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It reads: 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 area
Senator LAUSCHE. Speak louder, please.
Senator McGEE. Maybe we need a slurry pipeline here to get the witness' words through.
Mr. MURPHY (continuing) 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
I don't think you want me to read on. I believe that covers the question.
The CHAIRMAN. That is intrastate, isn't it?
Senator LAUSCHE. Should I gather that because of the probable lower rate, those who would be served by the pipeline would be in a position of advantage over those who were served by competing modes of transportation?
Mr. MURPHY. That could be true. I don't think we can make that as a positive statement today, but as I mentioned, it would require some study. Certainly if it was at a lower cost, by lower cost form of transportation it would give those receiving that service an advantage, from a cost standpoint, over those not having the service available.
Senator LAUSCHE. Are you familiar at all with the bill that is presently pending before this committee establishing a communications satellite corporation?
Mr. MURPHY. No, sir.
Senator LAUSCHE. In that bill, in order to insure distribution of rights in the company, it has been provided that 50 percent of the stock shall be available to communication companies and 50 percent to the general public.
The purpose of writing that provision into that bill was to eliminate the possibility of a monopoly in one person or one company or a few companies owning and controlling the entire communications system.
Would you want to express an opinion upon the advisability of writing this bill so that it will not put the pipeline into the control of
one company allowing it to choose its shippers, choose its consignees, and absolutely control the line?
Mr. MURPHY. Senator, I think that would be a policy matter for the Congress to determine. However, I might say this, that if the provision for establishing a pipeline is put on a public convenience and necessity basis, I think you would then have some control as to the origin and destination territory to be served the same as you have today over a motor carrier certificate or permit to operate. You do have some control over that.
I know the two carriers are not comparable as to the flexibility.
Senator LAUSCHE. They are not comparable at all because the motor carrier must serve whomever chooses to use its service and within the bounds of its authority must transport for whomever will ship and to whomever it is shipped to, and you have control of the rates.
Mr. MURPHY. Yes, sir, and that is what I was alluding to. If you have one that has received a certificate of public convenience and necessity I think that denotes, as I mentioned in the prepared statement, a regulatory function rather than an administration function where it need only be shown that a particular taking is for a public purpose.
I think there is a distinction between the two terms and certainly as to the public convenience and necessity as used in the present act.
Senator LAUSCHE. If you cannot answer these questions just say so.
Are you at all familiar with what membership and stockholding interest and ownership this pipeline company shall be ?
Mr. MURPHY. No, sir.
Senator LAUSCHE. You don't know whether it is a private coal company or whether it is a company with diverse holdings by many citizens?
Mr. MURPHY. No, sir.
The CHAIRMAN. Mr. Chairman, I wanted to state there has been a great deal of discussion about, I presume even before I came in, and the Chairman of the ICC has frequently referred to the intention of the bill. I want the record to show that S. 3044 was introduced by the chairman of the committee and the words “by request” are there. The bill is a result, of course, of a message from the President of the United States to the President of the Senate and the Speaker of the House on March 20 of this year and inasmuch as it is a common and historic practice in the Senate for the chairmen of the committees which have the jurisdiction over the proposed legislation, to introduce the bill by request, I did so.
That is why it was done in this manner.
I hope the record will be clear to those witnesses and those interested that the language of the bill is not the language of the chairman of this committee. It was language proposed in the request by the President, who cannot introduce bills himself. None of us have any pride of authorship in the bill and, of course, the purpose is to do just what the Chairman of the ICC has done here today, to make these pertinent and important suggestions as to modifications, amendments, and other things of that matter pertaining to this bill.
I have no preconceived ideas one way or another on this particular bill and that is why we are having this hearing:
Now, I want to ask one question along these lines.
In order to do what the Senator from Ohio has suggested, I don't mean that he has suggested this is what he wants done or what he thinks should be done, in order to determine the customers at either end of the line, or particularly the consignee end
Senator LAUSCHE. May I interrupt? My questions should not at all be inferred to be the expression of what | think at this time ought to be done.
I am trying to reveal the merits and the weaknesses of the bill.
The CHAIRMAN. Yes. And that is the purpose of the hearings and I wanted to make that clear. I am sure no member of the committee has any preconceived ideas as to the language here and some of the ramifications of this whole problem. But you did mention, and it was brought up and I think it very important, the question of who would select the customers at any end of the line.
If it was a public utility line we would then have to add to the bill a sort of preference clause such as we have out in my country under the Bonneville Act where we distribute power, otherwise the bill would not provide for this preference. That may be desirable, I don't know. But there is ample precedent for preference clauses to serve the public interest or public bodies at the end of any line or along the line.
It may be a municipal light plant, for instance, or a cooperative light plant or something of that kind. That we would have to determine here, and look at some form of preference clause if we deemed that to be desirable as a matter of policy. Wouldn't that be correct?
Mr. MURPHY. Yes, sir.
In that report we were trying to bring out in the discussion that we sent you on the 16th as well as this morning which was an abbreviated statement.
The CHAIRMAN. One more question, could a railroad operate such a pipeline on its right-of-way without permission of the ICC ? Mr. MURPHY. Yes, sir. The CHAIRMAN. It could ? Mr. MURPHY. Yes, sir.
