Pennsylvania, which charter gives them the privilege to carry gas from Pennsylvania over the line into the State of New York, and in pursuance of the privileges and rights granted by that franchise the Pennsylvania corporation does actually carry the gas into the State of New York and receives emoluments therefor-those are the facts?

Mr. CAWCROFT. Yes.

Mr. DEWALT. Do you now say as a legal proposition that having once assumed that liability and having once exercised that right and having received emoluments therefor it can now arbitrarily, because of a dispute as to price, shut off the supply of gas without violating the provisions of their charter?

Mr. CAWCROFT. We shall contend in the Federal courts that it can not, but for fear that under some circumstances we might be beaten, either in the legal proceedings or in a mechanical sense, because the company has the physical control of the gas supply, we want to establish a sort of second line of defense here and take this exception out of the act, so that if the corporation finally wins out on that proposition, it will pass under the control of the Federal Government. Mr. DEWALT. Do you not agree with me, however, that you have a remedy at law against these people?

Mr. CAWCROFT. We contend we have, very strongly.

Mr. DENISON. Let me ask Judge Dewalt this question: Do you not make an error in assuming that the State of Pennsylvania issued a charter granting the right to transport this gas over into another State?

Mr. CAWCROFT. He does. I can give you an interesting sidelight on the physical side of the situation, which I think you want. The Pennsylvania Gas Co. in its display advertisements in the city of Jamestown to force the withdrawal of these proceedings before the public-service commission was creating the belief that it in the final analysis would shut off the gas no matter how many lawsuits we won, taking the ground that under the constitution and the statutes of the State of Pennsylvania relating to the conservation of the natural resources of the State it could shut off the exportation of natural gas from beyond it boundaries. It took that position for a year. The present litigation has been on for 30 months. Some years prior to that the Pennsylvania Gas Co., in order to maintain its supply of gas, started to buy gas in West Virginia, and within the past year the State of West Virginia, having some similar provision in its constitution, has sought to shut off the exportation of natural gas as a natural resource into the State of Pennsylvania. Notwithstanding that the Pennsylvania Gas Co. had said in its display advertisements that the State of Pennsylvania could shut off the exportation of gas into New York, that compelled the Pennsylvania Gas Co. to reverse itself in the legal proceeding and it contended before the courts of the State of West Virginia that the State of West Virginia could not shut off the exportation of gas into Pennsylvania. So the company reversed its proposition in the courts.

The CHAIRMAN. A similar problem has developed in the transmission of waterpower. I am not sure whether that proposition has ever reached the Supreme Court?

Mr. CAWCROFT. I think the West Virginia case is pending in the Supreme Court and I think the gas companies in Pennsylvania are seeking the defeat of the State of West Virginia on that proposition.

Mr. DEWALT. As a basic proposition the State of Pennsylvania or any other State would have the right to say that under the police powers of the State a commodity like gas could be restricted in its transport to service within the State. I think that is true, except for this, that the State of Pennsylvania having granted a charter, which may or may not have been a charter definite in its terms as to the length of time, can not violate that contract afterwards by saying that the gas should be restricted simply to the confines of the country if the charter gives the company the privilege of carrying it from the State?

Mr. CAWCROFT. It does. Of course, the company says it has the right. It looks as though we would win every lawsuit and then lose the gas. That is why I am here. That is why we want the interstate gas companies placed under the control of the Interstate Commerce Commission, so that we can get from it direct relief, just as from the public service commission we have gotten relief, but what does it amount to if the gas is shut off?

The CHAIRMAN. You view this from your standpoint, which is proper. but there must be other sections of the United States where a like situation probably exists?

Mr. CAWCROFT. There are.

The CHAIRMAN. Where there is gradual but certain failure of the gas supply. Do you know of like situations?

Mr. CAWCROFT. I am familiar with the pamphlets issued by the Smithsonian Institute on the subject of natural gas situation from a physical standpoint, and, of course, the gas if it comes out of the well is naturally exhausting the well, but in the record before the public service commission it was shown that the Pennsylvania Gas Co., as you say, has collateral contracts with companies in West Virginia and Virginia and in Pennsylvania and in other States and that its supply of natural gas is, in fact, increasing.

The CHAIRMAN. Is it making new contracts and extending its lines?

