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(The documents referred to on p. 505 are as follows:)

MINUTES ICC-API ENGINEERS-ACCOUNTANTS VALUATION COMMITTEE

MEMORANDUM

ST. LOUIS, MO., August 28, 1934.

Yesterday and today, Mr. Louis Hood, of the engineering section, and I met in conference at the Jefferson Hotel with the representatives of the Oklahoma, Texas, Missouri, and Kansas commissions sent responsive to Chairman Lee's telegram of August 22, 1934, to the State commissions of those States, which read as follows:

"Interstate Commerce Commission, in preparing plans for valuation petroleum and petroleum products pipelines, would appreciate advice of State bodies that have had experience in such regulation. Would your commission send chief engineer or representative familiar with technical problems to conference with Mr. Lewis, Director of Valuation, at Jefferson Hotel, St. Louis, Monday at 3 o'clock? Please wire answer. Treat as confidential."

The representatives were: S. B. Nelson, chief engineer of the Missouri Public Service Commission; C. C. Brown, oil referee of the Oklahoma Corporation Commission; Mr. Anderson, chief engineer of the Kansas Commission; Olin Culberson, in charge pipeline valuation, Texas Road Commission.

The plans and order tentatively drafted by the Bureau and submitted to division 1 in B. V. Memo No. 393 under date of August 10, 1934, were submitted to these representatives. They were carefully studied and approved with minor corrections suggested. These generally were constructive improvements.

It was suggested that Section A: General, provide that the requirements be amplified by providing the rights-of-way maps show not only alinement and number of pipelines, but also size and date of installation (should not at least date be given on land and structural maps?)

It was suggested that section C, special instructions (4) be modified to include the land as well as accounting department as the recognized source of records. It was pointed out that section F would be found inapplicable to pipeline companies that they did not get aids, grants, gifts, or donations, land or otherwise. No corrections or changes were offered as to proposed B. V. form 623, lands owned or used.

A number of changes were suggested and after considerable debate, adopted, to form B. V. 624. The most important were: change title over columns 7 and 8 to read length in rods or feet, to conform to practice, the subheads being changed to conform; insert a column calling for width of right-of-way; elimination of columns headed "Sale of Portion of Property," inasmuch as easements do not constitute a transferable instrument-there is nothing to sell; and elimination of words "of parcel" over columns 10 and 11.

No corrections or criticisms of drafted B. V. form 625.

It was suggested-and accepted-that on submitted B. V. form 627 there be inserted under "Installed," the heading for the third column, the words "new or second hand," for reasons that are obvious.

In the text of section K, it was suggested that the wording of (2) invited evasion. We have drafted a new (3)-dropping all subsequent paragraphs one number-which provides that where construction was by contract, give cost in place and if that is not available, to supply the carriers own preliminary estimates.

No criticism or suggestions as to drafted B. V. forms 628 or 629.

It was suggested that two columns be added to drafted B. V. form 630. The first, probably best fitting in after colunm (4) would provide for type of line (i. e., screw, welded, etc.). The second probably best following (11) providing for river crossings. Attention was called to the fact that when pipe is laid under contract, the carrier has an inspector, but it was thought that would be charged to other accounts.

As to drafted B. V. form 631, it was suggested and accepted that under the title "Kind and Description," column (3), insert the words "description in detail," and that in column (14) after the word "inspection" add "or testing." No criticism or suggestions as to drafted B. V. form 632.

B. V. form 633, add to listed occupations (2), welders.

As to general plans there was unanimous approval of the plan suggested in Mr. Spencer's memorandum of August 9, 1934, i. e., to develop the forms for inventory by taking a specification property; and there was also approval of the selection of the Atlas which, together with the controlled Spartan Refining Co. which is engaged in purchase and refining of oil and separately engaged in pipe

line operations, was thought would present very generally the problems and properties that would be encountered at least in the midcontinent and Texas fields; as a new company its records, it was thought, would be good.

It was generally thought that the carriers could supply the requirements of orders in 60 days-that, with the latitude as acceptable available maps, they generally have most of the material available. It was thought that they will be hostile to furnishing pilots and cooperating in the work, and that they will fight. Advice was to get things well perfected and ready to start before calling on the carriers to form their committee or committees.

It was generally recognized that depreciation would be one of the most difficult things to handle. Mr. Culberson is to send in the Texas commission's methods by which it has placed the life of pipe at 33% years. But it is recognized that different kinds of pipe and the conditions under which, and soil in which, it is laid, will make almost every carrier a special case. There has been great improvement in manufacture and qualities of pipe in the recent past, which adds to its life.

The Texas commission is now beginning the valuation of intrastate properties, but will wait to see what we do as to adoption of forms and methods. Mr. Culberson presented us with a copy of their instructions for inventorying. It is drafted from the ICC classification of investment in pipelines, etc.; also with a copy of inventory of one company. All the States represented indicated a desire to cooperate-Texas especially so.

Mr. Brown (Oklahoma) thinks we shall get active cooperation if the Interstate Commerce Commission, Secretary Ickes, or the House committee recommends that ICC regulations extend to construction; i. e., writs of convenience and necessity; and is a strong advocate of it.

LEWIS, Director.

AMERICAN PETROLEUM INSTITUTE,
New York, October 1, 1934.

Subject: Valuation of pipelines.

Hon. ERNEST I. LEWIS,

Director, Bureau of Valuation, Interstate Commerce Commission,

Washington, D. C.

