the two which it has used for the sole purpose of conducting oil from its own wells to its own refinery. It would be a perversion of language, considering the sense in which it is used in the statute, to say that a man was engaged in transportation of water whenever he pumped a pail of water from his well to his house. So as to oil. When, as in this case, a company is simply drawing oil from its own wells across a State line to its own refinery, for its own use, and that is all, we do not regard it as falling within the description of the act, the transportation being merely an incident to use at the end." In Valvoline Oil Co. v. United States, 308 U.S. 141 (1939) the Commission ordered the company to file reports necessary for a valuation of the properties of the company under section 19 of the act. The Court found that Valvoline was transporting oil which it purchased from others at the wells, principally to its refineries but at times selling surplus oil to others, and that it was a common carrier within the meaning of the act and that it must file the required reports with the Commission. The first Champlin case, Champlin Refining Co. v. United States, 329 U.S. 29 (1946), also involved the filing of information for determining the value of the carrier's properties under section 19. The Court found that the company used its pipeline only to convey the company's own refinery products to its own terminal storage stations from which deliveries to purchasers were made. The company strongly contended that it was not subject to the act under the doctrine of the Uncle Sam Oil Co. aspect of the Pipe Line cases, supra. The company also contended that if it were a common carrier under section 19, it necessarily would be regarded as a common carrier for purposes of section 6 requiring the filing and observance of rates, serving the public, and other requirements applicable to common carriers. It contended that it could not constitutionally be compelled to become a common carrier. The Court, however, held that Champlin was within the act and must file the required information. The Court said: "Admittedly Champlin is not a common carrier in the sense of the common law carrier for hire. However, the act does not stop at this but goes on to say that its use of the term 'common carrier' is to include all pipeline companies a meaningless addition if it thereby included only what the term without more always had included. While Champlin technically is transporting its own oil, manufacturing processes have been completed; the oil is not being moved for Champlin's own use. These interstate facilities are operated to put its finished products in the market in interstate commerce at the greatest economic advantage." In regard to the contention that such a decision would be in violation of the fifth amendment because it would compel the oil company to become a common carrier, the Court said: "But our conclusion rests on no such basis and affords no such implication. The power of Congress to regulate interstate commerce is not dependent on the technical common carrier status but is quite as extensive over a private carrier. This power has yet been invoked only to the extent of requiring Champlin to furnish certain information as to facilities being used in interstate marketing of its products. The commerce power is adequate to support this requirement whether appellant be considered a private carrier or a common carrier." Regarding the assumption of the functions of a common carrier, the Court said: "The contention that the statute as so construed violates the due process clause by imposing upon a private carrier the obligations of a conventional common carrier for hire is too premature and hypothetical to warrant consideration on this record. The appellant in its entire period of operation has never been asked to carry the products of another and may never be. So far, the Commission has made no order which changes the applicant's obligations to any other company or person. If it does, it will be timely to consider concrete requirements and their specific effects on appellant. At present, appellant is asked only to provide information about a subject within the power possessed by Congress and delegated to the Commission, and it cannot be considered a taking of property even if it arouses appellant's premonitions." Four members of the Court strongly dissented from this decision. They contended that the company could not be held subject to section 19 and not to the other provisions of the act applicable to for-hire carriers, including the rate-filing requirements and the duty to transport for the general public. The second Champlin case, United States v. Champlin Refining Co., 341 U.S. 290 (1951), arose out of orders issued by the Commission requiring Champlin to file annual reports as a carrier under section 20 of the act, and to file tariffs of rates in compliance with section 6. The Court held that the Commission might require the filing of annual and special reports under section 20 and that it might impose some requirements as to a system of accounts, but it seems to balk at the idea of the Commission's imposing a complete accounting system: "The requirement that Champlin maintain a uniform system of accounts is somewhat more burdensome, but we think its independent value as a measuring rod for companies fully regulated under the act is clearly sufficient to justify the Commission's requesting so much as is pertinent." Concerning the filing of tariffs, the Court said, in part: "But it would be strange to suppose that Congress, in adopting a term broad enough to cover all competitive imbalances which might arise, intended that the Commission should make common carriers for hire out of private pipelines whose services were unused, unsought after, and unneeded by independent producers, and whose presence fosters