These, and similar questions, in our opinion, 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 profound effect upon other existing forms of transportation. These effects should certainly be considered in connection with this proposed measure. Our written report on this bill discusses these effects in some considerable detail. 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 we suggest that the same 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. Mr. Chairman, we appreciate this opportunity to appear and express our views on this subject, and if there are any questions I will do my best to answer them. Senator YARBOROUGH. Mr. Chairman, that is a very fine statement. The distinguished Senator from Washington, the chairman of the full committee, Senator Magnuson, has returned from the White House and I will yield to him. The CHAIRMAN. I have no questions. Senator YARBOROUGH. Senator Lausche? Senator LAUSCHE. Yes; I would like to ask a few questions. Directing your attention to page 2 of your statement, in the last partial paragraph you discuss the Natural Gas Act. Will you describe the operation of a gas company that is acting in the capacity of a private carrier as distinguished from a gas company that exercises a public utility service as it is controlled by that act? On page 3 you do discuss it and I would like to have you go into the detail of it. On page 3, you state: It is our understanding that typically the 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. Now, in those operations do you have two operators, one the wholesale vendor that sells to the utility? Mr. MURPHY. And then the pipline? Senator LAUSCHE. Yes. Are the pipelines in those instances operated by private carriers? Mr. MURPHY. That is my understanding, Senator, that they are; but they are servicing a public utility and as such they have been made subject to the regulatory provisions of the Natural Gas Act. Senator LAUSCHE. They are, however, a private carrier servicing a public utility company? Mr. MURPHY. Yes, sir; that is my understanding. Senator LAUSCHE. And both of them became subject to the regulatory provisions under the Natural Gas Act? Mr. MURPHY. Yes, sir; that is my understanding. Senator LAUSCHE. And did the question arise in the establishment of that structure as to whether or not the private carrier ought to be given the right of eminent domain? Mr. MURPHY. Yes, sir; as I recall it did, and the Court stated that was a matter for the Congress to decide, if it was constitutional for the Congress to do that the Court had no Senator LAUSCHE. Are you in the position to discuss the aspect of it which would be challenged on the grounds that the appropriation of the property is not intended for public use but for a private operator? Mr. MURPHY. No, sir. Senator LAUSCHE. You cannot discuss it? Mr. MURPHY. No, sir. Senator LAUSCHE. Except that you do quote the decision Thatcher v. the Tennessee Gas Transmission Co., in which the Court held that whether the power of eminent domain shall be given is a matter of policy for the Legislature and not for the courts. Mr. MURPHY. Yes, sir; and I might point out, Senator, that what we are trying to emphasize there is that the Court spoke of interstate commerce and they made no distinction as to whether it was common or private carrier. As I read the decision there it is that Congress has the authority to grant such right of eminent domain if it involves interstate commerce, regardless of whether it is a private or common carrier. Senator LAUSCHE. That is what you read into the two decisions? Mr. MURPHY. Yes, sir. If I may read on sheet 3, speaking of the Thatcher case: As a court we are called upon to determine only whether the legislative act in question is constitutionally proper as a regulation of interstate comThe wisdom of the exercise merce. and so forth. It makes no distinction in the decision as to whether it is common or private carriage. Senator LAUSCHE. You are not in a position to discuss how the Court got around the proposition that the right of eminent domain shall lie only when the property taken is to be used for public purposes? Mr. MURPHY. That is the basis on which the decision was based, I believe. That is my understanding as to how they arrived at that, Senator, that it was for a public use. Senator LAUSCHE. That is even though it was carried by a private operator, the fact that they were supplying a public utility warranted the judgment that it was for a public use, is that what you are wanting to say? Mr. MURPHY. Yes, sir; and it is moving in interstate commerce. Senator LAUSCHE. I understand that. Getting to page 6, I am reading now from the second paragraph in the middle of the page: 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? Will you elaborate on that? Mr. MURPHY. What we were trying to point out there, Senator, is that it should be understood that we have today some pipelines which are private lines, and that they are subject only to our reporting and accounting requirements. Then as to railroads, motor carriers and water lines operating as private carriers, the present act does not provide for the issuance of any certificate or permit to that type of carrier. We were merely trying to bring this to the attention of the committee. That is the situation as it exists today, and we did want to point it out to you. The question could arise as to whether this bill proposes or intends to grant a certificate of public convenience and necessity to a private carrier. Senator LAUSCHE. Based upon the language of the bill, would the private carrier of this type of fluid coal, servicing a public utility, be subject to regulation by your Commission? Mr. MURPHY. Yes, sir, I think it would. Senator LAUSCHE. That is it would Mr. MURPHY. As to services and rates, accounting. Mr. MURPHY. Yes, sir. Senator LAUSCHE. Would it be subject to your regulation in determining who is to be serviced by the private carrier? Mr. MURPHY. May I correct one thing? I said it would be subject to the rates, accounting, and such. I don't think it would as to rates unless they were hauling for hire, Senator. So I do want to correct that. Senator LAUSCHE. The private carrier would not be subject to your regulation in determining whether the rate charged was reasonable? Mr. MURPHY. If he was transporting for someone else at a rate or charge; yes, sir; I say it would be subject to it. Senator LAUSCHE. What if he were transporting for himself? Mr. MURPHY. No, sir; he would have no published rate on the movement so it would not be subject to that. Senator LAUSCHE. That would mean if you had this line owned by a coal company and it hauled its coal alone, its fluid coal, it would not