got to all go in the same pipe, no matter how you get it. Very self-evident. The Chairman. Then if a man accepts at destination the quan- tity of gas he receives at the destination point Mr. Douglass (interposing) . Of course, if the quality is the same it is all right. The Chairman. And the quality? Mr. Douglass. Of course. The Chairman. Is not that the same principle under which the grain elevators are run? Mr. Douglass. Well, grain is sorted and all that sort of business. The Chairman. Oh, well, I know; but when a man gets grain out of the elevator he gets practically the same as was put in. Mr. Douglass. I yield to you that that is true. Mr. Barklet. Is there any way of turning out gas at the other end so that one man can get his share? Mr. Douglass. No, sir. TO MAKE GAS PIPE LINES COMMON CAEEIEKS. 85 The Chairman. Not the identical gas, but can you measure out the c(uantity of the same kind of gas. Mr. Douglass. Not without taking away our gas or gas-pipe space from our consumers, of which gas we need every particle. The Chairman. Well, there would not be any more of it if it was your own gas. Mr. Douglass. Let me answer your question. The Chairman. You are getting away from the question. Let us assume for the sake of the argument that you have the capacity. Can you handle gas like grain in the elevators ? Mr. Douglass. No. The Chairman. Then if you accept gas of the same quality, can you deliver it at the other end of the line at substantially the same quality ? Mr. Douglass. We could not, of the same quality ; we would have to deliver mixed gas. The Chairman. Well, I started out by asking you if you did not have to send out gas of the same quality. Mr. Douglass. I say that all we have got to do The Chairman (interposing). Well, wait a minute. If your gas and my gas are exactly alike in every respect, except that I do not sell my gas to you, and I measure my gas into your pipe lines and I want you to deliver it to Judge Cullop at the other end of the line, could you not measure it at the other end of the line and would it not be just the same? Mr. Douglass. Yes, sir. Mr. Barkley. Where is it put after it is separated, so that he gets his quantity and quality of gas? Where is he going to put it? Mr. Douglass. I do not know. He can not store it. An illustra- tion: Suppose a big manufacturer wants to come down into the field — I am answering your question now. Judge — to avoid the ex- pense of transportation. He goes down and buys some production, and he says, " I will go to the company under this law and compel them to transmit it." Now, he wants it for his big plant — says the $15,000,030 steel mill at Lorain, Ohio — and he wants to buy all your gas. It is loaded into the pipes and the pipes are full in the winter time, and you have a franchise in Lorain and other cities ; but you are robbed of every part of your pipe capacity, because he di- verts it to his factory up there, and the consumers are robbed of all the gas that you owe them under the franchise. Mr. Cullop. Now, let me give you a concrete proposition: Sup- pose that at Wheeling, Va., there is gas produced by independent producers. Over at Columbus, Ohio, there is a factory and a pipe line runs from Wheeling to Columbus. Now, what is there to pre- vent you from turning into your pipe line the gas from the inde- pendent producer's line at Wheeling, W. Va., transmitting it to Columbus, and there turning out the same quantity into the pipes of the manufacturing company and its consumers the same gas? What is there to prevent a thing of that kind, you charging for the transmission ? Mr. Douglass. If that were done this is the difficulty: The pipe capacity to furnish the domestic consumption of the city of Colum- bus is needed, every inch and atom of space, to do that trick, and 86 TO MAKE GAS PIPE LINES COMMON CAKKIEES. not gi-\ e it to any industrial — the domestic consumer must of neces- sitj' be preferred Mr. C"trLU)P (interposing). Xow, you disclose the real purpose of this legislation. How ? Why, simply because pipe-line owners can do it. If the terms between the pipe-line owner and the independent producer are not satisfactory there could be a remedy lor that. You have a franchise which makes you a public utility for the transmis- sion of public business in the line for which you have been incorpo- rated. It becomes your duty which you owe to the public, because of securing that franchise, to discharge what you owe the public. If you do not do that you have no right under the law to the public franchise. Public franchises are granted for public purposes, and because a company gets a franchise does not mean that the public has no interest in it. The Chairman. I do not understand that you ha^e any exclusive franchise anywhere. Mr. Douglass. Oh, no, sir; none can be granted in my State. The Chairman. The question is whether the consumer shall be compelled to take your price, or whether they will be compelled to accept your monopoly. Mr. Douglass. Now I see your point. We have a duty to perform, and we must perform it or forfeit our franchise. If we are furnish- ing gas that comes across the line from West Virginia to Columbus — that is, if we have 100,000 domestic consumers there — we owe them a duty to furnish them a complete, dependable service the year round, and we must do that or forfeit our franchise. The rate that we can charge is fixed there. Our first duty is to that particular locality, that particular municipality where we have torn up streets to put in curb boxes, meters, etc., and got equipped to furnish that city. One man, say Jeffreys, has a large factory, and he gets a well down there, and he says, " I am going to run mj factory all the year round, 365 days in the year, and I am not going to the tremendous expense of running a pipe line up to my factory, but if it is necessary I am going to rob those 100,000 domestic consumers to run my factory the year round." Mr. CuLLOP. Now, you are revealing the misconception of the public duty your company assumed when it took out the franchise. You are going to shut out that factory when it is a citizen of Colum- bus. There is just as much duty owing to that citizen as to any other citizen of Columbus, precisely. You are discriminating against him, and he has a perfect right, a constitutional right, to drive the best bargain he can, as long as he remains within the limitations of the law. Now, you assumed a duty when you took out your charter to the public as well as to your stockholders, and that "was to furnish service. That man has applied for service. You can not refuse it to him. That is why bills of this kind are made absolutely necessary. As they are working now— the railroad commissions with the rail- roads of the country— they are beginning to realize the justice of this sort of thing. Now, there would never have been enacted in 188T a bill to regulate common carriers except for such principles as you have adopted. Mr. Douglass. We owe to every domestic consumer, including this Mr. Jeffreys, or this big manufacturer, domestic consumption, and when they apply for it we must furnish it to them. There is no ques- TO MAKE GAS PIPE LINES COMMON CAEEIEKS. 87 tion about that. The industrials are another thing. The rule all over the United States, indorsed by every commission, is that you ha\e five or six preferential classifications. The first of these is domestic consumption. You are not bound, however, and your fran- chise does not require you to furnish the industrials, railroad shops, and everything else that eats up the product, but you can make spe- cial contracts in the summer time. We do not owe the industrials anythmg. We can shut them off at any time. Mr. Jeffreys is en- titled to his domestic consumption, but if he v^^ants to get all of it for his factories he is robbing the 100,000 consumers. Mr. CuLLOP. But he can cut out the domestic consumption and put it into his residence. Mr. DorGLAss. Well, of course, at a price fixed liy the city council. jNIr. CuLLOP. Not in West Virginia. The town council has nothing to do with it there. But suppose he has a residence and he can buy of some independent producer at Wheeling. If he can get it trans- mitted to Columbus and then turn it into the pipe that goes to his residence, an individual pipe frcim the pipe, why, you ought to serve him with that independent. You will have to. The CriAiRMAx. Or buy from the other producer. _ Mr. Douglass. If he has that right, then the whole 100,000 domes- tic consumers have a right to go clown there and buy their own gas and require us to haul it. This doctrine is at war with the purpose of our incorporation and compels us to transport natural gas for hire only. Mr. Ctjllop. They have that right and the Constitution gives them that right. The Chairman. Have you anything further. Judge? Mr. Douglass. No, sir. I feel I have taken up too much of your time and that I should apologize to these other gentlemen. Exhibit A. OBJECTIONS TO THE ENACTMENT OF UNITED STATES SENATE BILL NO. 334.3, BEING THE PROPOSED LAW TO MAKE NATURAL GAS PIPE LINES COMMON CARRIERS. Ou November 3. 1913, the Senate of the United States passed, without debate, an amendment to the act of February 4, 1887, commonly known as "An act to regulate commerce," the purport of which amendment is to provide that all pipe lines used for the transportation of natural gas In interstate commerce shall henceforth be common carriers of such gas, and subjected to regulation In the same manner and to the same extent as was provided with reference to rail- roads engaged in interstate commerce by the original act of 1887, and the subse- quent amendments thereto. The original act of Congress was expressly limited in its operation to common carriers by railroad, or partly by railroad and partly by water, and an amendment some years ago extended its scope to in- clude pipe lines transporting petroleum oil, but Congress then expressly ex- cepted pipe lines used for the transportation of natural or artificial gas and water, doubtless for the very sufficient reasons now urged against the pending bill. The Senate passed the bill now in the House by unanimous consent and, although the interests of hundreds of thousands of consumers in the States of New York, Pennsylvania, Ohio, Maryland, West Virginia, Kentucky, Illinois, Indiana, Texas, Louisiana, and Arkansas, and the enormous investments in gas properties are grievously endangered by the measure, no hearing was held and no investigation or discussion invited, but action was taken upon a brief statement by Senator Reed that the sole object was to give relief from the scarcity of natural gas existing in certain cities in Kansas and Missouri, by 60476— PT 2—14 2 88 TO MAKE GAS PIPE LINES COMMON OAEBIEES. compelling a corporation, known as tlie Kansas Natural Gas Co., to transport to such cities greater quantities from tlie gas fields of Kansas and OklaJioma. It will be made plain by the objection hereinafter set forth that it the Senate had made a study of the technical features and problems of the natural gas Industry it would have found that the proposed bill would not only rail in the stated object, but would plunge the receivers of the Kansas Natural C^as Co. into distress in still further impairing the service which they might render to those cities, and at the same time would affect injuriously the far more exten- sive interests of consumers and natural gas distributors in other States. The natural gas produced in Kansas and Oklahoma in 1912, according to the United States Geological Survey, was only 18 per cent of the production in the United States; the number of consumers in Missouri and Kansas, includ- ing in the count not only all the consumers in Kiinsas City and Joplin, but also all consumers in those States on the lines of gas companies doing only an intrastate business, was only 12 per cent of the total number of consumers using natural gas in the United States, while in New York, Pennsylvania, Ohio, Kentucky, West Virginia, Maryland, and Indiana, where many pipe lines are operated across State lines, the number of consumers was 1,284,460, or 70 per cent of the entire number in the United States. In these last named States a population of 6,422,300 depended upon natural gas for fuel, and the natural gas produced was 75 per cent of the entire production of all the States. The service which a natural gas company performs necessarily distinguishes it from any company engaged in the storage and transportation of articles of commerce, and places it in a different class of public utility corporations. The peculiar business of a natural gas company and its public use is in furnishing and supplying gas to the public for consumption ; that is to say, the furnishing of an instant and constant service upon the consumer's premises. The business js analogous to that of a city water works, or an artificial-gas company, or a company furnishing electric light, where the public service consists alone in having something ready for the householder's instant use or consumption, a service which liears no relation to the duty of a common carrier. Natural gas, on account of its volatile qualities, its explosive nature, the danger of handling it and the fact that its availability for market depends upon its being produced from the earth and transported at high pressure, can not be stored or put into stock or reservoirs at all at the beginning of the transit, as can all other products handled by carriers. At the destination, where all carriers must store commodities, awaiting delivery, the pressure' of natural gas must be low, for safety in its use. Storage, therefore, can be in such insig- nificant quantities, only, as to be of little commercial value. The cost of storage for the consignor at the beginning of the transit, and for the consignee at the fnd, is incident to common carriage, would be prohibitive even if such storage were physically possible. Other differences will appear in the future enumeration of the characteristics of the business of furnishing natural-gas service which render the proposed legislation impracticable, unwarranted, and unjust. These characteristics are — First. The distribution of natural gas is now firmly established by law to be a public service distinct from and incompatible with that of a common carrier. There is now a clearly defined legal duty compelling each company so engaged to furnish a supply of gas without discrimination to all applicants at the various distributing points, and the rates chargeable for natural gas, as well as other conditions of the service, are extensively regulated by State and municipal laws and by State public-utility commissions. Second. The domestic consumer now using gas does not contract with the gas company to buy any fixed amount; he may close his house and cease the use entirely, to be resumed when he returns ; when his meals are to be cooked he uses a considerable amount of gas, and in sudden changes of temperature the extent of his use changes accordingly. The industrial consumer likewise con- tracts for such fuel as his plant requires, and he does not agree to use any definite amount per hour, per day, or per month, he shuts down his plant at will What has been said about a single consumer is true of a group of consumers for whom one plant is constructed. The consumer, therefore, whether domestic or industrial, or a group of consumers served by one plant, must place reliance upon the service which is rendered to him out of the resources of the eas com- pany and can not, in the nature of that service, contract for a supply of gas from some shipper inasmuch as the consumer can not tell the shipper how much to forward through the pipe lines nor when to make deliveries. TO MAKE GAS PIPE LINES COMMON CAKRIEES. 89 Third. Every natural-gas pipe line now in use was constructed for tlie purpose of serving a particular community whose requirements determined the route and capacity of such line. The public service to which each such line is devoted varied with the seasons and with the temperatures from day to day and from hour to hour. The variation of the domestic consumption between the minimum and maximum demand in the average community is more than 1,200 per cent. For this reason no existing line has been constructed with a carrying capacity in excess of the maximum or extreme weather requirements of the consumers which the owners of each such line have undertaken .adequtely to serve. .In times of low temperature the compressing stations are worked at full capacity and all available gas which the lines will safely hold is taken on at the wells, in order that at the consumer's end of the lines there may be enough gas to meet requirements. The appropriation of any part of this capacity to the use of others must to that extent deprive the gas company of the power to perform the service which it is now compelled under the law to perform ; the consumer who has fitted up his house for the use of gas and is prepared with no other fuel-burning appliances is made to suffer at the very time when he is most dependent upon the supply of gas for the warmth of his house and the health of his family. It is no answer to this objection that new and larger lines may be constructed. The duration of the existence of wells and fields productive of natural gas is most inconstant and unascertainable ; some of the older fields^ notably those of Indiana — are already exhausted ; others have greately declined. Capital can not be procured for the construction of a pipe line, the business of which would depend upon the hazardous mining ventures of producers not affiliated with transportation of lines forming a component part of a plant hav- ing at one end a definite market and at the other a developed supply operated under common management and complete control. It was found in the begin- ning of the business and has been emphasized by experience that the distributor or merchant must have and exercise control and dominion over transportation and production in order to fulfill the obligation to the consumer. Fourth. The natural-gas industry, while frequently referred to for descrip- tive purposes, as embracing production, transportation, and distribution, yet, nevertheless, admits of no such absolute severance, for the reason next above mentioned as well as for other reasons mentioned hereinafter. No company has ever been Incorporated for the purpose of, nor has any company or person been engaged in the business of transporting natural gas for others for hire at any time. The reasons why such a business has not been voluntarily undertaken are the same as those now urged against Congress compelling such an undertaking. Fifth. The duty of a carrier is to transport, store, and finally deliver to a given consignee the identical goods entrusted to it by the consignor. Obviously this would be an impossible undertaking for the operator of a gas pipe line because of the impracticability of storage, as has been pointed out, and because transportation, without commingling with other gas, is equally impossible. In this connection