competition in markets heavily blanketed by large 'majors'. Such a step would at best be pointless; it might well subvert the chief purpose of the act. "Yet on the record before us, this is precisely what the Commission is attempting to do * * *. *** We hold that on this record the Commission's order, insofar as it concerns S. 6, goes beyond what Congress contemplated when it passed the act." The Natural Gas Act, 15 U.S.C.A. 717f (h), confers upon persons who have obtained from the Federal Power Commission a certificate of public convenience and necessity the power of eminent domain to be exercised in Federal courts where the value of the property as claimed by the owner exceeds $3,000. Under the Natural Gas Act the Federal Power Commission regulates not only the movement but also the contract of sale. Typically, a natural gas company enters into a long-term contract to furnish gas to a distributor and the entire contract as well as the means of carrying it out are within the control of the Federal Power Commission. While these natural gas companies are not public utilities in the usual sense, they primarily serve public utilities and are an essential element of the public utilities they serve. Where these gas companies serve other than public utilities, the regulation of that activity is necessary for the protection of the public utilities. The grant of eminent domain under the Natural Gas Act has been upheld in the courts. A leading case is Thatcher v. Tennessee Gas Transmission Co., 180 F. 2d 644, certiorari denied, 340 U.S. 829. In the course of its opinion, the Court, of course, referred to the fact that provision was made for the issuance of certificates of public convenience and necessity and on the question of power, stated: "As a court we are called upon to determine only whether the legislative act in question is constitutionally proper as a regulation of interstate commerce, the wisdom of the exercise of such power, if constitutional, being a matter committed solely to the legislative branch of the Government." The power of eminent domain also has been conferred by the Federal Water Power Act, 16 U.S.C.A. 814, upon persons who have obtained from a commission created for that purpose, a license to build a dam across a navigable stream. This right is needed to acquire land that will be flooded by the dam. This grant of power has been upheld. State of Missouri v. Union Electric Light & Power Co., 42 F. 2d 692 (1930). In the course of its opinion, the Court said: "It is not within the judicial power to question the purpose for which property is to be taken under the power of eminent domain. The necessity for the taking is not a judicial question, but is exclusively within the power of Congress and one which it may determine by direct enactment or by delegating the power to some other officer or board." Attention is invited to the fact that under both of the above-mentioned statutes, a determination is required to be made by an administrative agency that the particular project is in the public interest, and the right of eminent domain does not exist without such a determination and certification. Under the Interstate Commerce Act, however, there is no requirement, whatever, that a person obtain a certificate, permit, or license before building and operating a pipeline or for the abandonment of service. Section 1 (18)-(21), providing for the issuance of certificates of public convenience and necessity for construction and 84356-62- 2 abandonment, applies only to railroads. Common carrier for-hire pipelines subject to the Interstate Commerce Act are subject to the rates and service requirements of the act, and to the reporting and accounting requirements after the line is constructed. Many pipelines nominally subject to the act, however, are subject only to reporting requirements. Neither type of pipeline is required to obtain permission of any kind before abandoning service. Eminent domain is, by commonly accepted definition, "the right or power to take private property for public use; the right of the sovereign, or of those to whom the power has been delegated, to condemn private property for public use, and to appropriate the ownership and possession thereof for such use upon paying the owner a due compensation" (29 C.J.S. 776). As stated by the Court in Campbell v. Chase National Bank, 5 Fed. Supp. 156, 171 (with numerous citations): "Under the Constitution the power of eminent domain means the right to take property for public use on payment, under the provisions of the fifth amendment, of just compensation for its value determined as of the time and place of its taking." We are not aware of any general Federal statute which confers the right of eminent domain upon common carrier railroads. It appears that railroads have, generally, functioned under State statutes. Under the provisions of S. 3044 the right of eminent domain would be granted to the operators of coal pipelines that are subject to any of the provisions of part I of the act upon a finding by the Secretary of the Interior that the operations of such a pipeline are required by the public convenience and necessity. The words "public convenience and necessity," as used in sections 1 (18), 207 (a), and 309 (c) of the act, are technical words relating to the granting of common carrier operating authority to rail, motor, and water carriers, respectively. We have some doubt that the words "public convenience and necessity" as used in line 2 page 2, of S. 3044 are intended to have the same technical application. In its context in the Interstate Commerce Act, the phrase "public convenience and necessity" relates strictly to a regulatory function, running to the service proposed to be instituted by a carrier, rather than to the taking by a carrier of land for use in the conduct of its business, which business may be affected with a