591 Opinion of JACKSON, J. puted approval with some particularity, because I attach importance at the very beginning of federal regulation of the natural gas industry to approaching it as the performance of economic functions, not as the performance of legalistic rituals. I. Solutions of these cases must consider eccentricities of the industry which gives rise to them and also to the Act of Congress by which they are governed. The heart of this problem is the elusive, exhaustible, and irreplaceable nature of natural gas itself. Given sufficient money, we can produce any desired amount of railroad, bus, or steamship transportation, or communications facilities, or capacity for generation of electric energy, or for the manufacture of gas of a kind. In the service of such utilities one customer has little concern with the amount taken by another, one's waste will not deprive another, a volume of service can be created equal to demand, and today's demands will not exhaust or lessen capacity to serve tomorrow. But the wealth of Midas and the wit of man cannot produce or reproduce a natural gas field. We cannot even reproduce the gas, for our manufactured product has only about half the heating value per unit of nature's own." Natural gas in some quantity is produced in twenty-four states. It is consumed in only thirty-five states, and is dent investment theory may have influenced that conclusion. See opinion of Mr. Justice Frankfurter in Driscoll v. Edison Light & Power Co., 307 U. S. 104, 122, and my brief as Solicitor General in that case. It should be noted, however, that these statements were made, not in a natural gas case, but in an electric power case-a very important distinction, as I shall try to make plain. 3 Natural gas from the Appalachian field averages about 1,050 to 1,150 B. T. U. content, while by-product manufactured gas is about 530 to 540. Moody's Manual of Public Utilities (1943) 1,350; Youngberg, Natural Gas (1930) 7. Opinion of JACKSON, J. 4 320 U.S. available only to about 7,600,000 consumers. Its availability has been more localized than that of any other utility service because it has depended more on the caprice of nature. The supply of the Hope Company is drawn from that old and rich and vanishing field that flanks the Appalachian mountains. Its center of production is Pennsylvania and West Virginia, with a fringe of lesser production in New York, Ohio, Kentucky, Tennessee, and the north end of Alabama. Oil was discovered in commercial quantities at a depth of only 6912 feet near Titusville, Pennsylvania, in 1859. Its value then was about $16 per barrel. The oil branch of the petroleum industry went forward at once, and with unprecedented speed. The area productive of oil and gas was roughed out by the drilling of over 19,000 "wildcat" wells, estimated to have cost over $222,000,000. Of these, over 18,000, or 94.9 per cent, were "dry holes." About five per cent, or 990 wells, made discoveries of commercial importance, 767 of them resulting chiefly in oil and 223 in gas only. Prospecting for many years was a search for oil, and to strike gas was a misfortune. Waste during this period and even later is appalling. Gas was regarded as having no commercial value until about 1882, in which year the total yield was valued only at about $75,000. Since then, contrary to oil, which has become cheaper, gas in this field has pretty steadily advanced in price. While for many years natural gas had been distributed on a small scale for lighting, its acceptance was slow, 4 Sen. Rep. No. 1162, 75th Cong., 1st Sess., 2. Arnold and Kemnitzer, Petroleum in the United States and Possessions (1931) 78. 8 At Fredonia, New York, in 1821, natural gas was conveyed from a shallow well to some thirty people. The lighthouse at Barcelona Harbor, near what is now Westfield, New York, was at about that 591 Opinion of JACKSON, J. facilities for its utilization were primitive, and not until 1885 did it take on the appearance of a substantial industry. Soon monopoly of production or markets developed.10 To get gas from the mountain country, where it was largely found, to centers of population, where it was in demand, required very large investment. By ownership of such facilities a few corporate systems, each including several companies, controlled access to markets. Their purchases became the dominating factor in giving a market value to gas produced by many small operators. Hope is the market for over 300 such operators. By 1928 natural gas in the Appalachian field commanded an average price of 21.1 cents per m. c. f. at points of production and was bringing 45.7 cents at points of consumption." The companies which controlled markets, however, did not rely on gas purchases alone. They acquired and held in fee or leasehold great acreage in territory proved by "wildcat" drilling. These large marketing system companies as well as many small independent owners and operators have carried on the commercial development of proved territory. The development risks appear from the estimate that up to 1928, 312,318 proved area wells had been sunk in the Appalachian field of which 48,962, or 15.7 per cent, failed to produce oil or gas in commercial quantity.12 time and for many years afterward lighted by gas that issued from a crevice. Report on Utility Corporations by Federal Trade Commission, Sen. Doc. 92, Pt. 84-A, 70th Cong., 1st Sess., 8-9. In that year Pennsylvania enacted "An Act to provide for the incorporation and regulation of natural gas companies." Penn. Laws 1885, No. 32. 