it should be noted that not all natural gas is of equal heat- ing and lighting quality. Sixth. The producer of gas — that is, the owner of a gas well or group of gas ■vjrells — never knows and can not foretell how much gas his wells will produce into the pipe line of a gas company. This is due to several causes : Gas is transported by the natural pressure under which it is discharged from the wells, supplemented to some extent by artificial pressure from compressing stations. The presence of gas in a pipe line brings about a pressure therein which operates against the reception of other gas from a well, and inasmuch as the amount in the pipe line varies with the weather and the consumers' needs, this restraining force is exercised in a varying degree. The amount of gas delivered from the well is never regular or uniform; it is also true that as gas is marketed from a well the productive capacity of that well neces- sarily diminishes, but with widely diflferent degrees of rapidity. The pressure capacity of wells varies from less than 50 pounds to more than 1,200 pounds to the square inch. The producer of gas, who in the proposed law becomes the shipper, is therefore uncertain how much he can produce, and can not contract to furnish any definite amount for delivery at any given time. Seventh. The measurement of gas both at the intake and outlet points of a high-pressure line is extremely expensive and out of all proportion to the value of the gas when shipped in small quantities. Eighth. A pipe line 100 miles in length serving a community at the dis- charge end might be rendered useless for its purposes ic case some producer 90 TO MAKE GAS PIPE LINES COMMON CARRIEKS. in tile middle of it was entitled to use its entire capacity for carrying his gas a distance of 5 miles. Ninth. The proposed law is opposed to the policy of conservation. Persons informed upon the subject differ as to the extent of the supply of natural gas yet remaining in the earth, but all agree that it is extremely limited and is being rapidly depleted. It is an ideal fuel for domestic purposes because of the facility with which it can be used and on account of the absence of smoke, ashes, etc., resulting fi-om the use of coal. Its present use for manufacturing purposes is believed to be temporary only, and is eveii now largely discon- tinued during cold weather, when domestic consumption is highest. Now, the effect of the proposed law is to divert the carrying capacity of the lines con- structed primarily, and in most cases solely, for delivering gas to be used for the purpose to which it is peculiarly adapted, and de\-ute a part of such capacity to the carrying of gas for other and different purposes, thereby injuring- the domestic con.suiuers not only by rendering their present service insnflicient and irregular, but also in the rapid e.xhaustion of the available supply of natural gas. Tenth. Natural-gas lines can, of course, l)e used for transportation of the com- modity in one direction only at the same time. Common carriers are required to transi)ort in both directions along their respective lines. Eleventh. The proposed law is in direct conflict with the policy which Con- gress has adopted with reference to railroad carriei's. The amendment to the act to re^^nlate commerce, known as the comn]odities clause, expressly pro- hibits a railroad company from transporting on its lines any commodity, except timber mined, manufactured, or produced by it, or which it may own in whole or in part, or in which it may have any interest, direct or indirect. It is common knowledge that the commodities clause was enacted to prevent the abuses naturally attending a situation in which a common carrier, incor- porated to be such, \\-ith the duty of performing its service for all, without dis- crimination, enga^ues in a business by which it becomes one of its own patrons, so to speak, with the accompanying tendency to give preference in the use of its facilities to the transportation of the articles in which it has a pecuniary interest. The builders of the natural-gas lines intended them solely for the transporta- tion of a coumiodity owned by themselves. They have never offered to carry for others ; have never had the aliility to carry for others. Thev have not l^laced themselve.s in the pcisition which Congress has found to be against public policy and has prohibited. It would be a strange inconsistency if they should be compelled by law to constitute themselves both common carrier and shipper and to envelop them- selves in the temptation as carriers, to discriminate, in their favor, as patrons. In other words. Congress is now asked to force the gas companies into the same situation from which it compelled the railroads to extricate themselves. This conclusion can not be avoided. The proposed law does not contemplate ttiat natural-gas companies now operating iiipe lines shall divorce themselves from the business of production in which they are now engaged, nor from the distribu- tion and sale of the said product; and such separation could not be made with- out disaster when the public nature of the business is considered, the present companies being under franchise and contract obligation to supply the service adequately and uniformly. Finally, there is no demand for the proposed law. From the 8,000,000 people being supplied with gas in their homes (\^-ith the possible exception of those in Kansas City), there is no complaint; there is likewise none from the thousands ot landowners deriving royalties and rentals under the existing plan for the conduct of the business. If complaint there is, it is from a few persons engaged in spasmodic production of gas desiring to avail themselves, without expense, ot the instrumentalities of marketing, while others have incurred the risk of constructing for particular purposes and not for common transportation. More- '^J^^' A.- *^ y^'^y.^ respectable complaint, and admitting that Kansas City and other Missouri cities supplied by the Kansas Natural Gas Co. have not an ade- quate supply of gas, we say, that the proposed law will work no remedy. If unrestricted capital and Ingenuity have found it impracticable or unprofitable ^,^.^«^f,?° ^°.,?I'SSoun all the natural gas there desired, then surely no such undei taking will be made under hampering laws of regulation (Signed by the following companies-) PnWh^f n'h' Gas Association of America, by Frank L. Chase, vice president, Columbus, Ohio; Thomas C. Jones, secretary-treasurer, Delaware, Ohio- David O. Holbrook, director, Pittsburgh, Pa.; George B. Sipe, director, Shr4vep6rt, TO MAKE GAS PIPE LINES COMMON" CAEEIERS. Vl La.; Arthur Booth, director, Pittsburgh, Pa.; Dennis Hastings, director, Tulsa, Okla.; Hoyt V. Shulters, director, Cleveland, Ohio; Bernard J. Crahau, director, Joplin, Mo.; Harry C. Reeser, director, Pittsburgh, Pa.; Harry J. Hoover, direc- tor, Cincinnati. Ohio ; George Heard, director, Pittsburgh, Pa. ; James S. Pos- gate, director, Independence, Kans. The East Ohio Gas Co., Cleveland, Ohio; by Martin B. Daly, president. The Iroquois Natural Gas Co., Buffalo, N. Y. ; by Walter W. Kichardson, president. The Philadelphia Co., Pittsburgh, Pa. ; by J. H. Reed, president. The Hope Natural Gas Co., Pittsburgh, Pa. ; by John G. Pew, vice president. The Ohio Fuel Supply Co., Pittsburgh, Pa. ; by George W. Crawford, president. The Logan Natural Gas & Fuel Co., Columbus, Ohio ; by E. P. Whitcomb, president. The South Western Gas & Electric Co., Shreveport, La. ; by Henry M. Dawes, president. The United Natural Gas Co., Oil City, Pa. ; by J. B. Crawford, vice president. The Arkansas Natural Gas Co., Shreveport, La.; by J. C. Trees, president. The California Natural Gas Co., Taft, Cal. ; by J. F. McMahon, treasurer. The Pennsylvania Gas Co., Warren, Pa. ; by Walter Jennings, president. The Oklahoma Fuel Supply Co., Tulsa, Okla. ; by H. Heasley, president. The Natural Gas Co. of West Virginia, Pittsburgh, Pa. ; by George Heard, president. The Southern Counties Gas Co. of California, Los Angeles, Cal. ; by Ferdi- nand E. Bain, president. The Equitable Gas Co., Pittsburgh, Pa. ; by Joseph F. Gnffey, vice president. The Columbia Gas & Electric Co., Cincinnati, Ohio; by W. T. Oartwrlght, vice president. The Peoples Natural Gas Co., Pittsburgh, Pa. ; by John G. Pew, vice president. The Oklahoma Natural Gas Co., Tulsa, Okla.; by R. H. Bartlett, treasurer. The Northwestern Ohio Natural Gas Co., Toledo, Ohio; by H. C. Reeser, assistant to the president. The Lone Star- Gas Co., Fort Worth, Tex.; by W. P. Gage, vice president. The Allegheny Heating Co., Pittsburgh, Pa., by W. B. Carson, secretary. The Midway Gas Co., San Francisco, Cal., by John Martin, president. The Wichita Pipe Line Co., Wichita, Kans., by Robert Law., jr., president. The Pittsburgh & West Virginia Gas Co., Pittsburgh, Pa., by W. L. McQcy, general superintendent. The People's Fuel Supply Co., Tulsa, Okla., by A. W. Leonard, manager. The Oblong Gas Co., Palestine, 111., by R. A. Crawford, vice president. The Carnegie Natural Gas Co., Pittsburgh, Pa,, by Norwood Johnston, vice president. The Central Kentucky Natural Gas Co., Lexington. Ky., by John Tonkin, gen- eral manager. The Oklahoma Gas & Electric Co., by W. R. :\Iolinnrd, manager The Philadelphia Co. of West Virginia, Pittsburgh, Pa., by John Gates, .1r., land agent. The Leavenworth Light, Heat & Power Co., Leavenworth, Kans., by W. H. Fellows, vice president. The Central Indiana Gas Co , Muncie, Ind., by J. H. JIaxon. president. The Louisiana Gas Co., Shreveport, La., by J. B. Ardis, president. The We.st ^'irginln & :Maryland Gas Co., Davis, W. Va., by Howard V. Thomas, vice president. The Res-erve Gas Co.. Pittsburgh. P;).. liy John B. Tonkin, treasurer. The Dallas Gas Co.. Dallas, Tex., by Henry C. Morris, general manager. The Sacramento Natural Gas Co., Sacramento, Cal., by H. C. Keyes, secretary. The United Fuel Gas Co., Pittsburgh. Pa., by F. W. Crawford, president. The North Texa.s Gas Co.. Denison, Tex., by H. E. Manley, general superin- tendent. „ , , ^ . ■ , J. The Wi'^hita Natural Gas Co., Wichita, Kans.. by Robert Law, jr., president. The Pittsburg Oil & Gas Co.. Pittsburgh, Pa., by D. Robertson, treasurer. The Dayton Gas Co., Davton, Ohio, by Edward W. Hanley, president. The Delaware Gas Co., Delaware Ohio, by T. C. Jones, president. The Joplin Gas Co., Joplin, Mo., by James T. Lynn, president. The Greenville Natural Gas Co., Greenville, Pa., by A. C. Hartzell, treasurer. The Empire Gas & Fuel Co., Wellsville, N. T., by Harry Bradley, president. The Mound Valley Natural Gas & Oil Co., Mound Valley, Kans., by Prank M. Gilmore, secretary. 92 TO MAKE GAS PIPE LINES COMMON OAEEIBBS. The Medina Gns & Fuel Co., Ashland, Ohio, by L. G. Neely, president. The Kidgway Light & Heat Co., Ridgway, Pa., by C. H. Law, general manager. The Fayette County Gas Co., Pittsburgh, Pa., by John M. Garard, vice presi- dent. The Fort Smith Light & Traction Co., Fort Simth, Arls., by H. C. Hoagland, general manager. The River Gas Co., Pittsburgh, Pa., by John G. Pew, vice president. The Pine Bluff Natural Gas Co., Pine Bluff, Ark., by A. B. Dally, jr., president. The Olney Gas Co., Olney, 111., by R. Clark, president. The Home Gas Co., Mount Morris, Pa., by M. B. Clavis, president. The Labette Gas Co., Ohetopa, Kans., by J. C. Gibson, treasurer. The Leflore County Gas & Electric Co., Poteau, Okla., by Howard N. Cassel, general manager. The Little Rock Gas & Electric Co., Little Rock, Ark., by W. F. Booth, general manager. The Columbus Natural Gas Co., St. Marys, Ohio., by John W. Smith, president. • The Webb City &. Carterville Gas Co., Webb City, Mo., by Charles Neile, secretary. The Quapaw Gas Co., Pittsburgh, Pa., by Robert Law, jr., president. The Gainesville Gas & Electric Co., Gainesville, Tex., by W. B. Milne, manager. The Potter Gas Co., Pittsburgh, Pa., by E. B. Reeser, general manager. The Portsmouth Gas Co., Portsmouth, Ohio, by James T. Lynn, president. The Hutchinson Gas & Fuel Co., Hutchinson, Kans., by Samuel Mountain, manager. The Guthrie Gas Co., Guthrie, Okla., by W. J. Dibbens, vice president. The Ashtabula Gas Co., Ashtabula, Ohio, by F. W. Stone, treasurer. The Bristow Gas Co.. Bristow, Okla., by Frank Barnes, secretary. The ilonongahela Natural Gas Co., Pittsburgh, Pa., by J. D. Gallery, vice president. The Fort Worth Gas Co., Fort Worth, Tex., by C. W. Sears, general manager. The Jluskogee Gas & Electric Co., Muskogee, Okla., by H. C. Hogland, general manager. The Garnett Light & Fuel Co., Garnett, Kans., by Gail Carey, secretary. The Sandusky Gas & Electric Co., Sandusky, Ohio, by E. A. Beechstein, general manager. The Okmulgee Gas Co., Okmulgee, Okla., by J. L. Clark, president. The Federal Gas & Fuel Co., Columbus, Ohio, by John M. Garard, vice president. The Washington Gas & Electric Co., Washington C. H., Ohio, by G. N. Clapp, secretary. The Worth Oil & Gas Co., Warren, Pa., by F. G. Phillips, treasurer. The Citizens' Gas Co., Nowata, Okla., by J. E. Jones, president. The Oherlin Gas & Electric Co., Oberlin, Ohio, by Paul Loewe, general manager. The Mercer County Gas Co., Greenville, Pa., by F. W. Stone, vice president The Middletown Gas & Electric Co., Middletown, Ohio, by G. N. Clapp, president. The Central Light & Fuel Co., Sapulpa, Okla., by C. C. Cantrell, vice president. The Killbuck & Millersburg Oil & Gas Co., Millersburg, Ohio, by H. H. Church, president. Ttie Consolidated Gas Co., Newcomerstown. Ohio, by S. L. Stowe, secretary and treasurer. The tltica Gas, Oil & Mining Co., Utica, Ohio, by O. C. Teague, vice president. The Malta & McConnelsville Gas Co., Malta, Ohio, by H. C. Hupp, manager. The Indiana Gas Light Co., Xoblesville, Ind., by R. H. Lawlor, secretary. The Wichita Falls Gas Co., Wichita Falls, Tex., by W. C. Gibson, manager. The Kay County Gas Co., Pouca City, Okla., by W. H. McFadden, president The Southern California Gas Co., Los Angeles, Cal.. by John D. Hackstaff, general manager. Exhibit B. tS. M. Douglass, Mansfield, Ohio, representing the Natural Gas Association of America.] Should Natural Gas Lines Become "Common Carriers?" Mr. Chairman and gentlemen of the committee, I gratefully acknowledge your courtesy in presenting to the natural gas interests and activities of the United States this privilege and apportunity. TO MAKE GAS PIPE LINES COMMON CAERIEES. 93 I appreciate, also, tliat if I am to use to any purpose tlie opportunity which you have accorded I must waive any discussion of the legal and constitutional questions involved and confine myself to a few of the practical reasons why United States Senate bill No. 3345, designed to malie common carriers of natural gas transmission lines, should not become a law. If it were possible that the production, transportation, and distribution of natural gas in the United States could be made to better serve and benefit the many millions of consumers therein by being brought under the provisions of this act, and thereby become common carriers, then it should ha\e instant and enthusiastic approval. But this can not be done, because it can be shown that to pass this act and thus make common carriers of the producers, transporters, and distributors of natural gas would not only transcend the constitutional limitations, but that it would be wholly impracticable, highly injurious to millions of the people of the Ignited States, and destructive of an essentially important public service. This being true, then by the same tolien it becomes the imperati\e duty of all to prevent such action. Waiving a discussion of legal or constitutional questions, I desire to present some practical objections to the enactment of United States Senate bill No. So-ifi. being the proposed law to make common carriers of natural gas lines. V\'hy do we oppose this bill? It is not enough that the enactment of this measure may be inconvenient or attended with greater expense to every pro- ducer, transporter, and distributor of natural gas, but if to come under the provisions of this act would injuriously affect millions of consumers and dis- organize and destroy a great and important public service, then surely opposi- tion to its enactment is justified, because it would be not only impracticable, but worse than legislative folly. First. The duty of a common carrier is to receive for all persons alike, trans- port for hire, store, and finally deliver to a given consignee the identical goods intrusted to it by the consignor. Second. No gas company has ever been incorporated for the purpose of nor engaged in the business of transporting natural gas for hire. Third. Every natural gas pipe line now in use was constructed for the pur- pose of serving a particular community, and this alone determined its route and capacity. Fourth. The distribution of natural gas is a public service, distinct and in- compatible with that of a common carrier. The nature of the service is similar to that of supplying water and electric current to the inhabitants of cities and towns. Fifth. Storage of natural gas is impossible. The commingling with other gas Inevitably results, not matter what the quality, either in heat units, dryness, odor, or other quality. Specific gravity, temperature of gas, and pressure must be considered to determine the volume. Sixth. Gas is transported by the natural or rock pressure emitted from the well. The operator of a pipe line could have no control over the transporta- tion, because the pressure capacity of wells varies from 50 pounds to 1,200 pounds to the square inch. Seventh. The service varies with the seasons, with the temperature from day to day, and even from hour to hour. Eighth. The variation of domestic consumption between minimum and maxi- mum demands is more than 1,200 per cent. Ninth. The appropriation of any part of the capacity of the line to the use of others deprives the gas company of the power to perform the service imposed by law under shifting or extreme weather conditions. Tenth. Natural-gas lines can be used for transportation in one direction only. Eleventh. It is opposed to the policy of Congress and the spirit of the com- modities clause, which expressly prohibits a railroad company from transport- ing any commodity (with exceptions named) of which it may be the owner in svhole or in part or have :iny interest, direct or indirect. Twelfth. Natural-gas lines are private lines and not public, and all are Eonstructed solely for the transportation of gas owned by themselves. They bave never ofiiered, neither have they the ability, to carry for others. Thirteenth. They mus be producers, transporters, and distributors of their 3wn product. To perform any other function than to combine all would be ilsastrous both to producer and consumer. Notwithstanding these palpable facts, on November 3, 1913, the Senate of :he United States passed, without debate, an amendment to the act of February 94 TO MAKE GAS PIPE LINES COMMON CAEEIEES, 4, 1887. commcjiilv known as an act to regulate commerce, the purport of wMcli amendment" is to provide that ;ill pipe lines used for the transportation of natural pis in