Evening star. [volume] (Washington, D.C.) 1854-1972, 1955-03-06
Price Control Debate.
Is Regulation of Natural Gas Producers in Public Interest:
TheCuse
In Favor

The need to protect natural gas
conSumers-the average citizen who
depends on gas to help run his home
or buSiness-is. widely recognized.
No matter how you view 1t, gas is
in the nature of utility and must
be kept available at reasonable
rates.
If there is to be any effective pro-
lection Of consumers, the producers
who bring the gas to market Gas
distinguished from pipeline trans
porters already subject to interstate
regulation) must be under some sort
of control. Otherwise, the gap in
price control structure is so great
that protection is more fiction than
fact.
Here is why the Federal govern
ment should and can expand its
control of the natural gas industry:
The Natural Gas Act of 1888,
L. which Congress passed to
protect gas users from vari-
Gus ruthless tactics of the industry,
gave the Federal Power Commission
control over the transportation of
natural gas and of sales in inter-
state commerce of natural gas deS-
tined for resale to the consuming
public. Is it reasonable to interpret
this as meaning that the sales by
producers to cross-country pipelines
are not sales in interstate COM
merce? Obviously not, and the Su-
preme Court has so held in the re-
cent Phillips Petroleum case.
- This Interpretation is borne
L. out by the history of recent
legislation. In 1850 Congress
passed the Kerr Bill, which Presi-
dent Truman vetoed. The object
of this bill was to exempt gas
producers from the Natural Gas
Act-and the real reason for the
bill was to change the intent of
Congress as outlined in the gas
act. not to re-d6frm that intent as
same contend. If proponents thought
the 1888 act excluded producers
they would not have bothered to
push the Kerr Bill through. How
ever, since that bill never became
law, producers are subject to FPC
authority as before. Whether these
producers actually were controlled
prior to the Phillips case is beside
the point.
= Experience has shown that
,. control is necessary. Con-
sumner resistance to high and
sometimes discriminatory rates was
the cause of the Natural Gas Act.
But this came about only after legal
limitations proved it was impossible
for the individual States to do any,
thing about gas coming into their
jurisdictions from out = of State
sources. The famous case of Mis-
souri, v. Kansas Gas Co. settled this
point: That the State has no power
to control gas moving in interstate
commerce. Only the Federal Gov
eminent can do that.
n If producers are left COM
4. pletely uncontrolled there is
temptation for them to work
out deals" with pipeline companies
"AAASAA NOoAA Nj Nul1FC1lJ GllC law.
For example, the pipeline company
might agree to a contract with a
producer at higher rates than it
ordinarily would-if the producer
will subsequently split it's profits
with the pipeline. OF course, the
consumer would bear the ultimate
cost. There are enough examples
OF ruthless dealings in the past to
make this worry real one.
That the gas producers need
y. to be controlled is evidenced
IN their price structure. Some
transmitting companies pay nearly
three times as much for gas pur-
chased at the Wellhead as do buy
ers for local distribution. Allowing
for all normal factors which could
cause price deviation, such a wide
range as this points to discrimina-
ton. Gas destined for Washington
users, for instance, costs about 20
per cent more at the Wellhead than
does gas headed for Chicago. OBJ
viously these variations are for rea-
sons other than transportation prob
lens. One of them, no doubt, is the
absence OF competing fuels at low
rates in some areas When this hap
pens the gas producers have their
distant customers over a barrel
and can afford to charge more.
The argument that control of
q. the producer is going to stop
exploration for new gas fields
iS cnoriaIic
The first is that there is much doubt
as to the existence of many undis-
covered fields of appreciate magni-
tude. Gas producers are aware of
this doubt and if they slow their
explorations it will be on this &C
count. The second reason is that
the argument is based on the as
sumption that control will lower all
Wellhead prices. This may or may
not happen. Control would, no doubt,
tend to level prices but would not
necessarily lower them. In fact, some
conservationists believe current
prices are too low in that they at
tract new users who speed up the
exhaustion of existing reserves.
The gas producers say that no
4. regulation is necessary, that
I'VE aren't going to gouge
anybody if left alone" Consumer
groups are skeptical. If there Is no
discrimination now. they inquire.
why is the gas industry going to
such expensive lengths to get out
from under Federal scrutiny?
Q Allegations that the FPC will
Q. stif1e the industry are, on the
basis of past performance,
entirely unfair. The FPC has not
driven other utilities under its con-
troll into bankruptcy. Moreover, the
gas producers are entitled to court
review of any FPC orders which they
consider harmful or inept. And. of
course. Congress can rewrite the law
il that should prove NECESSARY