That Gas Bill Veto

March 12, 1956

President Eisenhower’s veto of the natural-gas bill was confused, irrelevant, and a political blunder. It cannot be defended logically, constitutionally, or economically.

Most of this is clear from the text of the veto message itself. The President declares that “legislation conforming to the basic objectives” of the bill “is needed because the type of regulation of producers of natural gas which is required under present law will discourage individual initiative and incentive to explore for and develop new sources of supply. In the long run this will limit supplies of gas, which is contrary not only to the national interest but especially to the interest of consumers.” That accurately sums up the economic need for the bill.

In addition the President might have asked whether the Federal government has any business regulating the price of a commodity before it enters interstate commerce, and whether the Supreme Court, in its 5-to-3 decision of June 7, 1954, did not usurp legislative functions and flout the plain intent of Congress itself. Congress specifically exempted from the provisions of the Natural Gas Act of 1938 “the production or gathering of natural gas.”

But the President deliberately set aside the merits of the case, and the interests of more than 20 million consumers, in order to punish the “highly questionable activities” of a few “private persons, apparently representing only a very small segment of a great and vital industry.”

The only proper procedure was to decide each question—the question of natural-gas regulation, and the question of improper influence on Congress—on its own merits. That is what the Senate majority tried to do. By the President’s own admission, he is punishing some 8,000 natural-gas producers and more than 20 million consumers, continuing a practice that is more dubious constitutionally, and supporting an indefensible Supreme Court decision, all because one gas producer had acted improperly and stupidly in trying (unsuccessfully) to influence one or two votes in Congress.

The President’s veto message, unfortunately, did more than this. His veto was based on “efforts I deem to be so arrogant and so much in defiance of acceptable standards of propriety as to risk creating doubt among the American people concerning the integrity of governmental processes.” But it was the President’s veto message itself that did most to cast doubt on “the integrity of governmental processes.” For the Senate voted after the facts in the Case affair had been publicly aired—by the Senate itself. The vote was not along party lines. Thirty-one Republicans voted for the bill and fourteen against it. Twenty-two Democrats voted for it and 24 against it. By implication the veto message threw doubt on the motives of the majority that voted for the bill—though there was also a powerful lobby against the bill.

The economic and constitutional case in favor of the bill is overwhelming. There is no argument against the Federal regulation of some 110 interstate pipeline companies, and local regulation of some 1,200 public-utility gas companies; but under the present Supreme Court decision the Federal government is regulating some 8,000 intensely competitive producers who take a great risk every time they dig an exploratory well. (Over a period of years producers are estimated to have drilled an average of eight exploratory “dry holes” for each successful one.)

It is estimated, moreover, that 90 percent of the gas bill paid by the ultimate consumer goes to the pipeline company and the local public utility to cover the cost of transmission and distribution. In other words, even if the producer gave his gas away, absolutely free, the average household consumer could cut his gas bill only about 10 percent.

Finally, if gas prices can be regulated by the Federal government at the individual well, it is certainly as logical for it to regulate petroleum prices locally—not to speak of coal, farm products, automobiles, or anything that eventually finds its way into interstate commerce.