inteistate commerce shall henceforth be common carriers of such gas, and subjected to regulation in the same manner and to the same extent as was pro\ided with reference to railroads engaged in interstate com- merce by the original act of 1887 and the subsequent amendments thereto. The original act of Congress was expressly limited in its operation to common car- riers by railroad, or partly by railroad and partly by water. The'iimendment now proposed, as stated by Senator Eeed upon its introduc- tion into the Senate, h;is for its sole object relief from the scarcity of natural gas existing in certain cities in Missouri by compelling a certain corporation known as the Kansas Natural Gas Co. to transport greater quantities than are now being transported by it from the gas fields of Kansas and Oklahoma to such cities. Granting that this is true, such an exceptional local condition furnishes no reason why all private pipe lines in the United States shall be transmuted by legislative fiat into public facilities. We will preface this enumeration with a brief statement of the character of the natnral-gas industry as now conducted, as well as to briefly indicate the present status of legislation in reference thereto and judicial construction con- cerning the same. It is well to note, because it is a significant fact, that from the time of the passage of the original act, to wit, February 1, 1887, that although there have been many amendments extending its application, that natural gas has always been excepted therefrom. This exclusion was not only natural but imperative. In the amendment of June, 1906, extending the application of the law to oil, although with the added experience of 21 years since tlie passage of the original act, natural gas was again excluded from its operation. It is pertinent to ask if it can be made lawful to apply to oil, why not to natural gas? This I will undertake to answer and demonstrate before I conclude. Recurring now to a brief enumeration and statement of the character of the natural-gas industry as now conducted in the United States. I note the fact which the proponents of the pending bill desire to remedy embraces a very small proportion of the interests which would be affected thereby ; the natural gas produced in Kansas and Oklahoma and the public served or capable of be- ing served therefrom are an inconsiderable part of the entire natural-gas in- dustry. In addition to a very large purely intrastate business, ixi which the gas is ultimately consumed in the State of its production, there are also a large number of plants, constructed as units, for producing, tran.siiorting. and dis- tributing natural gas produced in one State while consumed in another. Fre- quently both classes of business (intrastate and interstate) are conducted through the operation of one plant. By reference to the oflicial publication of the United States (Jeological Survey entitled "Production of natural gas in 1012," it will be observed that during that year some natur.-il gas was produced in each of the lil States, and the aggregate production in all States was 562,- 203,4.52 JI. cubic feet. Of this amount 73,799,319 M. cubic feet was produced In Oklahoma and 2s,nf;8.370 M. cubic feet in Kansas; that there was in all States 6,106 producers, of which 203 were located in Kansas and 212 in Okla- homa ; that of the total amount produced in all States only ri3,013 cubic feet (M) was consumed in the State of JXissouri; th.at in said year there were in all States 15.936 persons purchasing gas for industrial use and 1,021,607 for do- mestic purposes. Of this entire number of con.sumers more than one-half are located in the States of Ohio and Pennsylvania, with a very .small percentage In Missouri. Assunnng that the average purchaser of gas for domestic pur- poses represented a family of five persons, we have, in the entire United States, more than 8.000,000 inhabitants whose homes are supplied with this fuel for heating, lighting, and cooking. It further appears from this publication that the St.ites of West Virginia, Pennsylvania, and Ohio far exceed all others in the production of natural gas, their combined production being more than two-thirds of the whole. These statistics, demonstrating as they do the magnitude of the business and the diversity of its location, constitute an essential part of a correct statement of the peculiar characeristics of the industry which render the proposed legisla- tion impracticable, unwarranted, and unjust. These characteristics are — First. The distribution of natural gas is a public service distinct from that Of a common carrier. There is now a clearly defined legal duty upon each company to furnish an adequate supply, without discrimination, to all appli- TO MAKE GAS PIPE LINES COMMON CAKEIERS. 95 ;ants at the various distributing points. The nature of tlie service is similar ;o tliat of supplying water and electric current to tlie houses of the Inhabitants )f cities and towns; the rates chargeable, as well as other conditions of the service, are extensively regulated by State and municipal laws. The present State and municipal laws cover the whole field of franchise ■ights, prices, regulation, and control of natural-gas companies. The statutes )f Ohio give to the common council. the power to fix the terms by which the ;ompany may be permitted to occupy its streets, and provide that the company ivlll forfeit Its charter for neglect to adequately furnish the product. The local luthorities liliewise fix the price or rate to be charged In every Instance. The node and manner of the service are scrupulously regulated and controlled. VIeters are Inspected by an inspector appointed by the municipality, who in- spects as well the quality of the gas and gas meters and supervises all bills, etc. Second. The natural-gas Industry, while fi:equently referred to as embraclng- Droductlon, transportation, and distribution, nevertheless admits of no such ibsolute severance, for the reason mentioned as well as for other reasons lollowiug; no company has ever been Incorporated for the purpose of, nor has my company or person been engaged in the business of transporting natural fas for others for hire at any time. If any existing corporation has the corpo- ■ate power under its charter to engage in such business, it Is the exception ■ather than the rule. Third. The duty of a carrier Is to transport, store, and finally deliver to a ;lven consignee tlie identical goods intrusted to it by the consignor. Obviously :his would be an Impossible undertaliing for the operator of a gas pipe line, )ecause storage of natural gas Is impossible. In this connection it should be loted that not all natural gas is of the same value or quality. Fourth. Gas is transported by the natural or rock pressure under which it s emitted from the wells. The operator of a pipe line, having no control over ;he wells feeding into it, could have no control over the transportation. When sufilcient high-pressure wells are connected to the line to result in a given pressure In such line, then no wells below the line pressure thus produced can jossibly deliver gas into the pipe line, and here It should be noted that the pressure capacity of wells along the route of the same pipe line, varies from 50 Dounds to 1,200 pounds to the square inch. Fifth. The measurement of gas, both at the intake and outlet points of a lighe-pressure line, is extremely expensive and out of all proportion to the ^alue of the gas if shipped in small quantities. Sixth. Every natural-gas pipe line now in use was constructed for the pur- )ose of serving a particular community, whose requirements determined its ■oute and capacity. Moreover, the public service to which such line is de- 'oted varies with the seasons and with the temperature from day to day md from hour to hour. The variation of domestic consumption between the ninimum anl maximum demand of the average community, is more than 1,200 )er cent. For this reason no existing line has been constructed with a carry- ng capacity In excess of the minimum requirements in extreme weather of he consumers which the owners of each such line have undertaken adequately o serve. The appropriation of any part of this capacity to the use of others oust, to that extent, deprive the gas company of the power to perform the ervice which it is now compelled under the law to perform. It is no answer this objection that new and larger lines may be constructed. The du- ation of the existence of wells and fields productive of natural gas Is most Dconslstant and unascertalnable. Some of the older fields, notably those of ndiana. are already exhausted. Others have greatly declined. Capital could lot be procured for the construction of lines forming a component part of a ilant, having at one end a definite market, and at the other, a developed supply perated under a common management and control. Seventh. The fact that natural gas is produced from the earth in somewhat he same mamier from the same fields as oil, and the further fact that the latter as been made the subject of carriage for hire, has doubtless inspired the pres- nt measure. The fallacy of this comparison, upon reflection. Is manifest. Among the ilferences in the two commodities are — (a) Oil can be and is stored at the beginning and end of the transit. Gas lust be used contemporaneously with Its transportation, without storage. (6) Oil is not the subject matter of a public service in Its distribution to ie ultimate purchasers. 96 TO MAKE GAS PIPE LINES COMMON CAREIBES. (c) The amount of oil to be transported is comparatively uniform through- out the day and the seasons. (d) Oil is susceptible of inexpensive measurement. Eighth. The proposed law is opposed to the policy of conser-\'ation. Persons informed upon the subject differ .is to the extent ot the supply of natural gas yet remaining in the earth, but all agree that it is extremely limited and is be- ing rapidly depleted. It is an ideal fuel for domestic pui'poses. Its present use for manufacturing purposes is believed to be temporary only, and is even now largely discontinued during cold weather when domestic consumption Is highest. "Now, the object of the proposed law is to divest the carrying capacity of the lines constructed primarily and in most cases solely for delivering gas to be used for domestic purposes, to which it is peculiarly adapted, and devote a part of such capacity to the carrying of gas for other and different purposes, thereby injuring the domestic consumers not only by rendering their present service insufficient and irregular, but also in the rapid exhaustion of the avail- able supply of natural gas. Ninth. The proposed law is in direct conflict with the policy which Congress has adopted. In response to popular demand, with reference to railroad car- riers, the amendment to the act to regulate commerce known as the " com- modities clause," expressly prohibits a railroad company from transporting on its lines any commodity, except timber, mined, manufactured, or produced by it, or which it may own in whole or in part, or in which it may have any inter- est, direct or indirect. The builders of the natural-gas lines intended them solely for the transporta- tion of a commodity owned by themselves. They have never offered to carry for others ; have never had the ability to carry for others. They have not placed themselves in the position which Congress has found to be against public policy and has prohibited. It would be a strange inconsistency if they should be compelled by few to constitute themselves both common carler and shipper, to discriminate in their own favor, as patrons. In other words. Congress is now aslied to force the gas companies into the same situation from which it compelled the railroads to extricate themselves. The proposed l.iw does not contemplate that natural-gas companies now operating pipe lines shall divorce themselves from the business of production in which they are now engaged, nor from the distribution and sale of the said product; nor could such separation be made without disaster, when the public nature of the business is considered, the present companies be- ing under franchise and contract obligation to supply the service adequately and uniformly. Finally, there is no demand for the proposed law. From the 8,000,000 people being supplied with gas in their homes (with the possible exception of those in Missouri) there is no complaint; there is likewise none from the thousands of landowners deriving royalties and rentals under the existing plan for the conduct of the business. If complaint arises in any quarter, it is from a few persons engaged in spasmodic production of gas desiring, without expense, to avail themselves of the instrumentalities of marketing, which others have in- curred, and as well, the risk of constructing for particular purposes and not for common transportation. If, as now constituted, the system of a typical gas company should be inter- fered with, and its lines transmuted from private lines to a public service as a common carrier that anyone anywhere in proximity of its lines could make eon- tracts far distant to supply great power houses, railroad shops, and the great industrials, which all require enormous quantities of gas, and thereby monopo- lize the pipe capacity for such purposes; this would not only cripple, but would work absolute destruction to the domestic service in extreme weather conditions when the company, in order to meet the " peak load " demands, must have every availajjle inch of its pipe capacity to meet the requirements of domestic con- sumption. It IS therefore not extravagant to say that to compel natural-gas companies to become common carriers would be utterly destructive of this great and important service as now conducted in the United States by all companies except a possible few isolated instances. We therefore maintain that because of the many, as we think, insurmount- able and unanswerable reasons herein pointed out this bill should not become a law TO MAKE GAS PIPE LINES COMMON OAEEIBKS. 97 STATEMENT OF ME. C. F. UEBELACKER, 115 BROADWAY, NEW YORK, CONSULTING ENGINEER. Mr. Uebelackee. My name is C. F. Uebelacker, of Ford, Bacon & Davis, 116 Broadway, New York, consulting engineers. Gentlemen, I will boil down wliat I have to say here to a very short statement, but if in trying to be brief I do not make things clear, I would be glad to have you ask me questions. The first thing I want to present to you, gentlemen, is an idea of the nature of the Service that is required of the transportation department of a natural- gas enterprise. For that purpose I have brought with me and will submit, first, a chart of the monthly outputs, the monthly sales of gas, separated between the sales to the domestic consumers and to industrial consumers, of the Philadelphia company, one of the large supplying companies in Pittsburgh, through the years 1900 to 1906. The Chairman. I do not know whether we can print charts in the hearings, so you had better state to the stenograjiher what they contain. You can leave them with us, if you desire. Mr. Uebelacker. This chart [indicating] shows in heavy red lines the total cubic feet sold each month ; in a solid brown line the cubic feet sold for industrial consumption each month. The Chairman. Can you not put that in figures as well as in colored lines? Mr. Uebelacker. Not very well. The figures will cover several pages. The Chairman. Well, you can tell what each line is. Mr. Uebelacker. There are 178 figures involved in that calcula- tion. The Chairman. It seems to me that if you can state it in lines you can state it in proportions or percentages. Mr. Uebelacker. May I go on with the discussion of the chart? The Chatriman. Certainly. Mr. Uebelacker. On this chart also has been drawn a blue line showing the domestic monthly consumption, and a broken blue line showing the average temperature each month, at Pittsburgh. J wish to demonstrate by this chart, first, the fact that the domestic consumption is a direct function of the temperature; secondly, the fact that the manufacturing, or, rather, the industrial consumption, of gas is curtailed by the companies in the cold months in order to supply a sufficient amount of the gas for domestic consumption. In other words, their transportation plant is proportionate to the do- mestic consumption and not to the combined domestic and industrial consumption, and they must, during the periods when domestic con- sumption requires their maximum transportation facilities, shut off the gas that is supplied for industrial purposes. That is marked " Monthly outputs, Philadelphia company. No. 1." Next, I have to present to your committee a chart showing the daily outputs for domestic consumption in the city of Cleveland for two months namely, the months of June, 1913, and February, 1913, illustrating the difference in the domestic requirement for gas between a summer month and a winter month. This chart will re- quire no comment, all necessary comment being indorsed upon it. This chart is marked "Daily outputs one month Cleveland No. 2." 98 TO MAKE GAS PIPE LINES COMMON OARBIEES. Next, I want to present to your committee a shart showing the hourly domestic requirement in the city of Cleveland for one day, upon which are also indorsed the necessary memoranda to make it clear to you. The chart is marked " Hourly outputs, one day, Cleveland, No. 3." The object of showing these three charts is to show, as I say, the nature of the sei-vice required of the ti'ansportation lines and the fact that its entire capacity is required for domestic service. I Avish next to present to the committee a chart on which I have shown the simultaneous pressures which exist in the field where the gas is received, at an intermediate point in the transportation system, and at the delivery end of the transportation system, showing the pressures necessary to be maintained at the three various points in order to meet the requirements that are indicated in the three charts previously submitted. That will be No. 4. The Chairman. Is there no way to increase the capacity of these pipes to carry gas ? Mr. [Jebelacker. There are several things to be considered The Chairman (interposing). You can not increase the pressure, I suppose, except by pumping? Mr. Uebelackee. Cnpacity depends on several things; first, on the diameter of the pipe; second, average pressure, which controls the density of gas; third, upon the difference in pressure between the receiving and delivering ends of the pipe; and fourth, the lengtn of the pipe. The Chairman. How can you increase the pressure? Mr. Uebelackee. Most companies compress at the intake end, at the intake station, but they are limited in pressure by the strength of the pipe. In the East the maximum pressure is about 350 pounds. There has recently been laid in the ^Yest one pipe for 500 pounds pressure, but that has not been very satisfactory. The Chairaiax. Then, in order to materially'in crease the capacity you would have to lay additional pipes ? Mr. Uebelacker. Yes, sir; you would have to replace with larger pipe or increased facilities. Mr. CuLLOP. Some years ago in northern Indiana they tried the scheme of having jji-essure stations along the way. Mr. Uebelacker. That is, a relay by making several compressions and increasing the number of pumping stations. Mr. Talcott. Is there any law in relation to the loss of pressure by transmission ? _ Mr. Uebelacker. Yes. There is a regular law that it follows, but it is quite complicated and depends upon the four elements I have mentioned. This curve that I have submitted illustrates what is knov n as " packing the line." As you will note from these previous curves of daily and hourly consumption, the requirements of the domestic consumer vary very rapidly during the different hours of the day. Noav, during the hours of the dav when the requirements are low it is possible by pumping at full speed in the fields or by turning on high-pressure wells to raise the pressure at the delivery end of the line and thus store a certain amount of gas at the point where it must be delivered in the distribution pipes. Then when the heavy draft is occasioned by the demand of the domestic con- sumers that pressure is gradually drawn down to a minimum; thus TO MAKE GAS PIPE LINES COMMON CABEIEES. 