be subject to regulation on the cost of carriage? Mr. MURPHY. On the rates; no, sir; I would say it would not. Senator LAUSCHE. And in the scale of the coal, of the fluid coal, would it be subject to your regulation? Mr. MURPHY. No, sir, not under the proposed bill. Senator LAUSCHE. Well, then, a private company would have the right to carry the coal without any regulation as to the cost of transportation or the cost for which the coal is eventually sold? Mr. MURPHY. That is my understanding; yes, sir. Senator LAUSCHE. Now, then, would you have any power under this bill to direct the carrier, this private carrier, to sell to various distributors at the end of the line? Mr. MURPHY. No, sir. Senator LAUSCHE. The private carrier could choose its distributors? Mr. MURPHY. That would be my interpretation of the bill; yes, sir, that he could serve whom he wished. Senator LAUSCHE. Would you have any power to direct the private carrier to serve particular shippers or coal companies at the beginning of the line or en route? Mr. MURPHY. No, sir; I am sure we would not under the proposed bill have that authority unless he starts out to hauling for other people, then, of course, he immediately switches from a private to a common carrier. Senator LAUSCHE. But let's assume that you have a number of shippers of coal that wanted to make use of this transportation system; could you compel this private carrier to serve those shippers and vendors of coal? Mr. MURPHY. No, sir, not as a private carrier; we would have no control over service. Senator LAUSCHE. What control, if any, would you have? Mr. MURPHY. Well, I don't think we would have any over service, Senator. Senator LAUSCHE. Unless they began transporting for hire? Mr. MURPHY. That is true. If they resorted to the practice that caused the oil pipelines to be included in part 1 of the act, that is of compelling the other producers to sell their oil to them in order to transport it by pipeline, I think you would run into the same situation here if that condition developed. That is the reason the oil pipelines were subject to regulation. Senator LAUSCHE. Then, to summarize: One, the private carrier of this fluid coal could completely limit the companies whose coal it would carry? Mr. MURPHY. Yes, sir; and that would have to be a private carrier. It would have to be transporting his own coal slurry. Senator LAUSCHE. No. 2, it could choose the utilities and the distributors of coal who were receiving it on the other end of the line? Mr. MURPHY. Yes, sir. Senator LAUSCHE. And it could completely control the shippers who were wanting to use the line? Mr. MURPHY. Yes, sir; they could refuse to carry for them. I think what you mean, if I understand your question, is they could just refuse to handle it for them. Senator LAUSCHE. On page 8 you make this statement: The institution of coal pipeline service, if successful, would have a profound effect upon other existing forms of transportation. These effects should certainly be considered in connection with this proposed measure. Our written report on this bill discusses these effects in some considerable detail. I have not seen the written report. Would you mind, if you can, describing the impact as you see its possibility? The CHAIRMAN. Senator Lausche, at this point, we will put the report of the ICC in the record. (The report referred to is as follows:) Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, APRIL 16, 1962. DEAR CHAIRMAN MAGNUSON: Your letter of April 3, 1962, addressed to the Chairman of the Commission and requesting comments on a bill, S. 3044, introduced by you, "to amend the Interstate Commerce Act to grant to any carrier of coal by pipeline, subject to any of the provisions of part I of the act, the right of eminent domain, and for other purposes, has been considered by the Commission and I am authorized to submit the following comments: S. 3044 would amend part I of the Interstate Commerce Act by adding thereto a new section 27 which would confer the right of eminent domain upon any carrier of coal by pipeline that is subject to any of the provisions of part I of the Interstate Commerce Act and whose operations have been found by the Secretary of the Interior to be required by the public convenience and necessity. This right would be exercised in a State court unless the amount claimed by the owner of the property to be condemned exceeded $10,000, in which case the action could be brought in either a State court or a Federal district court. Since the extent to which pipelines are subject to the Interstate Commerce Act has not always been clear, we believe that a review of some of the judicial developments in this field would be helpful in the consideration of this proposed measure. The amendments to section 1 giving the Commission jurisdiction over pipelines, other than those transporting natural or artificial gas or water, were added to the act in 1906. The purpose thereof was to reach the large pipeline-owning oil companies who, by refusing to allow their use by others, compelled other producers to sell their oil to these companies. The Supreme Court upheld this policy in the Pipe Line cases, United States v. Ohio Oil Co., 234 U.S. 548 (1914), stating: "The control of Congress over commerce among the States cannot be made a means of exercising powers not entrusted to it by the Constitution, but it may require those who are common carriers in substance to become so in form. So far as the statute contemplates future pipelines and prescribes the conditions upon which they may be established, there can be no doubt that it is valid. So the objection is narrowed to the fact that it applies to lines already engaged in transportation. But, as we already have intimated, those lines that we are considering are common carriers now in everything but form. They carry everybody's oil to a market, although they compel outsiders to sell it before taking it into their pipes. The answer to their objection is not that they may give up the business, but that as applied to them, the statute practically means no more than they must give up requiring a sale to themselves before carrying the oil that they now receive. The whole case is that the appellees, if they carry, must do it in a way that they do not like. There is no taking and it does not become necessary to consider how far Congress could subject them to pecuniary loss without compensation in order to accomplish the end in view." The Court, however, held the operations of one pipeline company not to be subject to the act: "There remains to be considered only the Uncle Sam Oil Co. This company has a refinery in Kansas and oil wells in Oklahoma, with a pipeline connecting |