Presidential functions such as the rule-making and quasi-legislative powers that Congress has itself delegated to the President over the years-which are of such fundamental character and importance as to suggest the powers themselves would not have been created by act of the Congress except upon the presumption that the President himself would carry them out as they direct. No practical and timely way, however, comes to mind to segregate and make an exception for such functions in the present bill, unless it were thought possible to consider critically and separately each of the 1,100 or more statutory functions of the President, and it is not to be presumed that the President will make any delegations without a careful determination that good administration no longer requires his personal performance of the functions involved. Nor is it to be presumed that the President will make any delegations which might tend to weaken his control over the actions of any part of the executive branch of the Government.

The General Accounting Office has no objections to express to the bill and, in view of the foregoing, no amendments to offer.

Sincerely yours,

AMENDING THE NATURAL GAS ACT OF JUNE 21, 1938, AS AMENDED

JULY 28, 1949-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. HARRIS, from the Committee on Interstate and Foreign Commerce, submitted the following

REPORT

To accompany H. R. 1758

The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H. R. 1758) to amend the Natural Gas Act approved June 21, 1938, as amended, having considered the same, report favorably thereon with an amendment and recommend that the bill. as amended, do pass.

The amendment strikes out all after the enacting clause and inserts a substitute which is set forth in appendix I of this report.

PURPOSE OF THE BILL

This bill has a very simple and limited purpose. The Natural Gas Act specifically provides that it shall not apply to the "production or gathering of natural gas." Consequently, since the passage of the act in 1938, it has been consistently administered and applied by the Federal Power Commission, in accordance with the intent of Congress, so that independent producers and gatherers of natural gas have not been subjected to regulation with respect to arm's length sales, made during the course or upon completion of production and gathering, of natural gas which is subsequently transported and sold by regulated interstate pipe-line companies (i. e., "natural-gas companies" within the meaning of the Natural Gas Act). As the term is here used an "independent" producer or gatherer is one who is neither a natural-gas company, by reason of other operations, nor affiliated with a natural-gas company. The sole purpose of this bill is to make certain that the Natural Gas Act will continue to be so administered and applied by the Federal Power Commission.

NECESSITY FOR LEGISLATION

Section 1 (b) of the Natural Gas Act, which specifies the jurisdictional scope of the act, reads as follows:

(b) The provisions of this Act shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used for such distribution or to the production or gathering of natural gas. [Italics supplied.]

Until the decision of the Supreme Court in the Interstate case (Interstate Natural Gas Company v. Federal Power Commission et al.; 331 U. S. 682 (1947)) it was assumed by all concerned that the specific declaration that the act shall not apply to "production or gathering" contained in section 1 (b) was broad enough to exclude from regulation arm's-length sales of natural gas by independent producers and gatherers, made in the course, or at the conclusion, of their production and gathering operations, and, consequently, to exclude such producers and gatherers from regulation. That this was intended by Congress appears to be generally conceded. That the Federal Power Commission itself took this position is clear from numerous statements made by the Commission, including statements made in its Order No. 139, issued on August 7, 1947, which is set forth in full in appendix III of this report. In that order the Commission said, in referring to various bills being considered by Congress during the Eightieth Congress:

At the hearings on these bills before the Senate and House Committees on Interstate and Foreign Commerce, the Commission likewise stated its view that independent operators who produce or gather natural gas and sell it at arm's length to natural-gas companies subsequently transporting such natural gas in interstate commerce are exempt from the provisions of the Natural Gas Act.

The first test of the jurisdictional scope of the act, in this regard, was made less than 2 years after the act was passed in the Columbian Fuel Corp. case in 1940. In that case the Federal Power Commission concluded:

that it was not the intention of Congress to subject to regulation under the Natural Gas Act, all persons whose only sales of natural gas in interstate commerce, as in this case, are made as an incident to and immediately upon completion of such person's production and gathering (2 F. P. C 200 (1940)).

No subsequent determination by the Commission has overturned this initial finding. No recommendation has come to Congress from the Commission during the past 11 years requesting that the jurisdictional authority in question be extended. No instance has been cited where the Commission has been thwarted, by reason of prevailing jurisdictional limitations, in its efforts to protect consumers or regulate industry operations.

While the Interstate case, above referred to, involved regulation of a natural-gas company, and did not present the issue of the power of the Commission to regulate arm's-length sales of natural gas by independent producers and gatherers, the Court couched its opinion in such broad terms that it immediately became the basis for diverse interpretations, by interested persons, as to its implications regarding the jurisdictional status under the Natural Gas Act of independent producers and gatherers. The views expressed by the Court gave rise to

the fear that if the Commission should depart from its theretofore consistent practice and attempt to regulate arm's-length sales by independent producers and gatherers. the Court might uphold such action by the Commission.

During the period of more than 2 years since the Supreme Court rendered this decision, confusion and uncertainty have prevailed to such an extent that it is imperative that Congress act without further delay to clarify the situation. The present bill will accomplish this by clearly and unequivocally reaffirming the original legislative intent and well-settled administrative practice.

