and without requiring security. If they had not been made it would at times have been difficult for Interstate to have avoided default under its mortgage.

(C) LYCOMING UNITED GAS CORPORATION

Lycoming United Gas Corporation, through two wholly owned subsidiaries, holds leases on natural gas producing acreage in the northern part of Pennsylvanis

and a pipe line extending from that acreage into New York State approximately to Syracuse, N. Y., and a small amount of producing acreage in New York State with a pipe line extending from the so-called "Wayne field" to Penn Yan, N. Y. The project was begun in 1930.

The company sells gas only at wholesale to a system of distributing companies located between Rochester and Syracuse, N. Y. Gas also is sold to a distributing company at Syracuse for mixing purposes and resale to industries.

Standard owns approximately 52 percent of the common stock. There was no public financing. Some of the securities are held by individuals who had gas

acreage which was put into this project. The company has notes outstanding, all of which are held by those interested in the project.

By reason of the fact that the anticipated markets have not developed as they were expected, the pipe line has not been used to capacity and so far has not been a profitable venture. No dividends have been paid. If the compary had to depend upon its own credit and resources there is no question but that it would be in receivership.

(D) MISSISSIPPI RIVER FUEL CORPORATION

This company owns a pipe line extending from the Monroe, La., field to St. Louis and East St. Louis and Alton, Ill. It was constructed in 1928 and serves gas wholesale to a number of localities in Arkansas and Missouri, and sells industrial gas at St. Louis and in the East St. Louis and Alton districts. Gas also is sold to the Laclede Gas Light Co. for mixing purposes.

Standard owns approximately 22 percent of the common stock. In financing the construction of the pipe lines bonds were sold on a basis of amortization within 15 years. Because the anticipated markets have not developed in this prolonged business depression, and because it has been necessary to sell gas at a less price than was expected the company has not earned sufficient revenue to meet the sinking-fund requirements of its bonds. The result has been that the owners of the common stock have had to advance money for the purpose of meeting sinking-fund requirements. Only in this way have the obligations of the company toward its bondholders been met. If this company were placed on its own financial responsibility it would not be able to meet the sinking-fund requirements of the bonds and necessarily would soon be in receivership.

(E) COLORADO INTERSTATE GAS CO.

This company owns a pipe line extending from Clayton, N. Mex., to Denver, Colo. From it gas is sold at wholesale to distributing companies at Denver, Pueblo, a small group of towns in southeastern Colorado and to the city of Colorado Springs which distributes the gas to consumers. Gas also is sold to the Colorado Fuel & Iron Co. at its plant near Pueblo. The line was built in 1928 and the gas is delivered into the company's line from the Panhandle field in Texas.

The company was financed in part by bonds which were sold to the public and which are being amortized on a 20-year basis. Standard owns 42 percent of the common stock and 50 percent of the preferred stock. It has been necessary frequently for Standard to advance money to Colorado Interstate Gas Co. in order that the sinking-fund requirements of its bonds be met.

(F) MISCELLANEOUS INVESTMENTS

Standard Oil Co. (New Jersey) owns interests in the following natural-gas companies:

A 50-percent interest in the Reserve Gas Co. which has producing acreage, gas wells, and gathering pipe lines in West Virginia.

A 50-percent interest in the Connecting Gas Co. which operates a gas-transmission pipe line from the Ohio River to Sugar Grove, Ohio.

Approximately a 13-percent interest in the common stock and bonds of Natural Gas Pipeline Co. of America, which operates a pipe line transporting Texas gas to Chicago, Ill.

A 30-percent interest in Atlantic Seaboard Corporation which, through sub sidiaries, owns a gas-transmission pipe line extending from southeastern Kentucky through West Virginia, Virginia, and Maryland into Pennsylvania.

A 30-percent interest in the Home Gas Co. which owns a gas-transmission pipe line extending through the southerly part of New York State from Olean to Unionville.

Investments have been made in these companies because other natural-gas companies in which Standard has an interest have the right to put gas into the lines.

VIII. EFFECT OF ENFORCED DISTRIBUTION OF STOCKS OF Natural-gas COMPANIES

Standard Oil Co. (New Jersey) could dispose of its holdings in natural-gas companies by distributing such securities to its stockholders. The fractional shares which the holder of a share of Standard stock would receive are shown on the statement on the following page. The effect of this would be wholly detrimental to the stockholders of Standard and to the consumers of the gas companies. Although Standard has no management or service contracts with any of its subsidiary gas companies the operations are under one general supervision. Certain men are officers of more than one company and all companies have the advantage of managerial and technical services at less expense than if these companies were operated as separate units. We believe that this common management supervison has been of decided benefit and an interruption of it will neces sarily increase the operating expenses of these individual companies.

The consumers of the East Ohio Gas Co. and of the Peoples Natural Gas Co. pay a rate for natural gas based upon a consideration of the fair value of the production system of the Hope Natural Gas Co. in West Virginia, as well as upon the transmission and distribution system serving the consumers. Rates are fixed

as if one corporation owned the production, transmission, and distribution facilities. If Standard must dispose of the stocks of these three companies then there will no longer be any affiliation of interests and the State commissions will not have the full control that now exists, proceedings will be more complicated, and the expense of operating the separate companies will be increased.

With respect to the other investments of Standard in natural-gas companies, such companies now get the benefit of experienced supervision without paying any management fees. Interstate Natural Gas Co., Inc., Mississippi River Fuel Corporation, and Colorado Interstate Gas Co. each has found it necessary in the past to borrow money to meet the sinking-fund requirements of their bonds. This money has been furnished by the stockholders. Only by such means have these companies been kept out of receivership. If the stocks of these pipe-line companies had been widely distributed there would not have been available these funds and the common-stock investment likely would have been lost. By having these stocks held by holding companies it has been possible to make advances and preserve the value that exists for the benefit of the stockholders of the holding companies and to maintain uninterrupted and satisfactory service to consumers.

The stock of these natural-gas companies belongs ultimately to the persons who own Standard stock. It is now owned by Standard stockholders jointly and held for them by Standard. It is possible to perform a better job for these stockholders than would be performed if there were not that common control

The bill prohibits the continuance of that common ownership or control and requires each stockholder to have his own shares. These natural-gas companies will be forced to rely on their own resources. The value of their common stock will be seriously impaired if not totally destroyed. The fractional shares that would be distributed would be of uncertain value, certainly of less value than when held by Standard. This unimpaired value can be saved to the stockholders of Standard only by permitting Standard to continue to own these stocks. is one example in which the sum of all the parts will not be equal to the present value of the whole.

This

Statement showing fractional shares in distribution of stocks of natural-gas companies

If this bill is enacted into law it will compel the disintegration of natural-gas properties which for 37 years have been in the ownership of Standard. No benefit to consumers can possibly result. Much damage to investors certainly will result.

The pipe-line companies in which Standard has an interest could not have been built without holding company backing. There was not local capital sufficient to finance that size and type of project. These companies still need holding company assistance.

The abuses which it is claimed exist in public-utility holding companies are not charged against the operating companies. The testimony of the Government witnesses related solely to those holding companies that are principally engaged in the electric and manufactured gas business and whose holdings in natural-gas companies are relatively incidental. No testimony at all has been given to establish the necessity of regulating natural-gas holding companies.

The investigation by the Federal Trade Commission of natural-gas holding and operating companies is yet to be made. On March 13, 1935, Senator Couzens