public interest. These activities are separate and distinct, one involving a regulatory function and the other being more in the nature of an administrative function. We would, therefore, be opposed to vesting a regulatory function, such as the granting of operating rights, in an executive department, such as the Department of the Interior. We do not, however, see any objection to vesting in an executive department the authority to make a determination as to whether the taking of property, as contemplated under the concept of the right of eminent domain, is for a public purpose. If, on the other hand, it is the intent of the drafters of the bill that a finding of public convenience and necessity is to be required in the regulatory sense, we believe that this would give rise to a number of questions. For example, would a private carrier be eligible for a certificate of "public convenience and necessity" when transporting for itself? Or could a private carrier obtain a certificate of public convenience and necessity only when it is providing service to a public utility? Or could only common carriers be certificated by the Secretary of the Interior upon making the necessary finding? It appears that under the Natural Gas Act, a natural gas company transporting gas for itself, which is essentially private carriage, but which in so doing services a public utility, may obtain a certificate of public convenience and necessity from the Federal Power Commission and with it authority to exercise the right of eminent domain. Under the Interstate Commerce Act, certificates of public convenience and necessity may not be granted to private carriers, as such. Therefore, to provide for the granting of such authority to a private carrier of coal by pipeline subject to the act, which appears to be altogether possible under the provisions of the bill, would constitute a radical departure from the regulatory scheme set forth in the Interstate Commerce Act. A further question is raised as to whether other carriers by pipeline subject to part I of the act should not also be certificated, thus enabling them to exercise the right of eminent domain. There are, of course, other questions involved, such as providing for "grandfather rights," provisions for holding hearings where an application may be contested, and the related question of whether such carriers should be required to file an application showing, as a condition to the proposed abandonment of operation, that the present or future public convenience and necessity permit such abandonment. These, and similar questions, could be avoided by changing the comma following the word "part" in line 8, page 1, to a period, and striking the rest of the sentence, and by inserting after the word "may" in line 11 on page 2 the following: ❝, upon a finding by the Secretary of the Interior that the taking of such land or other property is for a public purpose,". Thus, the test need not be whether there is a need for the pipeline service or the inadequacy of existing transportation services, but may be limited to the question of whether the taking is for a public purpose. The institution of coal pipeline service, if successful would have a most profound effect upon railroads and other existing forms of transportation. These effects should certainly be considered in connection with this proposed measure. The effects of such a proposed coal pipeline would not be limited to the points actually served. Conceivably, powerplants may be established along the pipeline and the power produced distributed to large areas, thus eliminating coal transportation to these areas. There is also the potential competition to both railroads and coal pipelines from the production of power at the mines and its transmission to the points of consumption by electric powerlines. The railroads' loss of revenue may not be limited alone to the actual diversion to the slurry pipeline. Traditionally rail coal rates from competing origin groups have been differentially related over or under the rates from a specified base group in the general origin territory. These differentials have mainly reflected market competition between the groups, rather than distance or cost of the service to a common market. Because of this origin rate relationship, a change in the rate from one group usually necessitates related changes from the other competing groups. It is reasonable to believe, therefore, that any reduction in shipper costs by pipeline from any particular producing group may necessitate related reductions in the rail rates from related groups throughout that general origin territory; otherwise coal producers in such related groups in many instances would be shut out of the markets. The magnitude of the potential revenue loss to the railroads cannot be even estimated without extended studies of the existing rate structures and market relationships between coal producing areas and many market destinations. At the present time, there is one large-scale, long-distance coal slurry pipeline in operation in the United States. This 11-inch line operates between Cadiz, Ohio, and East Cleveland, Ohio, a distance of 108 miles. Other slurry coal lines have been proposed, the latest of which would extend from a point in West Virginia to New York and serve some intermediate points. There is very little, if any, material immediately available which furnishes a comparison of the costs of transporting coal via a slurry line with the cost of transporting coal by railroad. We understand there was an estimate that there would be a saving of about $1 per ton in transportation costs through the use of a slurry line to move a capacity of 4 million tons from the coal fields to River Rouge and Trenton, Mich., for use by the Detroit Edison Co. The distance involved in this movement was 253 miles, and the costs of transporting and drying