99 you get a certain amount of storage effect due to increasing the pres- sure at the delivery end of the line. The actual pressure at which gas is handled in the distributing system is much less than the pres- sure at the end of the transportation line. The Chairman. Is there anything else that produces friction besides pressure ? ^ Mr. Uebelaoker. There is a slight condensation under compres- sion. Certain elements in the gas actually liquify under certain con- ditions and at very low temperatures. The Chairman. Of course, there is a natural law that everything loses force by friction? Mr. Uebelaoker. Yes. The Chairman. Now, are there any intermediate stations where you let gas out of that pipe ? Mr. Uebelacker. That depends on the system. Some systems have intermediate points to supply and other systems carry all the gas to the destination. The Chairman. Does that have any effect upoi? the final destina- tion — delivering it in parcels ? Mr. Uebelaoker. Yes. For instance, if you are going to deliver one-half of your gas at 100 miles and the other half of it 100 miles farther on you would have to have about 30 per cent more capacity in the first 100 miles than in the second 100 miles. The Chairman. Then it would not reduce the pressure in the pipes to deliver half of it half way? Mr. Uebelaoker. Well, it is practically the same thing as laying two separate pipes, one to convey gas the first 100 miles and the other to convey gas the full 200 miles, only in the first 100 miles you .put the area of the two pipes into one. The Chairman. Well, proceed with your statement. Mr. Uebelaoker. Gentlemen, I want to point out to you certain differences between the transportation of gas and the service rendered by other common carriers. I want to make these remarks just as brief as I can. First, the natural-gas plant is adapted to handle but one com- modity. It has no selection of commodities by which to equalize its revenues. It can handle this one commodity and nothing else. The Chairman. Then there is no other character of transportation company that could handle gas, is there ? Mr. Uebelacker. No ; there is no other that would be equipped to handle gas. The Chairman. Then gas must be transported by this means or it is not transported at all ? Mr. Uebelacker. There is no other commercial means of transpor- tation of gas. Of course, there are other feasible means,, but not commercial, such as transporting it in tanks, similar to the tanks in which we transport oxygen. But that is not a commercial means for transporting gas for fuel purposes. Second, a gas transportation enterprise can handle its products in but one direction. It can only deliver from the gas field in the direc- tion of the market it is designed to supply. It can not deliver in the reverse direction. Mr. Talcott. There is no necessity for delivering gas the other way. loo TO MAKE GAS PIPE LINES COMMON CAKEIEES. Mr. Uebelacker. No; but that is a decided point of difference between a railway transportation enterprise and a gas transportation enterprise. Mr. Talcott. Of course, the reasons so far applied would apply to the transportation of oil. Mr. Uebelacker. Yes, sir. Mr. Talcott. And oil has been put under the law applying to common carriers? Mr. Uebelacker. Yes, sir. Mr. Talcott. And I would like to have you point out the point of difference between the transportation of oil and the transportation of gas. Mr. Uebelacker. I was going to come to that later. Third, as illustrated in this diagram No. 4, which I have sub- mitted — and that was the purpose of submitting it — the control of the transportation is essential to the control of the supply of gas to the domestic consumers as the pressure in the transportation line must be such as to supply gas to the domestic consumers. Fourth, there is required of the transportation line itself — not simply the distribution system by itself, but of the combined transportation line and distribution system, instant response to the demand for serv- ice. The consumer does not go to the telephone and say, " Send me up so much gas at 4 o'clock this afternoon," but the consumer turns on a cock and gas is there. There is no interval between the demand and the supply. That is not the case of any other transportation system I know of. The Chairman. I suppose every transportation company provides facilities and means according to the cormnodity it transports ? Mr. Uebelacker. Exactly. The Chairman. And I suppose similar rules would be adopted to regulate your company according to its nature and the kind of trans- portation business it is conducting ? Mr. Uebelacker. Well, I do not know what would be the case in that matter. The Chairman. That is the rational assumption to make. Mr. Uebelacker. Well, I do not know about that. I am simply presenting the facts to you. Fifth, the location of the gas-transportation line is unstable. Now, in that connection I want to leave with you another diagram show- ing the actual recession of the gas-producing fields in West Virginia over a period of six years. This diagram shows that the average field in 1906 was nearly three times as far from the city of Pitts- burgh, which was the point of principal consumption, as it was in 1900. This illustrates the rate at Avhich the field is depleted by drawing, gas from it. Mr. Ctjllop. I would like to ge this straight. What is the lifetime of a gas well in the field? Mr. Uebelacker. Why, it is all the way from a year or 18 months to 10 or 15 years. It depends entirely on the nature of the strata in which you strike the gas. Some wells will hang on for 10 or 15 years and even longer, while some will be exhausted in a year or 18 months. Mr. CuLLOP. What is the average ? xu iVlAJS^Ji UAH Fieii LINES COMMON CAREIEKS. iUi Mr. Uebelackee. I can state it to you better in another way. I [link you might call the average recoverable gas about 2,500,000 or ,000,000 cubic feet per acre. The Chairman. In a gas field is all the gas found in a single tratum ? Mr. Uebelackee. It is frequently found in several. The Chaerman. Do the strata overlie one another ? Mr. Uebelackee. Yes. As I say, it is frequently found in several trata in the same weU. The Chairman. If you exhaust one stratum can you bore and dis- over another? Mr. Uebelackee. In some instances. Mr. Talcott. May I ask you a question right here ? Mr. Uebelackee. Certainly. Mr. Talcott. I think this complaint was made about the gas com- lanies at one of the hearings, that they would buy a few wells in ertain territories and they would drain the whole territory. Other len, still holding their wells, could not sell the product, and in the leantime the new company was drawing their gas away. Is that rue? Mr. Uebelackee. That is possible; yes, sir. If wells are drilled ery closely together, exhaustion of one well will aifect the other one. The Chairman. Well, gentlemen, I will have to go downstairs nd see the House open. I would like to get some understanding bout continuing this hearing. There is no immediate prospect of cting on this bill, but we would like to have the gentlemen, get the ecord in shape, so that we can have it to consider ; therefore it is not ecessary for every witness to sit here and narrate his story; you an write it out. Now, would you not better expedite the hearing y having a few succinct statements made and then let the others iibmit their statements in writing ? They will all be printed in the ecord. Mr. James K. Jones. There are a very few other gentlemen to be eard. I understand that Mr. Eugene Mackey, of Pittsburgh, wishes D reply to the allegation respecting Kansas City service. Mr. lackey is present now. The Chairman. I will leave Judge CuUop to preside now until go down and see the House meet. If we do not get through to-day 'e can go on to-morrow. Mr. Jones. The hearing could be continued until to-morrow, or we )uld finish this afternoon. The Chairman. Judge Cullip can take the chair and go on for a hile. Of course, we can go on to-morrow, but you can greatly ex- edite matters by letting the other gentlemen submit their statements I writing, because that -is the chief value of the hearing; the chief ilue is going to be the record that is printed, because that is what le full committee will consider. Mr. Jones. We may ask the committee later to allow us to incor- orate in the record a printed argument. The Chairman. Certainly. Mr. CuLLOP. Proceed, Mr. Uebelacker. Mr. Uebelacker. I was bringing out the points of difference be- reen gas transportation and other transportation enterprises, the 102 TO MAKE GAS PIPE LINES COMMON CAERIEES. fifth point. Due to the fact that the location of gas transporation lines is necessarily temporary, it can not be held as a railway is to a location on a theory that certain values in that location are depend- ent upon it. In the Scimc line of argument, the cost of the pipe which goes into the pipe lines is 60 or 70 per cent of the entire cost of con- struction of the line. That, of course, is exclusive of pumping sta- tions. Consequently, it is economy in the case of the natural-gas transportation line, when the supply of gas becomes too small for the capacity of the line, to lift that pipe and relay it m another place,, whereas in the case of a railway or other transportation enter- prise the bulk of the investment is in such things as grading and roadbed and right ofway, which can not be moved from one place to another. The seventh point is this : The business of a railway or other en- terprise which can depend on more than one commodity usually, grows with the development of the territory which it enters. The business of a natural-gas transportation enterprise decreases as the fields which it enters are exhausted. Mr. CuLLoP. If a well is drilled in a territory it exhausts the sup- ply of the immedite territorj^, does it not? Mr. Uebelackee. The practice is very variable in that respect. In some localities wells are drilled closer than others, depending on the porosity of the strata from which the gas is obtained. The figures vary from 50 acres to 100 or 200 acres. Mr. CuLLOP. Well, whatever that denisty may be, does it not ex- haust the supply of the whole area Mr. Uebelackee (interposing). Eventually it would, but during the time the gas is furnished it will not affect the supply appreciably, beyond, say, a half mile or something of that kind. Mr. CuLLOP. Xow, here is a +0-acre tract with a well on it. Sup- pose you own a 40-acre tract with a well on it and some other gen^ tleman owns a 40-acre tract adjoining it also with a well on it. Yotir well is in operation and his well is shut down, and we will say that each one of them is within 400 feet of the line — that is, 800 feet apart — will your well exhaust the supply of his? Mr. Uebelackee. Under certain conditions it might affect the su{)- ply of his well, but that would be a long distance for one well to affect another ; that is, 800 feet. The iiile is to drill them about 400 feet apart. This distance through which one well will affect another in locating competing wells depends on the strata. The closer the strata the closer you can locate wells without interference. Mr. CuLLOP. Then in that case the distance from the line would be 200 feet for each well, making them 400 feet apart ? Mr. Uebelackee. Yes, sir. Mr. CtTLLOP. Now, in that case if your wSll was active and his well was shut down, would your well exhaust the supply ? Mr. Uebelackee. Well, not to dodge your question, if you will make it 25 feet apart I will say it would. In other words, I concede the principle, but 400 feet would be too far apart to state certainly that there would be interference. It would depend on circumstances. In one case a well 400 feet away might affect its adjacent well and in another case it might not. Mr. CuLLOP. That would depend upon the density of the strata? J.U iYia.ri.ju ucJiD jrijrJL Jji.iNJi» (JUIVLIVXUIN (JAUJKlJtSltS. ±UO It. Uebelackee. Yes; that would depend upon the density of strata. Ir. CuLLOP. Go ahead with your statement. Ir. Uebelackee. A gas transportation plant contains no element ich is equivalent to rolling stock on a railway, which can be fted from place to place as required. The transportation ca- ;ity of a gas plant is fixed right in its particular locality ; conse- intly if a demand is made on a gas transportation system to trans- it gas from a point in the neighborhood of the field to a point ich is short of the delivery point for which the system is designed, the extent that that intermediate section is used the capacity of whole system for delivery at its designed point — in other words, point of consumption — is decreased. That is, the overloading of hort section of a line decreases the capacity of the whole system, ereas in the case of every common carrier excepting oil lines they ,'e a movable capacity, illustrated by rolling stock. The ninth point is this: It is not possible commercially to store i. Now, a very simple illustration will show you the difference in t respect between gas and oil. ^ tank that will hold about 55,000 barrels of oil can be erected in 1 Oklahoma field — let us take that because that is the center of I country to-day — for about $9,500. Say oil is about $1.75 a bar- ; that will hold about $98,000 worth of oil; or it will hold about ) worth of oil for each $1 of investment. ^ 5.000,000 cubic foot gas holder will cost, with foundations, im $250,000 to $300,000. The 5,000,000 cubic feet of gas which it II hold, at 25 cents, is worth $1,250; or you can store in a holder )ut half a cent's worth of gas per dollar of investment, as com- [■ed with $10 worth of oil per $1 of investment. 50 it is not feasible to store gas at the prices at which natural gas Is. Such holders as are used are used as regulators, but not as )acity holders.. Tenth. The variation in the shipment requirements : The required e of shipment is controlled absolutely by the weather, which is aething over which the transportation company, or the company which it delivers — for the two are usually the same — has abso- ely no control. They have got to supply the gas when the tem- -ature requires it ; gas is useless if it is delivered an hour late. The eleventh point which I wish to bring out is the fact that the Tier can not deliver the identical article which is delivered to him. is has been discussed here previously, so I will simply touch upon To state it in other words, the shipper can not have returned to a, or to his consignee, the identical article which he delivers to ! carrier; he has to accept a commodity of the average quality ich is put into the pipe line by all shippers. MTr. Payne. He can with oil. \Lr. Uebelackee. Oh, yes ; he can with oil. ^r. CuLLOP. That same condition also exists in connection with dn. . T A \/Lv. Uebelackee. In grain the delivery is made by grades. A n sells a certain grade of grain; and the same grade of gram is ivered; and, although it is perhaps not the identical gram, it 3 the same market value. 60476— PT 2—14 3 104 TO MAKE GAS PIPE LINES COMMON CAEEIEES. Mr. CuLLOP. And otherwise the service would be too expensive in the grain business. Mr. Uebelackee. Exactly. But in this case you have but one quality of commodity which you can deliver, and that is the average of all that are put in. To recur to the difference between oil and gas, to bring out the points which I have made, I will summarize and differentiate briefly between oil and gas: Oil does not have to be delivered instantly upon demand. It is an article of general commerce and accumulates in storage — first in the tanks in the field; second, in the tanks of the transportation line; thirdly, in the tanks of the refining companies, and lastly, on the shelves of storekeepers. It is one of those things that you tele- phone for and have sent up at 4 o'clock this afternoon; you do not expect to turn on a faucet and have it run. Furthermore, it is not an article which is transmitted directly from its point of produc- tion — the well — to the consumer. Practically all of it has to go through more or less manuf actuiing process and then becomes, as I say, an article of general commerce. In other words, an oil-pipe line is serving general commerce the world over. A gas transpor- tation pipe-line is serving a specific market and can do nothing else, because there is no feasible storage feature in gas transmission. I brought out the relative prices of storage facilities for oil and gas before, and I will not mention that again. There is no variation in the requirement for oil as a result of vari- ation in temperature; no seasonal variation like that that has to be met as in the transportation of gas. The identical oil that is deli-^^ered to the transportation agency can be delivered by them to the consignee. In other words, they can make separate runs through their pipe-lines of different grades of oil — in fact, of different identical shipments of oil. Those are the main points in the difference between a gas-trans- portation enterprise and other transportation enterprises which I wish to impress on you gentlemen in your consideration of the bill which is before you. Mr. CuLLOP. If you were to use the same means for transportmg gas which you describe for the transportation of oil through pipe lines, you could deliver the identical gas. could you not? Mr. Uebelackee. No; you could not. The method of delivering the identical oil is to pump what they call a plug of water ahead of each shipment— about a mile or two of water— into the pipe line ahead of the shipment of oil. In that wav you keep the different oil from mmglmg; you could not do that with gas. Mr. CuLLOP. You could exhaust the gas in the pipe line and keep the shipments separate in that way, could you not? Mr. Uebelackee. No; that would result in an explosion, because ^"^^'^'^A ® ^^^^ *° §®* ^^^ mixed with your gas in the pipe line. Mr. GuLLOP. You could pump all the air out. Mr. Uebelackee. No; it is not feasible to transmit gas in that way. Mr. CiDXLOP. It is not the easiest way to transport oil either, but it could be done. Mr. Talcott. In the case of oil, they transport the crude oil? TO MAKE GAS PIPE LINES COMMON CAEEIEKS. 