Harry S. Truman Presidential Library & Museum

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Harry S. Truman
1945-1953


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Provided courtesy of The American Presidency Project.  John Woolley and Gerhard Peters. University of California, Santa Barbara.
  88. Veto of Bill To Amend the Natural Gas Act of 1938  
April 15, 1950

To the House of Representatives:

I return herewith, without my approval, H.R. 1758, a bill to amend the Natural Gas Act approved June 21, 1938, as amended.

This bill would preclude the Federal Power Commission from regulating sales of natural gas to interstate pipe line companies, for resale in interstate commerce, by producers and gatherers who are not affiliated with the buyers. After careful analysis and full consideration, I believe that such an action would not be in the national interest.

I believe that authority to regulate such sales is necessary in the public interest because of the inherent characteristics of the process of moving gas from the field to the consumer. Unlike purchasers of coal and oil, purchasers of natural gas cannot easily move from one producer to another in search of lower prices. Natural gas is transported to consumers by pipe lines, and is distributed in a given consuming market by a single company. The pipe line companies, and in turn the consumers of natural gas, are bound to the producers and gatherers in a given field by the physical location of their pipe lines, which represent large investments of funds, and cannot readily be moved to other fields in search of a better price.

These characteristics of the natural gas business impose natural limitations upon effective competition among sellers. Competition is further limited by the degree of concentration of ownership of natural gas reserves. While there are a large number of producers and gatherers, a relatively small number of them own a substantial majority of the gas reserves. Furthermore, the demand for natural gas has been growing phenomenally in recent years, and its natural advantages as a fuel, coupled with its present price advantage, indicate that demand may soon be pressing hard upon total supplies.

Under these circumstances, there is a clear possibility that competition will not be effective, at least in some cases, in holding prices to reasonable levels. Accordingly, to remove the authority to regulate, as this bill would do, does not seem to me to be wise public policy.

It is argued that regulation of sales of natural gas to pipe line companies would discourage producers and gatherers from selling their gas in interstate commerce, and would discourage exploration and development of new wells. This claim rests primarily on the assumption that the Federal Power Commission would apply standards of regulation which did not take account of the peculiar circumstances of natural gas production--such as the cost of exploration and development, including the drilling of dry holes. I do not believe this assumption is well-founded. On the contrary, I am confident that the Commission will apply standards properly suited to the special risks and circumstances of independent natural gas producers and gatherers.

My confidence in this outcome is supported by the fact that, until recently, the Commission has not found it necessary to undertake to regulate the prices charged by independent gas producers and gatherers, although those prices have been advancing. It is only natural that prices have risen, since the interstate lines built during and since the war have offered a far wider market than existed previously and have resulted in more competition among buyers. This process of price adjustment will probably continue, and it is right that it should if held within reasonable limits.

Accordingly, producers and gatherers are finding, and I am sure will continue to find, strong incentives to search out new sources of natural gas and to sell their gas in interstate commerce. I believe the production and sale of natural gas will continue to grow rapidly, to the benefit of consumers and of all the businessmen concerned with serving them. I see no danger to that growth in the continuance of the authority of the Federal Power Commission to regulate sales of gas to interstate pipe lines.

The continuance of that authority will adequately protect the public interest by permitting the Commission to prevent unreasonable and excessive prices, which would give large windfall profits to gas producers, at the expense of consumers, with no benefit to the Nation in terms of additional exploration and production. Such cases are few, if any, at the present time, but the authority to deal with them in the future clearly should not be dissipated.

Experience may demonstrate that some improvement of the existing statute may be desirable. I have no doubt that the Commission will operate reasonably and in the public interest in carrying out the present law, but I would have no objection to reasonable amendments if they are found to be needed.

To withdraw entirely from this field of regulation, however, impelled only by imaginary fears, and in the face of a record of accomplishment under the present law which is successful from the standpoint of consumer, distributor, carrier, and producer alike, would not be in the public interest. Accordingly, I am compelled to return this bill without my approval.
HARRY S. TRUMAN
 
Provided courtesy of The American Presidency Project.  John Woolley and Gerhard Peters. University of California, Santa Barbara.