the slurry was slightly more than 1 cent per ton per mile. The railroads were able to retain the coal traffic by reducing their rate by 50 cents per ton. The 50-cent reduction would equal the possible $4 million saving per year when the coal movement reached the 8 million tons expected within a few years. In addition to the foregoing savings in transportation costs, the boilers used for burning slurry coal would be cheaper to construct than the boilers used for so-called dry coal because the pipes for the slurry would be less expensive than the conveyors required to move the dry coal into the boilers. We understand that further economies are anticipated from newer techniques for burning slurry. At the present time, slurry transported to East Cleveland consists of 50 percent coal and 50 percent water. The slurry is decanted and dried to remove most of the moisture. The proposed line to New York would handle slurry composed of 60 percent coal and 40 percent water, and this could be burned after the removal of one-fourth of the water, forming a slurry of 70 percent coal and 30 percent water. The technological improvement thus made should, as we understand it, reduce the transportation cost per unit. Of course, the saving that might be made by a slurry line is dependent upon the existing rail rate for transporting coal. If coal is a profitable traffic, its diversion from railroads to slurry pipeline would increase the burden on the traffic remaining to the railroads and thereby make it more difficult for the rails to compete with other modes of transporta tion. In addition, attention is called to the effect which the transfer of the traffic might have on local and State taxes derived from rail transportation and to the loss of the water used to form the slurry. The use of integral trains for the transportation of large quantities of coal, according to engineering estimates, would enable the railroads to make substantial reductions in the rates and thus would make them more competitive with slurry pipelines. The introduction of such trains would require considerable capital and innovations in railroad transportation, but these obstacles do not appear to be insurmountable. Changes in the categories of labor employed and location of jobs would occur. Increased numbers of slurry pipeline employees and of miners in some areas would be offset to some extent by reductions in railroad employment. One other basic consideration should be mentioned if the bill is to be considered for enactment into law. Among the current problems confronting surface common carriers generally and railroads in particular are certain inequities which affect competitive opportunity between the modes of transport. For example, the direct and indirect subsidies to airlines and publicly provided airports and navigational aids as contrasted with the privately provided rights-of-way and terminal facilities burdens of the railroads have contributed to the current crisis in rail operations. Since the proposed legislation would grant to another of the rails' competitors, the pipelines, a competitive advantage not enjoyed by any other mode of common carriage it might be an added factor to the present inequitable balance of opportunity to survive. Under the mandate of the national transportation policy this must concern us. There are other factors which also should be taken into consideration. Transportation of coal by either of the two methods mentioned would make use of our most abundant mineral power resource as opposed to the use of the less abundant oil or gas. However, construction of slurry pipelines does not necessarily determine whether the coal would continue to be transported by the railroads. It is understood that power line losses are being reduced in the long-distance transmission of electricity, and it appears that the time may be near when it will be more economical to construct electric powerplants near the source of the coal than to transport the coal to points where the electric power is used. The use of coal under either of the two circumstances outlined above, i.e., at or near the point of electric power use or at the mine, may be supplemented by the development of atomic power generators which do not require the transportation of large tonnages of fuel. It is noted that under the procedure prescribed in subsection (b) of proposed new section 27, any action or proceeding instituted in a U.S. district court would be required to conform to the Federal Rules of Civil Procedure. The Natural Gas Act (15 U.S.C. 717f (h)) and the Federal Power Act (16 U.S.C. 814), on the other hand, provide that the procedure to be followed in a Federal court in exercising the right of eminent domain "shall conform as nearly as may be with the practice and procedure in similar action or proceeding in the courts of the State where the property is situated." In the interest of uniformity it is suggested that the above-quoted language be substituted in S. 3044 for the requirement that the practice and procedure in the U.S. district court conform to the Federal Rules of Civil Procedure. In conclusion, we believe that the question of whether the Federal power of eminent domain should be extended to carriers of coal by pipeline as proposed in the bill, or, to any other pipeline carrier subject to any of the provisions of part I of the act, is a matter of broad congressional policy. Accordingly, we have confined our comments generally to those factors which we believe the Congress may wish to take into consideration in its deliberations on this proposed measure. Respectifully submitted. RUPERT L. MURPHY, Chairman. Mr. MURPHY. This report to which I have previously made reference and which the chairman permitted to become a part of the record, Senator, reads: The effects of such a proposed coal pipeline Senator LAUSCHE. Where are you reading from? |