105 Mr. Uebelacker. In the case of oil, they transport the crude oil; and that varies in gravity. Mr. Talcott. And refined oil goes to the consumers? Mr. Uebelacker. Yes ; refined oil goes to the consumers. Mr. Talcott. And the gas that is pumped into the line at the re- ceiving point is the gas that goes to the consumer ? Mr. Uebelacker. That is the gas that goes to the consumer. In other words, the gas transportation is just as much a part of the distribution as the distributing mains and the service in the city itself; the two have got to work together. In oil that is not neces- sary, due to the fact that you can store at one end and shift your time of delivery. The next set of points I want to bring to j^our attention are the objections from the consumers' standpoint to the use of the trans- portation lines which supply them as a general shipping agency; that is, to impose on those transportation lines the requirements of the general shij^per in addition to their own requirements. In 1911 — I did not happen to have in the brief time that I had to prepare these figiires any later data — there were in this country prac- tically 1,500,000 domestic customers, which means about 8,000,000 people, who were using natural gas for domestic purposes. There were at the same time about 14,000 industrial customers, or less than 1 per cent of the number of domestic customers in the United States. There were at the same time about 5,600 producers, or less than one-half of 1 per cent of the people numerically interested in the results of production and transportation of natural gas. It seems to me that it plainly follows that the people who should receive the most consideration are the domestic customers, who are the vast majority of all the peopile interested — they are 99 per cent of all the people interested in the business of producing, transport- ing, distributing, and handling gas. Mr. Talcott. May I interrupt you, Mr. Uebelacker? Mr. Uebelacker. Surely. Mr. Talcott. Is there anj^ way of measuring accurately the amount of gas received, as compared with the amount of gas delivered? Mr. Uebelacker. That depends on the quantity of gas that is being transported through the pipe which you are measuring. If the quantity is not too large to be measured by a mechanical meter, you can measure it fairly accurately. ^Yhen you get beyond the capacity of the mechanical meter, you have got to use what is Imown as a Pitot's tube measure, which measures by the change in the height of a column of water or oil the velocity of gas which is flowing through a pipe of given size. Now, the indications of the Pitot's tube are not particularly reliable; and, consequently, when you come to large pipe lines your measurements are not particu- larly reliable. On small lines where you can use mechanical meters they are reliable. Mr. Talcott. In these small lines will light pressures and tem- peratures have an effect upon the volume? Mr. Uebelacker. The pressure, of course, has a direct effect m accordance with Boyle's law. As you take the absolute pressure of the gas and divide it by 15, you get the number of volumes by which it is reduced ; for instance, gas is usually measured at 4 ounces above atmosphere, which is practically 15 pounds. Now, at 30 pounds 106 TO MAKE GAS PIPE LINES COMMON CAEEIEKS. pressure above absolute zero— namely, 15 pounds ■ above atmos- phere—gas is half the cubic space that it is at 4 ounces, and it follows that law practically under all the pressure up to the point of liquifi- cation. Temperature has a slight effect on the volume of gas also. What I referred to in speaking of temperature, is the effect which a decrease in temperature has on the domestic consumption, due to the fact that consumers turn on more stoves and more grates and more furnaces. That is the way in which the temperature controls the consumption, and, consequently, the requirements on the trans- portation line. Of course the customers' objections— and I am speaking now of the domestic customers, because they are 99 per cent and over of all the people interested in this business — are mainly m the inter- ference which would result from having another interest introduced into the handling of the transportation lines, and m the probable more rapid exhaustion of the field which supplies the customers, due to the fact that independent interests coming in will probably, . owing to their lack of distribution facilities, sell their gas m bulk to large industries and thus make a much more rapid draft on the field. Mr. CuLLOP. In other words, they do not want other people to share in their convenience and comfort. Mr. Uebelacilee. Well, from my standpoint I think that, owing to the convenience and comfort, the supply of natural gas should be conserved largely for the domestic customer ; that the only limit on that conservation is to use the pipe lines for industrial purposes to the extent that will be necessary to keep the price of the domestic gas down to the point where it is an economical fuel for domestic use. I think that is the only limit on the obligation to conserve the gas, to hold it for domestic consumption. I think its proper market is domestic consumption. Mr. Talcott. And there is no doubt in your mind that it could be arranged so that purchases of gas, or the transmission of gas, could be put upon the definite fixed standard Mr. IJebelackee (interposing). Provided additional pipe ca- pacity was put in; but unless additional pipe capacity was put in, additional shipments — that is, from shipper to consignee — could not be taken without decreasing the a^-ailable supply of gas coming through the transportation system for the domestic customer. In other words Mr. Talcott (interposing) . In other words, not with the facilities existing at present? Mr. Uebelacker. The facilites existing at present are only de- signed to be sufficient to supply the domestic trade during the period when the domestic trade makes its maximum demand ; as you will see from this first chart which I submitted to you [indicating] the industrial customers are cut off in the cold months. The supplying companies make contracts with the industrial customers under which they are at liberty at any time, when necessary in order to supply a sufficient amount of gas for domestic consumption, to cut off the industrial customers' supply entirely. Consequently their trans- portation lines and their investment are only sufficiently large to supply the demands of their domestic customers. TO MAKE GAS PIPE LINES COMMON CAEEIEKS. 107 Mr. CuLLOP. The price to the manufacturing phmt is much less han to the consumer for domestic purposes, is it not ? Mr. Uebelackee. I beg your pardon; I did not understand that [uestion. Mr. CuLLOP. They charge less ; the cost to the manufacturer is less 'or furnishing gas than to the domestic consumer, is it not ? Mr. Uebelacker. Yes ; it is. Mr. CuLLOP. And that is why that provision is put in the con- ract of the manufacturer, is it not ? Mr. Uebelacker. To cut it off ; yes, sir ; that is the reason. Mr. CuLLOP. Because there is more money in selling it to the do- nestic consumer? Mr. Uebelacker. No ; in the net I think it is about even. Mr. CuLLOP. Per thousand feet? Mr. Uebelacker. Per thousand; I do not think, taking the total [omestic consumption, that there are more net receipts to the com- )any per thousand than there are from the manufacturing con- umption, because the domestic consumption involves a vastly greater nvestment in distribution systems, and in meters, and greater ex- )ense in billing, collecting, and so on, than does the larger consump- ion of the manufacturers. Mr. Cullop. They have to build more pipe line for the domestic onsumers ? Mr. Uebelacker. They have to build a great deal more; yes. Mr. Talcott. Suppose a certain amount of gas was received at the ntake; how do you fix the amount of that gas that is delivered? 't would be received, of course, as so many cubic feet, would it not? Mr. Uebelacker. It would. Mr. Talcott. And it would be delivered as so many cubic feet ? Mr. Uebelacker. It would. Mr. Talcott. Now, it undergoes a change of pressure, and a change if temperature as well, does it not ? Mr. Uebelacker. It also undergoes a change of eventiuxl volume, lue to a certain amount of condensation — which is a point I was ;oing to bring out. Mr. Talcott. Then the volume delivered at the distributing )oint would not correspond with the amount of gas taken at the atake ? Mr. Uebelacker. No ; it would not. Mr. Talcott. How could that be offset ? Mr. Uebelacker. I do not Imow how that could be offset. That 3 one point which I was going to bring out later, that there are ertain conditions in the transportation of gas which would make settlement between the shipper and the transporting company Imost impossible. It would introduce complications there that I not see any way to overcome. As I said before, the main objec- lon which the consumer would have to the use of the transportation lie which is built and constructed for his needs only— also for the eeds of the individual shippers along the line— would be, first, m hie interference with the service given to the consumer, and secondly, 1 the more rapid depletion of the field which would result. Mr. CxJLLOP. That is a selfish view, that the consumers are the only nes to be served by the lines, is it not ? 108 TO MAKE GAS PIPE LINES COMMON CAEEIEES. Mr. Uebelacker. Purely selfish. I guess we are all selfish. I guess the 99 per cent of the consumers interested are just as selfish. It is the 99 per cent, however, that we ha^e got to look out for, and not the 1 per cent. In the next place, the rights for local distribution which have been given to these companies which are transporting gas from the fields to the localities where it is distributed have been given, at - least tacitly, and in several instances that I laiow of actually in writing, on the condition that these facilities were to be devoted to the use of the locality which gave the rights. In other words, that locality having given the rights for local distribution, has certain rights in the service which the transportation line feeding it can render; and these rights should be paramount. It has been mentioned before, by the gentleman immediately pre- ceding me, that there is such a thing as wet gas, and this in quite noticeable quantities in some places. The introduction of wet gas into a pipe line overloads the drips and is liable in cold weather to freeze the line and shut off the supply of gas. It is very apt to interfere with the regularity and sufficiency of supply during cold weather. The companies which own their own wells, or purchase gas as they have a mind to— which do not have to take all gases offered to them for shipment, of course watch very carefully the condition of the gas that goes into the mains. If they were required to take all the gas that was offered for shipment, it would not be feasible for them to check the quality closely enough so that it would not tend to interfere with the supply of the requirements of the domestic cus- tomers in the localities which those transportation lines were de- signed to ser-\-e. The next set of points that I want to draw to your attention are those wherein a common carrier of gas must fail to meet the shipper's requirements. I have just been talking to you about the objections which the domestic customer would have to this double use of a gas transi^ortation line. Now, I want to come to the shipper's side of it. I have touched on the question of natural gas not being susceptible to storage before; so I will not go into that to any extent now. I just ay ant to remind you of that point before I go on. The corollary of that is that, as neither storage at the point of shipment nor storage at the point of deliverv is feasible, the shipper must deliver to the transportation company his gas at the rate and at the time when his consignee requires it. In other words, his con- signee controls the rate at which that gas comes down. Consequently, the only thing the shipper can do, lacking general distribution facilities, IS to consign his gas to some single large industry, which in turn, as I mentioned before, tends to deplete the field more rapidly ; and from the shipper's point of view makes his market very narrow indeed. Ihere are only a few industries that would be able to con- Sd ^^^ ^" way— contract with individual producers in the As the line pressures, as indicated in this chart No. 4 which I pre- sented to you, have to be varied to meet the requirements of the cus- tomers on the delivery end of the transportation line; and as the well pressures at the producing end go down as the well is used and pro- TO MAKE GAS PIPE LINES COMMON CAEEIEBS. 109 duces gas ; and as the shippers must deliver to the pipe line, minute by minute and hour by hour, gas in proportion to the requirements of his consignee, it becomes essential for each individual shipper to have his individual compressing plant so that he can control the rate of delivery from his wells into the pipe line at the varying pressures in the pipe line which are made necessary to supplv the domestic market at the delivery end of the line. That would practically elimi- nate all but large producers from the possibility of shipping gas through a transportation line which ran through their vicinity; and from anything but shipping their whole output. Mr. Talcott. And it would be absolutely necessary to determine the amount shipped ? Mr. Uebelackee. Yes, in order that they might be able to put into the pipe line the amount Avhich their consignee required them to ship. Mr. Talcott. And they Avould account for the same amount at the distributing end? Mr. Uebelackee. They would account for the same amount at the distributing end. You see, they can not store the gas at the receiving end, nor can the consignee store it at the delivery end. Consequently the gas has got to be put in the pipe line by the shipper at the same rate at which his consignee takes it out at the other end. Now, to do that he has got to have a compressing plant, because the line pres- sures where he puts his gas in are varying up and down, in accord- ance with the requirements of the whole system. You see that makes it practically impossible for the small well owner to become a shipper. It is only a comparatively large producer who could afford to put in the compressing plant necessary and give it the attendance necessary to put himself in a position to ship. Under this same heading of the objections which shippers would have to this means of transporting gas I think we ought to include the question of the mingling of the gas. In other Avords, the trans- portation agent can not deliver to the consignee the identical article, or the same quality of article, which the shipper delivers to it. There is a variation in gas that might come out of the same terri- tory of, say, from 800 to 900 B. t. u. up to 1,100 to 1,200 B. t. u.— British thermal units, which measure the heating value of the gas — in other words, there is a variation of about 30 per cent. If a ship- per puts in 1,100 B. t. u. of gas he certainly ought to be entitled to get back 1,100 B. t. u. of gas, or its value in dollars, and he will object very much if he has to take the average gas, which is only 950 or 1,000 B. t. u. He has a right to object. But the physical limi- tations of gas transportation are such that nothing else can be delivered to him than the average of Avhat goes into the system. Mr. Talcott. Because they can not have separate runs, as in the case of oil? Mr. Uebelackee. No ; they can not plug the pipe line as they do in the case of oil, because there would be danger of an explosion if you should empty your gas pipe line and exhaust it; there would be some air left in it ; you would never get a perfect vacuum in a pipe line. ... •. ij Finally, from the shippers' point of view, it seems to me it would be almost impossible to adjust between the transportation agency and the shipper, the shippers' claim for loss due to actual condensa- 110 TO MAKE GAS PIPE LINES COMMON CAKBIBBS. tion of gas which takes place in the line and the compressing station, and the loss which takes place when the line breaks, as it does occa- sionally when the side of a hill slides out, or something of that kind. I do not see any feasible way of making adjustment of that loss on the part of the shipper. There are also a couple of objections to the passage of the act which, from my point of view, stand on the ground of general public policy. . First, is the question of conflict with the authority of the present local commissions. I have here a list of the States which have com- mission regulation of public-service corporations, including gas and natural gas companies. I have not counted them recently, but there are some 32 or M States that have commission regulation; and, with the permission of the chairman, I will simply put this telegram, which enumerates the States having such commissions, into the record. Mr. CuLLOP. The telegram will be placed in the record at this point. [Telegram.] New Tork, July 28, 19U. C. F. TJebelacker, Care F. Vhlehnehaut, jr., G. E. Duquesne Light Co., 435 Sixth Avenue, Pittsburgh: Full jurisdiction, including supervision capitalization Arizona, California, District of Columbia, Georgia, Illinois, Indiana, Maryland, Massachusetts, Michigan, Missouri, New Hampshire, New Jersey, New York, Ohio, Pennsyl- vania, Vermont, Wisconsin. Full jurisdiction, except overcapitalization Con- necticut, Idaho, Montana, Nevada, Oklahoma, Oregon, Rhode Island, Wash- ington, Virginia, West Virginia. Regulation, except lighting utilities, while controlled locally, Kansas, Nebraska, Texas, New Mexco, North Carolina, South Carolina. The foregoing list does not include a number of States regulating railroads and telegram companies only. J. L. ESSON. Mr. Uebelackee. The interest of the local commission, of course, is with the domestic local customers. They have the right in all these cases to regulate both the character of service which the trans- portation line gives to these domestic customers, and the rates which the combined transportation and distribution companies make for their service. Mr. CuLLOP. Well, now, that applies to the intrastate business, does it not, and not to the interstate business ? Mr. TJebelacker. I am not lawyer enough to know where the line is drawn between the State commission and the Interstate Com- merce Commission. I would not want to speak at all on that, 'be- cause it is out of my line entirely. Mr. CuLLOP. Weil, the State could not pass any extra territorial laws. Mr. Stevens of Minnesota. No; but in passing an act relative ' to the use of interstate products in their own State, the State would have such power. That has been