CERTAIN DEVELOPMENTS LEADING TO THE PRESENT SITUATION

Owing to the course of the proceedings in the lower courts in the Interstate case, confusion and uncertainty prevailed within the oil and gas industry regarding the scope of the Commission's jurisdiction. Various bills, accordingly, were introduced in the first session of the Eightieth Congress, attempting, among other things, to correct the doubt and ambiguity then being cast on the correctness of the Commission's past administrative policies and practices. These bills (H. R. 2185, H. R. 2235, H. R. 2292. H. R. 4051. and S. 734) were accorded extensive hearings.

During the course of those hearings, the Federal Power Commission recommended delay, taking the position that the legislation proposed was anticipatory of the results and recommendations which it felt it. would be in position to make to the Congress upon the completion of its then pending investigation of the natural-gas industry (Docket G-580).

The Supreme Court, however, rendered its decision in the Interstate case on June 16, 1947. The Chairman of the Commission, accordingly, under date of June 23. 1947, advised this committee that:

Under these circumstances, as we have stated previously, your committee may now wish to consider the adoption of an amendment to clarify this situation. Therefore we are submitting to you and your committee the attached legislative proposal which is in accord with the Commission's interpretation that the Congress intended independent producers and gatherers to have a nonjurisdictional status under section 1 (b) of the Natural Gas Act, and is likewise in accord with previous rulings and determinations by the Commission regarding this matter

Pursuant to the recommendation, a member of the committee, Hon. J. Percy Priest, of Tennessee, introduced the Commission's proposal as H. R. 4099, which was subsequently proposed on the floor of the House as a substitute for H. R. 4051.

The full membership of the Commission urged the enactment of this bill to make clear the exemption of independent producers and gatherers, as is indicated in a letter of July 10, 1947, to the chairman of this committee:

MY DEAR MR CHAIRMAN This is in response to your request of July 9 for an early comment by the Commission regarding HR. 4099, a bill introduced by Congressman Priest, of Tennessee

The Federal Power Commission urges the enactment of this bill at this time to make it perfectly clear that independent producers and gatherers of natural gas are exempt from the provisions of the Natural Gas Act and the jurisdiction of this Commission

The enactment of this bill would dispel the uncertainty regarding the status of such independent producers and gatherers which has been created following the recent decision of the Supreme Court in the Interstate case. Such action by the Congress now should dispose of this important and noncontroversial matter.

This procedure would enable the Congress to defer action on the many other aspects of natural-gas regulation involved in the complexities, uncertainties, and ambiguities of H. R. 4051 (the Rizley bill), to which we referred in detail in our statement of July 1 to you and the members of your committee. As you know, all these problems are being carefully analyzed by the Commission, in cooperation with all interested parties, in the natural-gas investigation (Docket No. G-580) A full report on this investigation will be submitted to the Congress for its consideration within the next few months.

I am authorized to state that the position of the Commission in this matter is fully in accord with the legislative program of the President.

Respectfully yours.

FEDERAL POWER COMMISSION, By NELSON LEE SMITH, Chairman

It will be noted that in this letter the Commission characterized the matter of clarifying the status of independent producers and gatherers as a "noncontroversial matter."

The first session of the Eightieth Congress adjourned without any clarifying legislation being enacted. The Federal Power Commission, accordingly, on August 7, 1947, less than 2 months after the Interstate case was decided, in Docket No. R-106, issued an order (No. 139), which in the language of the Commission, was "designed to relieve any existing uncertainty regarding the Commission's position." This order was signed by Commissioners Smith, Olds, and Wimberly, with Commissioner Draper dissenting. (See appendix III for the full text of the order.) The rule adopted by the Commission to implement this order, stated:

The Federal Power Commission is of the opinion that it was the intent of the Congress that the control of production or gathering of natural gas should remain a function of the States and that the Natural Gas Act should not provide for regulation of those subjects

For the purpose of administering the Natural Gas Act, the Commission wil construe the exemption contained in section 1 (b), to the effect that the provisions of the act shall not apply to the "production or gathering" of natural gas, as including arm's-length sales of natural gas by independent producers and gatherers, made during the course or upon completion of production and gathering The Commission, consistent with this construction. will not assert jurisdiction solely because of such sales

The Commission stated in order No. 139 that

It is also our intention, in keeping with the position heretofore taken. to continue to recommend to the Congress that it take appropriate clarifying legislative action regarding this matter

Since the issuance of order No. 139, one of the signers has changed his interpretation and now believes that independents are subject to regulation under the Natural Gas Act. Another Commissioner, who was not a member of the Commission at the time the order was issued, has stated that he considers the rule a nullity-absolutely meaningless. A majority of the Commission, which has the power to do so, has stated. through their spokesman, that order No. 139 will be rescinded when proposals now before Congress are finally disposed of

Hence, during this session three members of the Federal Power Commission have adhered to a new interpretation restricting the exemption in question solely to the physical functions of producing and gathering; the other two members of the Commission have adhered to the interpretation consistent with past and prevailing practices of that agency. (Actually, as of today, the membership is divided two to two because the term of one member of the majority recently expired and, while he has been renominated, his reappointment has not been acted on by the Senate.) Previously, therefore, a 3 to 1 majority prevailed in