DEAR MR. LEWIS: Your letter of September 13 addressed to Axtell J. Byles, president, American Petroleum Institute, on this subject, has been referred to the institute's central committee on pipeline transportation.

As chairman of that committee, I wish to inform you that your letter was considered by the central committee at a special meeting held in New York on September 28 at which time I was directed to appoint a committee on valuation of pipelines which should confer with you in the matter of valuation of common carrier pipelines.

I have appointed the committee with membership as follows:

H. T. Klein, chairman, the Texas Co..; Fayette B. Dow, secretary, American Petroleum Institute; D. S. Bushnell, Northern Group of Pipelines; James J. Cosgrove, Continental Oil Co.; Clark H. Kountz, ex-officio, chairman, Central Committee on Pipeline Transportation.

The committee will be glad to confer with you at your convenience if you will kindly inform the secretary, Fayette B. Dow, 930 Munsey Building, Washington, D. C., when and where such a conference might best be held.

Very truly yours,

C. H. KOUNTZ, Chairman.

BUREAU OF VALUATION, ENGINEERING SECTION

DECEMBER 14, 1934.

Subject: Inventory and Valuation of Pipeline Common Carriers-Conferences with Steering and Subcommittee.

Memorandum to Director Lewis:

In order that you may be informed in writing as to the various subjects discussed in the Engineering Section's various conferences with the subcommittee, composed of 9 engineers and 3 accountants, and the agreements and understanding reached, this Section wishes to advise as follows:

Monday morning, December 10, 1934, as you know, all three sections met in your office with the steering committee. In the afternoon the three sections,

including yourself, met with the subcommittee, chairman of which is Mr. R. B. McLaughlin, of the Texas Co. You, of course, know what took place at the two conferences in your office, and it is needless for me to repeat the happenings here. On that same afternoon, a conference in your office was adjourned about 3:45 p. m., and the subcommittee met with our Land Section.

On Tuesday, December 11, 1934, the subcommittee again met with the Land Section in the morning, but at 1:30 p. m. the Engineering Section met with the subcommittee in hearing room D. Employees of the Engineering Section who were present at this and subsequent conferences were as follows:

C. H. Spencer, head valuation engineer: Louis Hood, assistant head valuation engineer; George S. Douglass, coordinating engineer: John R. Thomp son, equipment engineer: R. W. Shields, who will be in charge of the engineering section's inventory party: John E. Hansbury, F. B. Scheetz, A. A. Dibble; M. J. Cairns.

At the conference on the afternoon of the 11th, the Engineering Section's forms which were a part of valuation order 26 were discussed in much detail and a great many suggestions were offered by various carrier men, especially Mr. Weidner of the Sinclair Prairie Pipe Line Co., and several of the changes suggested were approved and agreed to by the Engineering Section, subject of course to your approval. In fact, it was agreed to completely rewrite form 630, dealing with the laying of pipe, as the pipeline people felt that there should be columns for additional information which we would need. So Messrs. Weidner, Shields, and Hansbury were appointed a further subcommittee to correct and get into an agreed form for submission to you all the Engineering Section's forms, and these will be submitted either today or tomorrow.

On Wednesday, December 12, the Engineering Section representatives again met with the carriers' subcommittee in hearing room D at 9:30 a. m. In the first part of the morning we continued to discuss valuation order 26. We then took up the questions of valuation sections, went over the carriers' alinement maps, and agreed what was the minimum to be shown on these maps; that the Engineering Section would require a copy of the carriers' right-of-way maps for trunklines: and that on gathering lines, we would accept sketches.

On the subject of valuation sections, it was further agreed, after the carriers' subcommittee thoroughly understood just what was meant by valuation sections and for what purposes they were created, that the Engineering Section would address a letter to each of the 49 pipeline companies requesting a small map showing the trunkline and gathering-line layout of its property and designating for our approval their assignments of valuation sections, it being thought best to first allow the carrier to assign its own sections, subject of course to our approval.

At 12:30 p. m. the conference adjourned, and in the afternoon the pipeline subcommittee met with our Accounting Section. At 4 p. m., Mr. Hood discussed with the chairman of the subcommittee some of the details regarding an inventory.

On Thursday morning, the 13th, the chairman of the subcommittee and Mr. Hood met at 9 a. m. on the subject of inventorying properties and continued until 9:30 a. m., when the entire subcommittee and the employees of the Engineering Section again gathered in conference.

The first subject discussed was the selection of a property, or a section or sections of one or more pipelines, to be inventoried by the Engineering Section's forces, photostated, and served on the pipeline carriers to be used as a guide by their forces in making their inventories for us. It was finally agreed that the Commission would inventory the Pure-Van Pipe Line Co. in southeast Texas with its own forces, in addition to which it would inventory the Texas Pipe Line Co.'s pumping station at Humble, Tex., and a second pumping station located at Hoffman belonging to the Sinclair Prairie Pipe Line Co. The subcommittee felt that by taking the Pure-Van Pipe Line Co. in its entirety, plus the two pumping stations, we would have a complete and typical layout of the properties to be encountered.

The next subject discussed was regarding the cost of reproduction new and the cost of reproduction less depreciation, and on the question of depreciation it was pointed out that it not only cover physical but that our cost of reproduction less depreciation also cover obsolescence, take into consideration depletion of oilfields, et cetera. In other words, cover in general the new classification of accounts of pipelines which becomes effective January 1, 1935.

The subject of corrosion, pitting, and service lives was discussed at some length, but the chairman of the subcommittee stated that they felt that they