Unwelcome Gift

The U.S. Supreme Court last week gave the Federal Power Commission a power it did not seek and does not want: authority to control natural gas prices charged by "independent" producers, i.e., those who are not affiliated with interstate pipeline companies. In the gas-producing states of Texas, Oklahoma and New Mexico, the reaction was one of dismay. Regulatory efforts by those states are aimed at conserving natural resources, and prices have a direct effect on conservation policies. At one time gas prices were so low that the gas was wasted; the expense of gathering it was more than the selling price. Thus, the states feared that federal control of prices might keep them too low, upset state conservation programs.

Gas Slow-Up? How the natural gas industry felt about the ruling became quickly evident at the winter meeting of the Interstate Oil Compact Commission in Oklahoma City. Some oilmen who produce gas merely as a byproduct recklessly threatened to burn their gas rather than submit to federal regulation, since they feared it would open the way to oil price regulation also. Since oil and gas frequently come from the same well, regulating the price of one would affect the price of the other. Others pointed out that recent contracts between gas producers and pipeline customers provided for automatic cancellation if the Federal Government gets control over prices.

The real dangers seemed to lie in a long-term slow-up of the natural gas industry, rather than immediate difficulties. Said C. H. Hinton, engineer for the Panhandle Eastern Pipe Line Co.: any "victory" for consumers through slightly lower gas bills will be short-lived, because new drilling for wells will "slow down drastically," and new contracts for additional gas supplies will be "virtually impossible to complete."

Job for Congress? The FPC, undermanned and with little experience in gas price regulation, is anything but eager to police the 2,300 producers who sell their gas directly to interstate pipelines. Although the Natural Gas Act, on which the court's opinion was based, has been on the books since 1938, FPC has never interpreted the law to mean that it could control intrastate prices of the independent producers. In a test case involving the Phillips Petroleum Co., biggest of the independents, FPC decided that the company was outside its jurisdiction. But five gas-consuming Midwestern cities and states appealed to the courts, and the U.S. Circuit Court of Appeals in the District of Columbia reversed the FPC.

The U.S. Supreme Court, by refusing to review this decision, upheld the lower court. Phillips Petroleum is already preparing a petition for a rehearing. But the eventual solution will probably be up to Congress, which once passed a bill to put gas at the wellhead beyond FPC's jurisdiction (TIME, April 24, 1950) but had it vetoed by Harry Truman.

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