The CHAIRMAN. Would its rates be subject to ICC jurisdiction if it did?
Mr. MURPHY. Yes, sir; if they held themselves out to handle the traffic of anyone desiring to ship by it or if they started handling for someone else it would be subject to it?
The CHAIRMAN. Subject to the rates?
Senator LAUSCHE. Would you then have a situation where if the railroad operated it, it would be subject to regulation but if it were operated by a private coal operator it would not be subject to regulation ?
Mr. MURPHY. So long as he operated it as a private carrier, no, sir, it would not be subject to regulation, but the railroad would, since it would be transporting for hire for others.
Senator LAUSCHE. That is, the railroad would be a transporter of goods as a private carrier and the private carrier would be carrying his own goods and therefore would not be subject to regulation?
Mr. MURPHY. That is correct, if the railroad was transporting its own coal.
The CHAIRMAN. So it all depends in this case, generally now, before we get into a lot of details, it is not who operates the line, it is how they operate it?
Nr. MURPHY. It is how it is operated and to whom they offer the service or how they hold themselves out.
Senator Y ARBOROUGH. The Senator from Oklahoma ?
In our expression here as to what was intended I fully understood that it was issued-I mean introduced by you at request.
The CHAIRMAN. I wanted that clearly understood, and that this committee has never discussed this whole matter before. This is merely a request of the executive to go into this matter.
Mr. MURPHY. If we created any other feeling it was unintentional because we fully understood it.
Senator YARBOROUGH. The Senator from Oklahoma?
Senator MONRONEY. Mr. Chairman, in my State virtually all the oil that is produced there is transported by pipeline. While the oil industry that I have heard comment on this bill has no objection to the general purposes of the bill or the movement of any basic fuel by pipeline where it can be expeditiously or economically moved, there is a great fear that the use of power of eminent domain might bring all of these well-established pipelines under regulation. The law is generally settled regarding their operations as to their rights to build without a permit of convenience and necessity and to either run their oil to their own refineries or to serve as common carriers as part of this service in the movement of oil.
I have been reading your statement and the paper and I am wondering if you could make it absolutely clear in your testimony that nothing in this act granting the power of eminent domain to such coal slurry lines and perhaps requiring a certificate of convenience and necessity would be applicable to the well-established and long-recognized legislative field and the judicial decisions with regard to oil pipelines?
Mr. MURPHY. Senator, I touched on that particular subject in my statement pointing out some of the questions that the bill would raise and which would have to be dealt with, and one is as to whether you would give grandfather rights to those pipelines in operation today, whether you would give certificates to them as are issued upon a finding of public convenience and necessity, and whether to give them not only to those performing a common carrier service but also to private carriers.
I think you have these questions and that they will have to be ironed out in whatever is ultimately enacted into statute.
Senator MONRONEY. In other words, under your interpretation of the statute this could make drastic changes in existing rights and powers and authority of our present widespread network of oil and gas pipelines; is that right?
Mr. MURPHY. I don't think that the present bill would do that. Just off the cuff, Senator, I think it would raise a question as to whether someone would insist as to the oil pipelines, this being confined to the coal movement. I could not say that it would automatically give the right of eminent domain to an oil pipeline.
Senator MONRONEY. They are not asking for it, they usually buy their rights-of-way, they know where the field that they want to build into exists. A new field comes in, the only way you get the oil out is to build a pipeline in there, there are no rail connections. The oil is moved to a refinery.
They were very concerned for fear of all the redtape and a huge backlog which could result in a newly discovered oilfield waiting 4 years before it is connected with the pipeline, which means that the field sits there and remains undeveloped. They do not wish in any way to see this legislation transgress upon them and cause delay and the redtape and necessitate securing of permits of convenience and necessity and all the other things that might be entailed, just because somebody wants the power of eminent domain to run a pipeline or two for coal slurries.
Mr. MURPHY. May I respond to that, Senator, by saying this: We raise these questions in the spirit of trying to be helpful to the committee so that if there is a feeling that the oil pipeline should not be disturbed it will not be overlooked and thereby avoid getting into a court hassle in years to come, or if it is the desire of Congress to have them in there we raise it for whatever consideration Congress would want to give it.
Senator MONRONEY. It is certainly something Congress must be conscious of as we pass this coal slurry pipeline bill, that we do not involve a well-estabīished industry in a lot of legislative complications in doing the job that it has been doing all along and against which no complaints have been lodged; is that correct?
I mean, Congress must make its intent clear in this bill that it should not apply or would not apply to anything other than this coal slurry line which is before us.
Mr. MURPHY. If that is what Congress wants, yes, sir. What we want to do is to carry out the intent of Congress, and that is the reason we raise these questions is to try to be helpful to the Congress.
Senator MONRONEY. In other words, the pipelines as they exist meet the needs and the speed and the service with which the oil industry has become accustomed to. They are required to be common carriers of both gas or oil, so that they can not monopolize the distributing facilities of the produced oil, and yet they do not have to secure a permit of convenience and necessity and are limited in Federal regulation primarily to reporting and accounting. Is that not true?
Mr. MURPHY. The one that is performing common carrier service has to publish their rates.
Now the private carrier, as I have stated before, does not have to publish any rates.
Senator MONRONEY. That is right. In other words, you say on page 4 of your statement today:
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.