held by the Supreme Court for 50 years. Mr. Payne. They have taken jurisdiction of the plant in every i city where the gas is furnished. Mr. Ctjllop. That is, the sale of the product for consumption? Mr. Payne. That is all we are generally interested in, the sale of a product in a local place. TO MAKE GAS PIPE LINES COMMON CABBIEES. Ill Mr. CuLLOP. This bill relates to the transmission from one State to another. Mr. Uebelackek. I could not give you any answer on that point at all, because I am not familiar with the legal side of it, and it would be nonsense for me to discuss it even. The second objection that 1 have down here from the standpoint of general public policy is the fact that the million and a half do- mestic customers in this country have property invested — and I have good grounds, which I v^ill state later, for making this state- ment—valued at in the neighborhood of $135,000,000 to $150,000,000 in house piping and appliances for the use of natural gas, which will become useless to them when natural gas is exhausted. The invest- ment is staggering, when you come to figure what it is through the whole country. The basis of those figures is that since natural gas was introduced into Cleveland, Ohio, there has been on the average expended by the householder in Cleveland over $90 per service, per house, for pipes and fixtures for the use of natural gas. There again is one of the reasons why 1 think natural gas should be conserved as far as possible for domestic use, because the collec- tive investments of the domestic customers in apparatus for the use of natural gas far exceeds anything that all the industrial cus- tomers put together have. It is not a very difficult matter for an industrial customer to change over to coal for fuel, or to change to manufactured gas if the cost of natural gas gets too high for him. But that is not practical for the individual domestic customer, and the individual domestic customers' collective investment is infinitely greater than that of the 14,000— less than 1 per cent — industrial cus- tomers in the country. Just to have the facts before the committee, I would like, in clos- ing, to ask permission to include in the record a little printed state- ment which I have cut from Westcott's Handbook of Natural Gas, and which I assume, from the form in which it is printed, is taken from the Government statistics. This statement shows the distribu- tion of natural gas consumed in the United States in 1911, and gives the figures as to number of domestic customers, number of mdustrial customers, number of producers, amount produced, and values pro- duced, et cetera, by States— which I think might be of interest to the committee in considering this matter. Mr. CuLLOP. You may have it inserted as part of your remarks. (The paper referred to is as follows) : 112 TO MAKE GAS PIPE LINES COMMON CAERIEKS. I 13 S 00 e s ■.s ■3 > s (M Oi CD -^ IN .H 1- 3SE cDcnc -1 (N tr~ in (D tDCOOOCOCOiOOOOiOsdOfS ■qo«;o)<--CM M 3 « so ©■a CCi O) -^ fC i^D (>) l>- lO ■— I O tH CSl lO o ei O 00 00 CO ■* t— I CO ■* Oa I— I CO W Ol M 05 CO »o oT ■^"'tD to" o"o ^ " CO iQ !>. (N 00 '-' - r- OJ ^ t- I-l I-n .- c>rcrco"cc t-T csoocoiot^oiior-" HM<£>OCNrf(OC303<£>OOt^cOiO-^ Ij tjh 00 to lo >-i CO oq o> Oi r* 1^- o 00'HCSOO'^lr~(N(NO(OtOOO«3t-iO ■^co^Hoi-^cooooJira-^oO'^lHio co^o'ccTi-TiN' cccrod"io lo"^ qcDt^cOOOlMt-Cfli-H^COOOOOO st^Ti'QOTj'oocoocooor^eocoot- HOSOlOSCOt^-^QOCOO'-HtOOiCO ~t--COtDi-lO'-lOMt— a 8i-it-(C3aooiocor-i-Hi-ioi COiOOOTOtOcOCOCOC M Cooooeor-coo"3' tocscQcor-.t-tOQOoo-a'cococo-^coiMoi^'-t ■Tco o ro coc^o c ni00t^i>i-i^HO5C , _, ■.'Oco-^ooio»Oi-(COmcNb ~ t;~ CO CO to CO i-T C^i-T t— ■^^-cocs>OlcOr■ Ol CO O tOOO ■* OC--'!' 005 O i-H lO to CD U3 IM lO iH CO -^ CO (N ■-! P-i o t-^!rocooOTf-^(0-iu MCDiQCOi— liOt— t-OCOOir— COOiirau lOC^M'^cooo'OOicsoiraO'^coioc o" i>r ort--r CD ^^ i-T M I-H go" cT o -xT COf^OlOOi-l-^COCS-^i-l,— li-i COiO •-( "-I i^ocqocjTf T OC35-^T*ltOO-^lO I i^iiii II lifi i m gg Lis Pi « .2,3 .30 i2.rii a-S.S « S TO MAKE GAS PIPE LINES COMMON CABEIEBS. 113 Mr. Ctjllop. Is that all yon have to submit ? Mr. Uebelacker. That is all I have ; yes, sir. Mr. Ctjllop. Who is your next witness ? Mr. Mackey. I should like to address the committee. Mr. Ctjllop. How long will it take you ? Mr. Macicey. I am not exactly a witness; but I would like to appear here and make a statement defending the company with which I have been connected for 10 years against the charge of almost brutal treatment made in the record here. I would like two hours in which to do that ; but I apprehend that the committee will not give me that much time. Mr. Ctjllop. Well, perhaps the committee may do that to-morrow, but we could not do so to-day. (Thereupon, at 12.40 o'clock p. m., the committee adjourned until to-morrow, Thursday, July 30, 1914.) Committee on Interstate and Foreign Commerce, House of Representatives, Thursday, July SO, 1914.. The committee met at 10.30 o'clock a. m., Hon W. C. Adamson (chairman) presiding. STATEMENT OF MR. EUGENE MACKEY, 11 BROADWAY NEW YORK CITY. The Chairman. State your name, address, and business to the stenographer. Mr. Mackey. Eugene Mackey; and I am a lawyer. My office address is 11 Broadway, New York City, and I may also be reached at the Columbia Bank Building, Pittsburgh, Pa. The Chairman. You may proceed with your statement. Mr. Mackey. I appear here in order that the committee may be advised of certain things concerning which I think there is now something of a misunderstanding. I became general counsel of the Kansas Natural Gas Co. on June 1, 1904, and have acted as such ever since. The first labor which 1 undertook for the company was the registering in Kansas of the company, which is a Delaware corporation. I left for Kansas that evening to give the matter my personal attention. When I reached Kansas I found there a very well-developed organization to prevent the transportation of natural gas out of the State and even from the Kansas gas fields themselves to points within the State where natural gas did not exist. There were certain counties in that State which produced natural gas. Of these the main one was Montgomery, lying immediately north of the Oklahoma line. The inhabitants of these counties wanted to preserve the natural gas within their counties. Later on I found this idea of keeping the gas in the favored counties was so prevalent that in many instances the land- owners, when they leased their lands to oil and gas operators, inserted provisions or conditions in their leases that none of the gas produced should be piped out of the county in which the lands laid. 114 TO MAKE GAS PIPE LINES COMMON" CAEEIEES. I was at Topeka three weeks attempting to register the company. The inhabitants of the gas-producing counties appeared at the capital in great number's to oppose the registration of the company. They paraded the streets with small silk banners pinned upon the lapels of their coats, reading "Kansas gas for Kansas." Fiery speeches were made to the charter board in opposition to our application for a license to do business in the State, and it was refused. I did then what I would not now at this time undertake. Not- withstanding the refusal I advised that the company without regis- tration take over the title of the leases, amounting to hundreds of thousands of acres. You may say that that was a very unwise thing to do, and as I now look back upon it I sometimes think that it was ; but for certain financial reasons not necessary now to state, I did it. We also organized a corporation under the laws of Kansas to build pipe lines from the gas territory to Topeka and other cities of Kansas. The Kansas Natural Gas Co., out of a bonded indebtedness of $4,000,000 which it placed upon its property, loaned money to the Kansas corporation to build those lines. The State of Kansas has a law on its statute books giving gas com- panies organized \mder its laws the right of eminent domain, but it contained a pro^•ision that this right should never be exercised by a company which piped gas out of the State. We had, therefore, to- buy our rights of way, and in many instances we had to pay for rights of way over farms almost as much as the land itself was worth. In the fall of 1904 we had finished our financing and secured the major parts of our rights of way. We made contracts for pipe and started laying our line in Montgomery County, Kans. Our workmen had no more than sti'uck a pick in the ground before the county com- missioners arrested them and hauled them before justices of the peace, acting as committing magistrates. I was in Philadelphia when a telegram giving that information was handed to me. I wired back, directing bail to be given and to continue the work. This was clone. The workmen again went to work and were arrested a second time. Bail was again given and they were arrested a third time, I think. We finally came to the conclusion that our capacity to give bail would soon be exhausted. "We then filed a bill in the district court of Montgomery County, Kans., to enjoin the commissioners from inter- fering with the work of laying our line. Judge Flannelly granted us an injunction and we again began the laying of our line. He had, however, enjoined only the county commissioners from inter- fering with us. Oui- opponents then went to the city of Coffeyville, in the southeast corner of the county, and there in a local and special court for that city, caused another warrant to issue for the arrest of our workmen, and they were again arrested and carried across the country to Coffeyville and locked up in jail. We pave bail again, and Judge Flannelly then enjoined the judge of the Coffeyville court from interfering v\'ith the laying of our line. That may ap- pear to be a rather queer proceeding — one judge to enjoin another of coordinate jurisdiction — but it was done. Our opponents imme- diately ap]iealed the case to the Supreme Court of Kansas, and that coui't, after most elaborate arguments, affirmed the decree of the lower court, and the injunction became perpetual. This appeal is reported in Seventy-first Kansas, page 499. About the same time our opponents, notwithstanding we had purchased our rights of TO MAKE GAS PIPE LINES COMMON CAEEIEES. 115 way from the abutting property owners and notwithstanding, as they admitted at the argument, that our lines did no harm to the public highway or the travel thereon, sued out an original writ of manda- mus in the Supreme Court of Kansas, in which they denied our right to lay our lines along or across the public highway. As the public roads of Kansas are a mile apart in whatever direction you choose to go, it followed that this case was most vital to our company and was therefore carefully briefed and argued. The court sustained our right. The case will be found reported in Seventy-first Kansas, page 508. When our opponents found that they could not lawfully interfere with the laying of our lines they attempted to prevent its being laid by using force. One night a body of men disguised and armed a tempted to destroy miles of our pipe line by dynamiting it, in which, fortunately, they were only partially successful and their efforts resulted merely in delay. In addition to all this our opponents then sued out in the supreme court of the State an original writ of quo warranto to oust the Kansas Natural Gas Co. from the State, because it had not secured a license to transact its business therein, although it had offered to do and comply with all things required by the Kansas statutes gov- erning foreign corporations doing business within the State, and which license the charter board had, as I said, refused us. This proceeding we lost (reported 71 Kans., 785), but by the time the decision came down the State charter board had so changed its atti- tude toward us that upon a new application they readily granted us a license, and the Kansas Natural Gas Co. went on with its business. Later, as the general counsel of the company, I was told that I must prepare myself for the necessary legal steps to extend the line into Oklahoma, then about to become a State. On the very day that Oklahoma was admitted into the Union there was another pipe line laid across or being laid across the State line dividing Kansas and Oklahoma. On that day the governor of Oklahoma ordered this pipe line torn up, and in obedience to his instructions it was torn up, and the material of which it was constructed thrown back upon the Kansas side of the State line. Armed men were then ordered to patrol the Oklahoma side of the State line, instructed to shoot anyone attempting to lay pipe line across it. We then filed a bill in the District Court of the United States for the Eastern District of Oklahoma praying for an injunction restraining the governor and attorney general of Oklahoma and every executive officer of that State from interfering with the laying of our line. After a hard fight we secured a preliminary injunction. The case was argued before Campbell and Pollock, JJ., and their opinion is reported in 172 Fed., 545. And now, mark you, Mr. Representative, on the strength of noth- ing but a preliminary injunction, the Kansas Natural Gas Co. did that which no business man will say was the proper thing to do ; but by reason of the absolute necessity of the company to get gas for its customers, and under only the protection of a bare preliminary in- junction, we laid a line into the State of Oklahoma and expended a million dollars in order to give the people of Kansas City gas. A million dollars expended on the strength of only a preliminary in- junction! No business man would assume such a risk with his 116 TO MAKE GAS PIPE LINES COMMON CARKIEBS. private business, yet under the stress of the necessity for gas we as a public-utility corporation did assume that risk. This decree entered by Judges Campbell and Pollock eventually came before the Supreme Court of the United States for review and was there affirmed by a divided court — three judges dissenting. The case will be found reported at 221 U.' S., 229, sub nominee West v. Kansas Natural Gas Co. Immediately upon the mandate coming down to the lower court the attorney general of Oklahoma moved Judge Campbell to modify the decree, a motion which was refused, and the case came again into the Supreme Court and was again con- firmed (224 U. S., 217, sub nominee Haskell v. Kansas Natural Gas Co.). Up to this point I had served the company only as general coun- sel, but one day in the city of Philadelphia, where I had gone on some business between the Kansas Natural Gas Co. and the United Gas Improvement Co., a company -which you will find mentioned in your record here, and with which I am in no waj' connected, and whose officials I am frank to say to you are not to-day on speaking terms with me, a representative of that company told me that his company was about to bring proceedings to put the Kansas Natural Gas Co. in the hands of a receiver. You can imagine I was considerably taken back, and asked for time. I returned to Pittsburgh and told two of my most influential directors what was threatening, and brought them to Philadelphia to see what could be done to prevent the threatened litigation. They were closeted for some time with officers of the U. G. I., while I remained in an anteroom. After a time I was told, in substance, that if I would accept the presidency of the Kansas Natural Gas Co. everybody would stop their quar- reling. It is not necessary for me to give the motives that made me accept. They were largely Don Quixotic in their nature. I should never have accepted, but I did, and from that date acted both as director, president, and as general counsel of the company, and di- rected all of its affairs. Therefore I feel very keenly the unjust charges made against my company before the committee. I became president of this company at that time, vliich was, I think, the 29th day of December, 1909. I was not able to go west to Oklahoma and Kansas for about two weeks after my election, but when I did I discovered such a condition, such a physical condition, that had I known it before no power on this earth would have made me accept the presidency. I supposed that the trouble with the Kansas Natural Gas Co. was internal dissension, and I made up my mind that I could and would stop that, but ^vhen I ^Aent there I discovered that the real source of the com]Dany's trouble was a dearth of gas. Now, you take an eastern gas company, and there are three things neces- sary for its success, both financially and as a public-service corpora- tion : First, a public to buy ; second, a line to carry ; and third, a reserve field. The Kansas Natural Gas Co. had absolutely no reserve field at all. They were living, you might say, from hand to mouth, in order to meet the daily necessities of the people along the system. On the day of my arrival at the western office I asked the man in charge for what we call the deadly curve. That is this [indicating]. You gentlemen, unless you are gas men, do not know what that means. The Chairman. It is Dutch to me. TO MAKE GAS PIPE LINES COMMON CAKEIEES. 