Mr. CAWCROFT. Yes, sir. Erie was one of the war cities of the country and increased from 40,000 to 120,000. There were about 2,000 Government houses erected by the housing commission, and they were not supplied for a long time. The city of Erie wants the gas diverted to Erie.

The CHAIRMAN. Has it been done?

Mr. CAWCROFT. Not entirely, because there is a contest as to the price. New York State wants the gas diverted to it to supply them, and it does not want to pay the arbitrary price fixed by the gas company; it wants it reviewed by a proper commission or judicial body. In the same way the city of Buffalo has a contest on as to gas. It is a unique situation as to Buffalo. The gas company has given notice that the price must go up; that there will be a cut of 20 per cent in the available supply; and then the comptroller of the two companies that make that announcement says that there will be an artificial gas company at Buffalo, and announces that it will make up the 20 per cent in supply of the natural gas which is shut off at $1.30 a thousand. The CHAIRMAN. Five or six years ago there was a very elaborate hearing before this committee on a bill seeking to extend the powers of the Interstate Commerce Commission over pipe lines, including

gas pipe lines, but no action was taken to remove the exception from section 1 of the act.

Mr. CAWCROFT. I do not know whether any of you gentlemen live in a natural-gas town and know the physical conditions.

The CHAIRMAN. Mr. Sanders of Indiana comes from a natural-gas State.

Mr. SANDERS of Indiana. The natural gas is slowly being exhausted.

The CHAIRMAN. Then it is no longer a problem in your State? Mr. SANDERS of Indiana. No, sir.

Mr. CAWCROFT. We have had natural gas so long that the majority of the workmen's houses are built with small stairways, chimneys, and cellars. We can pay any price, for it is a convenience to some of these towns. They can put it $1 above the price of coal; we are willing to stand for any price, provided it is fixed by some competent body who can keep it at that figure.

The CHAIRMAN. Should they physically shut off the gas supply you intend to enjoin them, and you want relief in that direction? Mr. CAWCROFT. Yes, sir.

Mr. MERRITT. As to the dwelling houses, if the gas is shut off it will require physical alteration of the houses?

Mr. CAWCROFT. Yes, sir.

Mr. MERRITT. As many of them have small chimneys?

Mr. CAWCROFT. Small chimneys, such as you can use with natural gas, and the stairways down to the cellar are narrow.

Mr. MERRITT. Not sufficient to burn coal?

Mr. CAWCROFT. No, sir.

Mr. DENISON. Under the laws of the State of New York does the Pennsylvania corporation have to apply to any official body in the State of New York to get a license?

Mr. CAWCROFT. Under our system in New York a foreign corporation files its certificate of incorporation under the certificate of the State where organized in the office of the secretary of state at Albany and pays the State tax. It is then entitled to sue and to be sued in the courts of the State.

Mr. SWEET. How can any provision be placed in the original charter as to doing business in other States?

Mr. CAWCROFT. I am not informed as to that feature, but I know it was found that the Pennsylvania Gas Co. had the right to do business in other States under its charter. Of course, they were so glad to have the Pennsylvania Gas Co. at Jamestown, some years ago. just as they are in the case of the Bell Telephone Co., that they just passed a blanket resolution asking them to come in. That is the nature of the franchise. The gas company claims that it has a right in Jamestown, but has no obligation under that franchise. We contend that it has created an obligation by operating there for 30 years and taking our money. It seems to me the situation is so complicated up in that section of the country, and in any other section of the country where natural gas is provided, that we really need Federal control.

Mr. HAMILTON. Are you able to state in a general way what the natural-gas area is?

Mr. CAWCROFT. No; but it is set out in the Smithsonian Institute reports in map and text form. It is in our case before the New

York Public Service Commission. I could have those briefs sent to you.

Mr. HAMILTON. I was thinking of that in connection with your request of this committee?

Mr. CAWCROFT. Yes, sir.

Mr. HAMILTON. That it would give some idea of the scope of operations. There is Oklahoma, Indiana

Mr. CAWCROFT (interposing). West Virginia.

Mr. HAMILTON. West Virginia.

Mr. CAWCROFT. Virginia, New York, Pennsylvania, Ohio—it is a vast business in this country.

Mr. HAMILTON. In the extension of your remarks, please state the natural gas areas?

Mr. CAWCROFT. Yes, sir.

May I make this other fact clear!

The CHAIRMAN. Certainly.