10 See Steptoe and Hoffheimer's Memorandum for Governor Cornwell of West Virginia (1917) 25 West Virginia Law Quarterly 257; see also Report on Utility Corporations by Federal Trade Commssion, Sen. Doc. No. 92, Pt. 84-A, 70th Cong., 1st Sess. 11 Arnold and Kemnitzer, Petroleum in the United States and Possessions (1931) 73. 12 Id. at 63. Opinion of JACKSON, J. 320 U.S. With the source of supply thus tapped to serve centers of large demand, like Pittsburgh, Buffalo, Cleveland, Youngstown, Akron, and other industrial communities, the distribution of natural gas fast became big business. Its advantages as a fuel and its price commended it, and the business yielded a handsome return. All was merry and the goose hung high for consumers and gas companies alike until about the time of the first World War. Almost unnoticed by the consuming public, the whole Appalachian field passed its peak of production and started to decline. Pennsylvania, which to 1928 had given off about 38 per cent of the natural gas from this field, had its peak in 1905; Ohio, which had produced 14 per cent, had its peak in 1915; and West Virginia, greatest producer of all, with 45 per cent to its credit, reached its peak in 1917.13 Western New York and Eastern Ohio, on the fringe of the field, had some production but relied heavily on imports from Pennsylvania and West Virginia. Pennsylvania, a producing and exporting state, was a heavy consumer and supplemented her production with imports from West Virginia. West Virginia was a consuming state, but the lion's share of her production was exported. Thus the interest of the states in the North Appalachian supply was in conflict. Competition among localities to share in the failing supply and the helplessness of state and local authorities in the presence of state lines and corporate complexities is a part of the background of federal intervention in the industry.1 West Virginia took the boldest measure. It legislated a priority in its entire production in favor of its own inhabitants. That was frustrated by an injunc 18 Id. at 64. 14 See Report on Utility Corporations by Federal Trade Commission, Sen. Doc. No. 92, Pt. 84-A, 70th Cong., 1st Sess. 591 Opinion of JACKSON, J. 17 tion from this Court.15 Throughout the region clashes in the courts and conflicting decisions evidenced public anxiety and confusion. It was held that the New York Public Service Commission did not have power to classify consumers and restrict their use of gas.16 That Commission held that a company could not abandon a part of its territory and still serve the rest. Some courts admonished the companies to take action to protect consumers.18 Several courts held that companies, regardless of failing supply, must continue to take on customers, but such compulsory additions were finally held to be within the Public Service Commission's discretion.19 There were attempts to throw up franchises and quit the service, and municipalities resorted to the courts with conflicting results.20 Public service commissions of consuming states were handicapped, for they had no control of the supply.21 15 Pennsylvania v. West Virginia, 262 U. S. 553. For conditions there which provoked this legislation, see 25 West Virginia Law Quarterly 257. 16 People ex rel. Pavilion Gas Co. v. Public Service Commission, 188 App. Div. 36, 176 N. Y. S. 163. 17 Village of Falconer v. Pennsylvania Gas Co., 17 State Department Reports (N. Y.) 407. 18 See, for example, Public Service Commission v. Iroquois Natural Gas Co., 108 Misc. 696, 178 N. Y. S. 24; Park Abbott Realty Co. v. Iroquois Gas Co., 102 Misc. 266, 168 N. Y. S. 673; Public Service Commission v. Iroquois Natural Gas Co., 189 App. Div. 545, 179 N. Y. S. 230. 19 People ex rel. Pennsylvania Gas Co. v. Public Service Commission, 196 App. Div. 514, 189 N. Y. S. 478. 20 East Ohio Gas Co. v. Akron, 81 Ohio St. 33, 90 N. E. 40; Newcomerstown v. Consolidated Gas Co., 100 Ohio St. 494, 127 N. E. 414; Gress v. Village of Ft. Loramie, 100 Ohio St. 35, 125 N. E. 112; Jamestown v. Pennsylvania Gas Co., 263 F. 437, 264 F. 1009. See also United Fuel Gas Co. v. Railroad Commission, 278 U. S. 300, 308. 21 The New York Public Service Commission said: "While the transportation of natural gas through pipe lines from one state to another |