117 Mr. Maokey. In order to explain it, I will read you some figures. The Chairman. In order to get it into the record, you better trans- late it into English. Mr. Mackey. Now, I might say that the Kansas field is divided up into pools. The Chairman. Can't you manage in some way to express your ideas without using these diagrams? Mr. Mackey. I will do that, and will furnish you with quantities of these [indicating charts] . The Chairman. Well, put it in straight English. Mr. Mackey. I will try and do that. As I said, the Kansas fields are made up of what are known as pools. It is not one vast field of gas, but is made up of a succession of little pools or fields. When Ave went there we expected to supply Kansas City from what is known as the upper pool. The Chairman. How are these pools deposited? Are they caverns in the ground or porous earth ? Mr. Mackey. They are porous earth, and they vary according to the tightness of the sand. If the sand is tight, the gas does not come so quickly. The Chaiejman. Some of it is more porous than others? Mr. Macicey. Yes, sir; very much more so, and the more porous they are the larger the quantity of gas that comes out; but on the other hand the life of the field is correspondingly shorter. Nov,', I want to call your attention to what we call " rock pressure." If you are not advised as to what that means, I will say that rock pressure is the confined pressure of gas in the gas sand. That pressure varies in some fields, but as you tap the stratum of sand and draw upon it, you reduce that pressure. You reduce or lower that pressure as you draw the gas out. That pressure might be called the barometer to the field. When you first open it, you have the higJiest pressure, and as you continue to draw out the gas, the pressure goes down and as it does you know that the sand is becoming depleted. Now, I will give you a statement cf the rock pressure for what I call the Inde- pendence field, which is the best field we have discovered. It lies in Montgomery County, Kans., where much of the trouble to which 1 first referred arose. In 1905 there were 49 wells in that pool, and it had an average rock pressure of 372 pounds. Perhaps I should explain how this rock pressure is taken. The gas well is drilled and is capped in, shutting in the gas. Then we fasten an ordinary steam gaxige on tlie cap and turn the gas into the gauge, just as you would turn steam into it. The pressure of the gas moves the indicator on the dial and thus shows the pressure of the gas in the well. AVlien the indicator will record no higher the rock pressure is reached. Now, when we went in there in 1905 there were 49 wells in that field, with a pressure of o72 pounds. In 1906 there were 3-1 wells — some of them had been abandoned — and the pressure was 355 pounds. In 1907 they had drilled up to 57 wells and the pressure had fallen to 300 pounds. In 1908 they had drilled 86 wells and the pressure was 260 pounds ; m 1909 there were 130 wells and the pressure had fallen to 210 pounds; m 1910 there were 174 wells and the pressure was down to 149 pounds; m 1911 we drilled only 3 wells and had 177 wells m all and the pressure had fallen to 105 pounds: in 1912 there was a total of 206 wells and 118 TO MAKE GAS PIPE LINES COMMON OARRIEES. the pressure had fallen to 91 pounds; in 1913 there were 308 wells and the pressure had fallen to 75 pounds. This year we have in that • field 284 wells and the jDressure has fallen to 56 pounds. The CiiAii«iAN. If it is much lower than that it is not available? Mr. Mackey. No, sir. I will take that up with you in a moment. Now, Allien I became president I found those figures, and I say to you frankly, Mr. Representative, that 1 neier came so near quitting anything in my life as I did then. I was on the point of handing in my resignation. I was a lawyer and I had a good practice; I had talfen charge of this company as a matter of compromise. They had thrown upon me a company with nothing but a pipe line and market and Avith no reserve field at all. That is the burden I had to take up, but I did not quit ; I stuck. As I said, we went down into Oklahoma with our line upon the strength of nothing but that preliminary injunction, something no sane man would have done. The first field we struck was the Vander- pool field, in Vv'hich there was one well of which I think I should sjDeak. When it was drilled in, it caught on fire and burned for six weeks. 'When the fire Avas finally put out and the well shut in it was measured and found to produce over 50,000,000 feet per day, open-air measurement. I mention this merely to show you how rich the Vanderpool field Avas. When Ave extended our line into it and drew gas from it, it lasted us substantially one winter and was then substantially exhausted. The Chairman. How much of it did that fire burn up ? Mr. Mackey. It burned up great quantities of it, of course, but it was not the fire which exhausted the field, for we did not extend our lines into the field until long after the fire was extinguished. When our line penetrated the field and began using gas the rock pressure was 410 pounds ; within a year it had fallen to less than 100, showing the substantial exhaustion of the field. The Chairman. How did you extinguish that fire? Mr. Mackey. Several methods were tried; but we finally used a hood and smothered it. Then we extended our line down 20 miles below Vanderpool and went into what is called the Hogshooter field. When I became president I discovered that there had been some internal dissensions over getting a supply of gas. Some of the directors wanted to buy the gas in the Hogshooter and Vanderpool fields and they split over it. As president I said, " Gentlemen, you must buy all the gas you can get," and in two Aveeks' time I had contracted for every bit of gas that was to be purchased in the Hogshooter field. That Hog- shooter field was 10 miles long and 2 miles wide. Here [indicating] is the curve of that field. Starting in at 500 pounds pressure The Chairman (interposing). State Avhat these figures mean. Mr. Mackey. It started in on the 1st day of August, 1911, with 495 pounds pressure, and on the 1st day of January, 1913, that pres- sure had fallen doAAm until it was about 100 pounds. The Chairman. My recollection is that the chief complaint against you was that you had bought up and were holding these fields with- out utilization. Mr. Mackey. Mr. Chairman, we did not do anything of the kind. I was there TO MAKE GAS PIPE LINES COMMON .CABRIEBS. 119 The Chairman (interposing). What do you call a reserve field Mr. Mackey (interposing). We never had a reserve field. We could not get it. It is not there. I went west of that, where they have the great Osage lease The Chairman (interposing). The complaint was that you wanted to hold back this natural gas, because you had some subsidiary com- pany that could sell something else. Mr. Mackey. That is not true. We never did anything of the kind. The Chairman-. The complaint was that they were purchasing artificial gas while you held the natural gas for better prices, or that is my recollection of it. Mr. Mackey. That is not true, sir. We never sold a foot of arti- ficial gas in the world. The Chairman. I may be wrong about it, but that is my recollec- tion of it. Mr. Mackey. No. sir. You are right about that. That charge is in the record, but it is wrong, entirely wrong. Now, I am going to take time to state this, because I want you to feel just as I have felt about this thinji: I want you to knoM" how my company has suf- fered — actually suffered. After I had gotten hold of that Hogshooter field, as I started out to tell you, I went to the Osage lease, consist- ing of about 500,000 acres lying west of the Hogshooter field. I entered into a contract with the Indian Territory Illuminating Oil Co., the owners of that lease, to buy the output of gas therefrom, One of the conditions was that I should secure them a loan of $185,000. I went back to Pittsburgh and personally negotiated a loan of that size. Seventy-five thousand dollars of it was to go into the drilling of neAv wells, and the balance went to pay off their float- ing indebtedness, which was bothering them some. So that aft«r I made that contract with them we had the gas from that 500,000 acre^ of land. We never received a foot of their gas. When we needed the gas the most they repaid the loan, refused to deliver us the gas, and sold the whole of it to competing companies. But the quantity of gas found in the Osage lease was never large, and would have re- lieved us only temporarily even if we had gotten it. The Chairman. You say you have not secured an adequate reserve field yet? Mr. Mackey. No. sir. The Chairman. What is there in the complaint that you could furnish them with gas if you would accept gas where you can get it— that is, a sufficient supply for culinary and heating purposes? Mr. Mackey. There is absolutely nothing in it. We would be glad to buy gas from anybody. The Chairman. Don't they complain that they could get it ouc there if you would be a little more liberal in accepting it from other people ? Mr. Mackey. They may claim that, but it is not true. 1 am going to bring in in regular order _ ^ ^ , ,, . ^ The Chahjman (interposing). What I want is to find out the facts on these issues. Nobody pretends that your honor fiU be hurt by anything at all; but we v,-ant the facts. 60476— PT 2—14 4 120 TO MAKE GAS PIPE LINES COMMON CARBIEKS. Mr. Mackei'. But I do; 1 take that as a reflection upon me per- sonally. The Chaieman. I do not think anybody here takes it that way. Mr. Mackey. I have been called a liar for the statements which I have made here to-day and which are absolutely true. The Chairman. Well, that word " liar " is bandied around in this country a good deal. Mr. Mackey. To show you what immense quantities of gas we have purchased, I Avould say that in 1904 and 1905 every foot of gas we sold we produced. In 1906 we produced 89 per cent of the gas we sold and purchased 10 per cent ; in 1907 we produced 78 per cent and purchased 22 per cent ; in 1908 we produced 83 per cent and pur- chased 17 per cent; in 1909 vie produced 92 per cent and bought 7 per cent; in 1910 we produced 89 per cent and bought 11 per cent; in 1911 we produced 63 per cent and bought 36 per cent; in 1912 we produced 53 per cent and bought 46 per cent; in 1913 we produced 39 per cent and bought 60 per cent ; and this year, up to the present time, the company has produced 28 per cent of the gas it has sold and has bought 72 per cent. The Chairman. In two or three of those years your figures do not show the full 100 per cent. Mr. Mackey. I did not read the fractions. The Chairman. Then you either produced or bought everything, and did not transmit any property for other people at all ? Mr. Mackey. No, sir; we did not act as a common carrier at all. Every foot of gas we sold we either produced or bought. I will make the statement that in any winter when there was a shortage, if the company could have bought gas thej^ would have done so at any price. Now, Kansas City — and I Vi'ant you to understand that when I say this I do not mean it in an offensive way — ^has harassed us badly, and that, too, when we were doing everything in our power to furnish a full supply of gas and prevent a shortage on our system and the suffering which necessarily follows. The Chairman. Is there any other place where the conditions are acute ? Mr. Mackey. They are all over our system, wherever there is a shortage. The Chairman. I mean that complaint? Mr. Mackey. It is all over the system, whenever there is a short- age ; but they are not quite so vicious as in Kansas City. I do not mean that word in an offensive sense, because the public is ignorant and do not know the situation, although they should. Now, this record is full of the United Gas Improvement Co. The U. G. I. Co. owns a distributing plant in each of the tAvo Kansas Cities, and you will find that reference has been made here to the fact that they are the gas trust. Now, whether they are a trust or not, I will not attempt to argue, although I do not think they are. I am not connected with them, but I know a good deal about how they do business, be- cause we have been associated in business for a good many years through the Kansas Natural Gas Co. Now, the two Kansas Cities are the only places on the globe where they handle natural gas. They have a plant in Omaha, another in Des Moines, they operate one in Philadelphia, and they have one in Scranton, and undoubtedly TO MAKE GAS PIPE LINES COMMON CAKEIEKS. 121 at other places but they are all artificial gas plants and not natural gas plants at all. When we proposed building our line to Kansas City, we did not have money enough. We had placed a $4,000,000 mortgage upon our plant, but the money from that source was not even sufficient to build the line straight up to St. Joseph with branches to Topeka, Atchison, and Leavenworth. We did not have money enough to build the line to Kansas City. The V. Q. I. owning distributing plants at that time in the two Kansas Cities, we approached them for money to build the line to Kansas City. They first advanced $3,000,000 with which to put in the line, and took a first mortgage The money was loaned to a company which was called the Kansas City Pipe Line Co., which built and owned the line to Kansas City. They leased us that line and the yearly rental we pay for its use equals the amount of the bonds of that company as they fall due each year with interest and also the taxes on the line. As I said, the mortgage first given was for $3,000,000 ; but we found that the upper fields from which it was at first proposed to supply Kansas City were not sufficient in either volume or pressure or staying quali- ties to supply the cities on our upper lines. We had expected them to run for 7, 8, or 10 years, they became about exhausted in 2 years. So we had to extend the line from our fields into Montgomery County, to which I referred a moment ago. We did not have the money, and the U. G. I. furnished it. This was done by the Kansas Oity Pipe Line Co. giving a new mortgage of $5,000,000, which took up the first one of $3,000,000 mortgage and provided enough money to ex- tend the lines into Montgomery County. The public utility commission of Kansas City, Mo., wrote to us several times and demanded that we furnish them with a better supply of gas in Kansas City. Mr. McBeth, the general manager of the Kansas Natural Gas Co., appeared before them and explained the situation. Then, they demanded that the U. G. I. Co., should build a holder, which they did. They built a holder holding, I think, 5,000,000 cubic feet, but that is only of assistance during a very limited shortage. Wheii there is a shortage of gas for any extended period, the holder affords no substantial relief as the quantity in it is soon exhausted and it can not be refilled until the shortage is over. I think the holder becomes exhausted in an hour's time. The Chairman. What you call a holder is a temporary storage arrangement ? Mr. Mackey. Yes, sir. The Chairman. And it would require too large a storage for a supply of gas that would last any considerable time? Mr. Macket. That would he absolutely out of the question. The expense is prohibitive, and holders are never used in the natural-gas business except to a very limited extent. The commission wrote me a letter and wanted me to appear before them. As I had been before the commission before and explained the whole situation, I did not think my appearing again would do any good. I replied to their letter by another letter, which I will now read to j'ou. It explains the whole situation. This letter is ad- dressed to the commission, and I had it published in the Kansas City papers— the Kansas City Gas Co. paid $3,000 to publish this lettCL' m the Kansas City papers. I thought the expense warranted, as it 122 TO MAKE GAS PIPE LINES COMMON CAEKIEES. presented the situation truthfully; and these newspapers were sold over our entire system, and thereby each one of our consumers would read it. Senator Reed. What papers did you publish it in? Mr. Macket. In the Star, the Post, and the Journal. The Chairman. The letter may go into the record. (The letter referred to is as follows:) AN OPEN LETTEK FROM THE KANSAS NATURAL GAS CO. .June 28, 1911. To the consumers of naturaj gas in Kansas City ,Mo. Gentlemen: I h.-ive yo-ur favor of the 17th instant requesting me to appear before your honorable body as soon as possible and show what the Kansas Natural Gas Co. has done to prevent a short:ige in the gas "supply for Kansas City during the coming winter; but I believe a definite written communication will be more satisfactory to you than an oral discussion. The company will, during the summer, overhaul its compressor stations, lines, and all parts of the entire plant and put them in the highest state of working efficiency for rendering service during the coming winter. In addition to this, it will cause the field and gathering lines of the Marnet Mining Co. in Oklahoma (to prevent confusion, I desire to say that the Kansas Natural Gas Co. owns no property in Oklahoma. All of the lines referred to in this communication are those of the Marnet Mining Co.. which the; Kansas company operates under con- tract) to be extended to other gas wells in Oklahoma, from which it will buy gas during the coming winter. The company was able to supply your city, even as well as it did last winter, because the largest part of its winter sales of gas came from wells in Oklahoma with such a high confined rock pressure that with it 300 pounds could be maintained upon the Marnet line running out of Oklahoma. So lung as such a pressure can be maintained on this Marnet line, the company can deliver through its system practically the same quantity of gas that it did last winter, less, of course, the gradual diminution of the Kansas fields. These additional wells in Oklahoma, to which the ilarnet company will connect its field or gathering line, are of such high rock pressure that we believe the company will thereby be enabled to maintain 300 pounds pressure upon this JNlarnet line during the coming winter and give its customers the service consequent upon such a pressure. The company can not assure you there will be no shortages of gas during the coming winter. As Mr. Jlncbeth, when last before you, told you, the com- pany will not be able, during periods of very cold" weather, to deliver enough gas to meet the hea\-y demands during such periods of severe cold. As Mr. Macbetli also told you .your people should provide for such shortage by laying in a supply of coal or other fuel for use when the gas temporarily weakens or fails, and this warning I now repeat to you. Those shortages can not be avoided and the company should not be criticized for their occurrence. They will occur next winter, notwithstanding every com- pressor and foot of pipe in the company's system is in the best possible working condition ami its entire force from the general manager down, bending every energy to serve your city and the company's other customers, and not with- standing every available well, which the company owns in Kansas and every well in Oklahoma from which the company is buying gas, is discharging its capacity into the company's lines. The fault, if yon see fit to call it that, is not that of the company, but rather should be charged against nature for not storing a larger quantity of natural gas in the Oklahoma and Kansas gas fields. The company is a natural gas and not a manufactured gas company, and can not deliver you gas which nature has not seen fit to provide for use. It is only human and can not perform miracles. I now mibrace this opixirtnnity to call to your attention a matter of the greatest uioineut to the consumers of gas in your city, as well as those over the company's entire system. ^\'hen the first gas line fi-om the gas fields of Kansas was completed to Kansas City your city withheld a franchise to the local distributing company for upward of 17 mouths, and during that time the company's line lay packed with g; s ready for delivery to consumers thereof in your city, but earning very little, as it served only the comparatively small consumption in Kansas TO MAKE GAS PIPE LINES COMMON CAEKIERS. 