Mr. CAWCROFT. There are probably 15 or 20 gas companies involved in this controversy. Each of these companies has collateral contractwith producing wells; that is, each of them has contracts with the other. In other words, a producing company may sell to the Buffalo line and then to another company, and then the producing company, owning the Buffalo line, raises the rate 20 per cent and therefore the Buffalo company raises its rate 20 per cent, but in each case a majority of the stock in each of them is owned by the National Fuel Co. and the National Fuel Co., I suppose, is controlled by the Standard Co.

Mr. HAMILTON, What is the real need of these intervening com

panies!

Mr. CAWCROFT. That is the arbitrary method they have of either raising the rate or shifting the supply of gas from Jamestown to some ether city. That is the whole nigger in the fence, to use that phrase. Mr. HAMILTON. There is not any practical need of these interven ing companies?

Mr. CAWCROFT. No, sir. There is one great National Fuel Co. which owns a majority of the stock of these 20 companies, and all of these lawsuits going on are largely fictitious lawsuits.

Mr. HAMILTON. Is it a scheme indirectly to raise the price to the

consumer?

Mr. CANCROFT. It is a double scheme, one is to permit them to operate between the State laws and the Federal sovereignty and the other is to provide an arbitrary method of raising the price, as you

sav.

I have here the ruling of Judge Irvine on this question of selling gas ont-ide of the State. Judge Irvine was formerly dean of the Cornell Law School and is one of the best informed men dealing with public service corporations. In his opinion he said:

While the transportation of natural gas through pipe lines from one State to other State is interstate commerce, Congress has not taken over the regula tion of that particular industry. Indeed, it has expressly excepted it from the

operation of the Interstate Commerce Commission law (Interstate Commerce Commission law, sec. 1). It is quite clear, therefore, that this commission can not require a Pennsylvania corporation producing gas in Pennsylvania to transpart it had deliver it in the St. te of New York and that the Interstate Commerce Commission is likewise powerless. If there exists such a power-and it seems There dies-t is a power restad is Congress and by it not vet exercised. There is to available source of supply for the Crystal City Co. at present except

through purchasing from the Potter Gas Co. It is possible that this commission might fix a price at which the Potter Gas Co. should sell if it sold at all, but as the commission can not require it to supply gas in the State of New York, the exercise of such a power to fix the price, if such power exists, would merely say sell at this price or keep out of the State.

The committee is much obliged to you gentlemen for your presentation.

Mr. CAWCROFT. I thank you, Mr. Chairman.

The CHAIRMAN. The committee will now take a recess until 10 o'clock to-morrow morning.

(Thereupon the committee took a recess until Tuesday, September 23, 1919, at 10 o'clock a. m.)

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Tuesday, September 23, 1919.

The committee met at 10 o'clock a. m., Hon. John J. Esch (chairman) presiding.

The CHAIRMAN. We will be glad to hear you now, Mr. Thorne.

STATEMENT OF MR. CLIFFORD THORNE, LYTTON BUILDING, CHICAGO, ILL.

Mr. THORNE. Mr. Chairman and gentlemen of the committee, there are many portions of this bill with which we are in hearty accord. The CHAIRMAN. Mr. Thorne, for the sake of the record in this hearing, give your name, address, and whom you represent.

Mr. THORNE. Clifford Thorne, Lytton Building, Chicago; certain oil, grain, and live-stock shippers. Do you desire the names of the organizations?

The CHAIRMAN. You may supply them.

Mr. THORNE. National Live Stock Shippers' League, Western Petroleum Refiners' Association, American Independent Petroleum Association, Corn Belt Meat Producers' Association, National Council of Farmers' Cooperative Associations, and various individual shippers.

As I started to say, there are various portion of this bill with which we are in hearty accord. I see nothing that can be accomplished by reviewing those propositions. I desire to direct my remarks rather to some portions of the bill to which we might offer some suggestions for modification or change.

The effect of certain parts of the bill is to further eliminate competition. This is accomplished, first, by permitting pooling of terminals and equipment and earnings; second, by the commission's authority to fix minimum rates; third, by giving to the commission authority to fix water rates, both maximum and minimum.

One of the great arguments that has been offered during the past few months against the further continuance of Government operation of our railroads has been the necessity to preserve competition, and yet we see in this measure now proposed very substantial steps taken with the deliberate purpose of killing off much of that competition still remaining in the railroad world, though it is very small in amount to-day.