123 City, Kans., and the villages and towns along its route. All tliis time, wliile the investment in the line was practically idle, interest on the company's bonded and floating indebtedness kept running on. Obligations matured and had to be met. livjienses were necessarily hicurred and had to be paid. The company was forced to sell immense quantities of "boiler gas" at a few cents per 1,000 cubic feet to enable it to meet and discharge its obligations. During the yeai-s since the company began business its returns from the sales of gas for domestic purposes have not been sufficient to enable it to meet its maturing bonds, its fixed ch;u-ges, and the betterments which it was compelled to make. For example, during tlie year 1910 the company invested nearly $1,000,000 in betterments. In addition to this it had to take care of its fixed charges and pay off its maturing bonds. In order to do so, the returns from domestic sales being insufHcient, the company was forced to sell, and did sell, huge quantities of gas for boiler purposes, on which it realized a com- paratively small sum. all of which went into betterments. And in addition thereto the company borrowed thousands of dollars in the open money market, which the company will not do again, all for the purpose of enabling it to give you the service which you received during the last winter. This summer we are again forced to sell boiler gas, from which we realize but a very small return, in order to meet cur obligations .".nd fixed charges and to keep up our betterments and improvements. These continued and forced sales of boiler gas have made immense inroads upon the stores of natural gas in the Kansas fields. When the company began business the rock pressure of its wells in Kansas averaged about 400 pounds to the square inch. This has fallen off until now the highest pressure is about 90 pounds, iiiid runs from that to as low as 18 pounds. The fields have waned until at the present time there c:in not be taken from them over 50.000,000 cubic feet of gas per day. You know the quantity necessary to supply Kansas City, Mo., alone considerably exceeds that amount. Your city was cnrried through the winter of 1909-10 by what is known as the " Vanderpool " field, lying just south of the Kansas-Oklahoma line. In January. 1010, the rock presisure in this field was over 400 pounds; to-day it is less than .30. Last Septenjber the Marnet Co. extended its line into the northern half of the " Hogshootsr " field in Oklahoma, and upon its completion turned into its line the gas which the Kansas Co. purchased from wells in that portion of this field, and since then the rock pressure has fallen off over 150 pounds, and this northern half is not now sufficient to maintain 300 pounds upon the Marnet Co.'s Oklahoma line. The new wells to which the Marnet Co. is extend- ing its gathering lines, and from which we will buy gas for the coming winter, are in the southern half of this Hogshooter field, and their high rock pressure will, as I said, maintain a 300-pound pres.sure on the Marnet Co.'s line out of Oklahoma during the coming winter, but not during that of 10]2-i;i. It is apparent at once to any thoughtful man that it would h;ive been far better for the consumers of gas in your city, and, indeed, over the company's entire system, had this boiler gas never been sold, for it has torn the he:rt out of the Kansas and Oklahoma gas fields, and if its sale be continued the end of natural gas in Kansas City is not far distant, and your citizens will for light and fuel be forced to fall back upon manufactured gas with its much higher price and lesser heat units. The gas which has been consumed is, of course, gone; but the g.is which is left should be conserved. And here I would call your attention to the fact that the Kansas and Oklahoma gas fields do not have the staying qualities of those in Pennsylvania and West Virginia. Precisely what causes the difference I have not yet been able to satisfy myself, but the fact remains As a matter of comparison I invite your attention to the " Speechley field, below OH City, In northwestern Pennsylvania. It has been supplying cities m that part of the State for 30 years, and is still quite good. Over 20 years ago the gas company distributing the output of gas therefrom wholly discontinued t^^e S'-^'e ^'f boilei gas and conserved the field for domestic consumption alone As a result the snnnlv has lasted 30 years and will last for some years yet to come. Compare ?Kith the vfnderpooT field, to which I have heretofore made reference, and which wa=i snuffed out in a little over one year. , .^ ^ ^ ,, ., FurtheimTetSe Kansas and Oklahoma fields h,.ve been exploitedfar beyond tlieboiind™of reason. Take the Hogshooter field for example. It is irregular to Shane but only about 12 miles long and some 2 miles wide-not a large field Out of it! besides the 18-inch line of the Harnet Co.. a line runs to Mus- 124 TO MAKE GAS PIPE LINES COMMON CAKEIEES. kogee and intermediate towns, another to Nowata, another to Bartlesville and the smelters ne.ir there, another to lola, Kans., another supplies the Wichita Co. running to Wichita and Hutchinson, Kans., and the Quapaw Co. running to the Joplin mining district. With competition so fierce in substantially the only gas field remaining the wonder will be not that shortfiges happen on our system, but that they are not more frequent in time and longer in duration. So long as the domestic consumers are not paying a price sufficient to 'enable the company to meet its fixed charges and maturing oblis'.ations avid nuTlie neces- sary improvements, it is too clear for contention that the price is too low, even if only the company's investment be considered. The company will meet and discharge its obligations as they mature. The lawful duty so to do is upon it and it must and will perform that duty and pay its debts, including its floating indebtedness, which it will take care of, and if it does not realize sufficient income from its domestic sales to do so it must continue the sale of boiler gas. But inasmuch as natural gas by reason of its nature is peculiarly a domestic or home fuel, and should be used for that purpose alone, the company now asks you to raise the price of domestic gas in Kansas City and so enable it to dis- continue its sales of natural gas for boiler consumption. By so doing I estimate the future life of the gas fields of Kansas and Oklahoma will be at least doubled. Every thousand cubic feet of natural gas sold in your city to-day is intrinsic- ally and relatively worth over 35 cents. This is at mice apparent when you consider that the average domestic con- sumer will willingly pay 50 cents per thousand before he will allow It to be taken out of his house and he be relegated to the upe of conl or manufactured gas. I know this, for I h.'ive been a consumer of natural gas for 30 years and I will willingly go above 50 cents per thousand rather than be compelled to use manufactured gas with its lesser heat units or coal with its dirt, ashes, and Inconveniences. It is also apparent when a city within 10 miles of the Independence gas fields was willing, within the last year, to contract for a supply of our gas at 25 cents. That 35 cents is to-day less than the worth of natural gas in Kansas City, is still more apparent when you consider the amount of the company's mvestment and the distance the gas is piped in bringing it to you. In this connection, I would remind you that the investment of a natural gas plant is not like that in a railroad or street car line, or even a manufactured gas plant. With them, their business goes on year after year without limit. Their plants, if properly managed, increase each year in value. The life of a natural gas plant is lim- ited to that of its gas fields. Each year those fields abate in quantity stored and depreciate in value; and when they are completely exhausted the system is B mass of junk. That natural gas in Kansas City is to-day worth over 35 cents, is clearly apparent when you consider the limited area of these western gas fields, how quickly they go off and the small quantity of gas left in the fields to-day, and that before many years those fields will be wholly exhausted. It is again apparent that 25 cents is an entirely inadequate price when you consider the great number of consumers who waste it at that figure. At 25 cents, a consumer does not guard his stop cock with the care he does at 35 cents. When a consumer wastes gas, you may believe he is paying less than it is worth to him. Of course, this wasteful use does not in itself occasion the company any loss, as all gas is sold by meter; but I speak of it upon those high principles, which I think every broad-minded man entertains, when he con- siders the woeful waste by Americans of their natural resources and energies, and, considering, desires their conservation; if not for his immediate benefit, then at least for those who follow after him. Every gale of boiler gas reduces the rock prpss;ire and depletes the field so much. As the fields wane, just so fast does the day of manufactured gas ap- proach Kansas City. I therefore urge upon you that the franchise price of natural gas in your city be immediately raised to 50 cents per thousand cubic feet. It is just to the company and it is the best for your citizens. Do not understand me that the company would at once advance the price to 50 cents. It should, however, be immediately fixed at 35 cents for this summer, and 30 cents or higher for next winter and thereafter, as the fields deplete and the worth of gas advances, until in time it can be used only for lighting and cook- ing purposes and not even for heating purposes, the price should advance pro- portionately. Even then it is far cheaper than manufactured gas. TO MAKE GAS PIPE LINES COMMON CAEEIEBS. 125 ad^^ibllUv Toh^vL^ ll-^f '* °^ P^^*^^' I ^°""^ c"^" y°"^- attention to the snmmer thP 1^L« fi/ ^ a higher price in summer than in winter. During the fnTsm^n Tt th'l^'"''^'^''''" ■^' ""^^^^^' t^^ ^-eturn on the investment is excee.1- _r'rh;,/,n . ® costs more per thousand feet to supply consumers in nn^^n,^n^nl T^ ^^^l' J^^ "^'^ °* ^°^t enters into the worth of the gas. One company I know of charges 10 cents per thousand moiv in summer than in wmter; others 5 cents. I think the latter sum about right ""'^''"'^ '^"•'" Do not overlook the fact that the company has paid no dividends for two years, and, as I view the outlook, and even with the higher prices .-isked, it will not declare any for a long time yet to come; for before declaring any it intends to discharge the floating and bonded indebtedness and make such betterments in the nature of field or gathering lines as may be necessary. As an evidence of the company's good faith and the risks which it has taken to supply Its customers, do not overlook the further fact that in the winter of 1908-9, when, the Kansas fields being unable to furnish it with an adequate supply, the company decided to push its lines into Oklahoma, and was met at the frontier of that State with force and violence and armed guards ordered to resist with force the laying of any gas line across its borders, the ll.irnet Co., the lines of which it now operates under contract, secured a preliminary Injunction from the Federal court, and under its protection laid its lines into Oklahoma and invested hundreds of thousands of dollars upon the strength of . such interlocutory decree. Is there a member of this commission who would have hazarded so much upon a decree of so temporary a nature? Is there a sane business man in Kansas City who would have done so? The present manage- ment will not assume another such risk; but by taking it Kansas City secured a supply of gas during the winters of 1909-10 and 1910-11 which otherwise it would never have had. A- crisis confronts Kansas City. It can exact the present franchise rate from Messrs. McGowan, Small & Jlorgan, grantees, but if it does the years of natural gas in the city are numbered and the use of manufactured gas and coal is upon the city. If the city grants to the grantees the increase of rates which I have asked, the life of the natural gas fields will, in my judgment, and as I have already expressed it, be doubled. I deem it most proper that the people of Kansas City be at once advised of the impending danger. They have a right to know, and it is right that they should know. I deem this so urgent that I will run this letter in your newspa- pers as a paid advertisement — an open letter to Kansas City and its citizens. Yours, very truly, Eugene Mackey. Public Utilities Commission, Kansas City, Mo. Mr. Mackey. I want to say that in my judgment any gas company that sells gas for these purposes — the gas referred to in this letter as boiler gas, and by which name we call it in the Kansas fields, although in other places it is called manufacturer's gas — any com- pany anywhere that sells gas for that purpose commits a crime against nature. Natural gas is the greatest blessing of this age. This is a pretty broad statement, but it is a blessing for the class of people that need it. The man who owns a mansion, and heats it with a furnace and keeps a man to attend to his furnace, may not care whether he uses gas or furnace, but to the housewife, particu- larly the one who does her own home work, natural gas is a great blessine. There is no dirt, no ash. no carrying m of fuel, no burn- ing of a large fire wiien a small one will answer. The gas is always ready, and when its use is over can be stopped in a moment. The CHviR-»i\N You have given a very extended and interesting history of your company, and I suppose the purpose of your state- ment is to show the reason why you do not want to have the duties and obligations of a common carrier thrust upon you Mr IvElCkey. So far as I am personally concerned, and so far as the Kansas Natural Gas Co. is concerned, whether you pass this bill 126 TO MAKE GAS PIPE LINES COMMON" CAEEIEES. or not it will never benefit the Kansas Natural Gas Co. or any of its consumers. The Kansas Natural Gas Co. is dead, and I know whereof I speak. The Chairman. Is it going out of business? Mr. Mackey. It is now in the hands of receivers, and, in my opinion, will never leave them. This bill will never benefit the company or any of its consumers in any way whatever The Chairman (interposing). I think the impression of the pro- ponents of the bill was that the receivership situation was artificial. Mr. M.4CKEY. Not at all. The Kansas Natural Gas Co. could not have lived through the following winter. It was absolutely impos- sible. It Avas in default on its bond payments and sinking fund ])ayments when this bill was filed. In addition to that, the State of JCansas had brought a proceeding against the Kansas Natural Gas Co. and placed its receivers in charge of the company. I say to you, Mr. Eepresentative, that the Kansas Natural Gas Co. v-ill never come out of the hands of either one or the other of those receivers. The Chair jiAN. What will be the result? Will that line be sold? Mr. Mackey. This Avill be the result: The receivers will undoubt- edly lop off sources of consumption to meet the diminished supply of gas in the fields, and undoubtedly the line that runs to St. Joseph will be the first one cut out. The CiiAimiAN. "Why not sell it and let another company oper- ate it? Mr. Mackey. WTierein could any other company do better? It is not the fault of the system of pipes which the company owns, but a lack of a reserve field of gas — a shortage in the field — that causes all the trouble. Senator Reed. Because of the suggestion of the chairman of the committee that you may file any papers that are desirable, I want to avail myself of this opportunity to get just a little light, if I can, by a few questions. Mr. Mackey. I will tell you anything I can. Senator Reed. Mr. Mackey, I was not here when you began your statement, and I have been away from Kansas City "so much tliat I have lost track of the officers of this company. "\^1iat is your office? Mr. Mackey. Well, I was the general counsel of the company. Senator Reed. Of what company? Mr. Mackey. Of the Kansas Natural Gas Co. From January, 1904, until, I think, the 29th day of December, or at least between Christmas and New Year's, 1909, when I became president and general counsel. In the early part of October, 1912, I became one of the Federal receivers, and I will say to you. Senator, that that was not at my solicitation. In fact, I wanted another man ap- pointed Senator Reed. I am obliged to go to the Senate in a few minutes, therefore I want to elicit a few facts. Mr. Mackey. You want to know whether I am connected with the U. G. I. ? I am not. I will tell you something more. You want to know if the U. G. I. dominates our company? You said here, or somebody said, that the U. G. I. indorsed our paper. The IT. G. I. never indorsed a penny's worth of the Kansas Natural paper. TO MAKE GAS PIPE LINES COMMOlSr CAKRIEES. 127 When I became president of the company and examined into its finances I found that it had a very heavy floating indebtedness and that Mr. T. N. Barnsdall and Mr. W. A. Shaw, of Pittsburgh, and Mr. R. A. Long and Mr. R. M. Snyder, jr., of Kansas City, all directors and in no way connected with the U. G. I., had indorsed upward of half a million dollars of paper to keep it afloat and help it make its extensions and betterments in an effort to supply the public with gas. I myself, individually, went on the back of about $200,000. The U. G. I. or any of its officers or representatives never indorsed a single dollar of the company's paper. Senator Reed. Let me develop what I desire to develop, as my time is limited. You were, up to the time the receivers were ap- pointed, the president and the general counsel for this company and are now one of the receivers ? Mr. Macket. No ; I am not a receiver. I have not anything to do with the physical control of the company, and at the first meeting of the board of directors my resignation as president will be offered. Senator Reed. You are not a receiver any longer? Mr. Macket. No, sir. Senator Reed. But you were a receiver until what time? Mr. Macket. I was receiver until last spring, when I resigned. Senator Reed. The Kansas Natural Gas Co. has how much stock? Mr. Macket. $12,000,000. Senator Reed. How much bonds? Mr. Macket. It had an issue of $4,000,000 ; two issues of $4,000,000, and then the Kansas City Pipe Line Co. had an issue of $5,000,000, not all of which was sold ; nearly all, not quite all. Senator Reed. Your aggregate outstanding bonds are how much approximately ? I do not ask you to be accurate ? Mr. Macket. Nearly $7,000,000 ; $6,900,000 of cold hard cash. Senator Reed. The Kansas Natural Gas Co. was originally or- ganized by R. M. Snyder, was it not ? Mr. Macket. No, sir. Senator Reed. R. M. Snyder, M. M. Sweetman, and one other? Mr. Macket. No. The Kansas Natural Gas Co. was organized by Mr. T. N. Barnsdall and James O'Neil. The New York Oil & Gas Co., composed of R. M. Snyder, R. A. Long, M. M. Sweetman, and R. M. Snyder, jr., proposed to organize another company to take " gas from the Montgomery fields straight through to Joplm, Mo., and never intended to come to Kansas City. Barnsdall and Snyder got together after the Kansas Natural was formed, Snyder had not then organized his company— they got together and mcreased the capital ftock of the Kansas Natural from $6,000,000 to $12,000,000. Senator Reed. Snyder or his associates did build some pipes ( Mr. Macket. No ; they never built a foot. Senator Reed. Did not the Kansas Natural duphcate certain pipe lines that had been built? S^enatot'^RElD ^o you mean to tell the committee that those who weS LtTmately associated with the U. G. L were not intimately associated with the Kansas Natural Gas Oo. 5 Mr Market. Long after the Kansas Natura Gas Co. was or-