Appendix 10

Getting Michigan Natural Gas to Market - Then and Now

In the early days of natural gas production, the purchaser built a pipeline to the wellhead, owned the pipelines and sold the gas where they pleased. The Michigan Public Service Commission (MPSC), known in the 1930s as the Public Utilities Commission, campaigned to open more markets for the state's natural gas fields. The Six Lakes Field, also known as the Tri-Township Field, in Montcalm and Mecosta counties were the largest known gas fields at the time. This area became the focal point of a battle between producers who wished to open up more markets for the natural gas they had discovered and Consumers Power Company, who owned the pipeline into the field and was concerned that over-marketing would be "a disaster to users and producers." The difference of opinion brought about one of the most controversial proposals of the PSC.

PSC Chairman Paul H. Todd noted that the Reconstruction Finance Corporation, an agency of the federal government established to help reverse the effects of the Depression, had loaned $8 million to construct a natural gas pipeline from El Paso Texas to cities in Arizona. If it could work in Texas, why not in Michigan? In an address on Michigan State College's radio station, Todd proposed a RFC financed pipeline in Michigan at a cost he estimated between $2 and $3 million. Todd said "it is quite within the limits of possibility that the RFC would loan the cost of a pipeline connecting southern Michigan cities with the Consumers Power line to Saginaw and the American Light and Traction pipeline to Grand Rapids." Under the plan gas flowing to Detroit and Grand Rapids would also supply Battle Creek, Kalamazoo, Jackson, Ann Arbor and Flint.

Todd added that if the additional pipeline was built, it was "possible that the Consumers Power Company and the American Light and Traction Company could be required to connect with the terminals of the pipelines at Grand Rapids and Saginaw since they could probably be proven to be common carriers." As a "common carrier" both the Consumer Power and American Light and Traction Company would be subject to public rate setting and regulation, a possibility that delighted Michigan petroleum producers and the horror of Consumers Power and American Light and Traction Company (forerunner of Michigan Consolidated Gas, MichCon). The pipeline, Todd added, even if the RFC pipeline was constructed by a private firm, eventually it might become public property. Leaving the lingering impression that other, existing, privately owned pipelines might also eventually enter the public sector.

Dan E. Karn, then vice-president of Consumers Power, answered Chairman Todd by saying that his company would extend its pipelines without delay to Jackson, Flint, Kalamazoo or other cities "if engineering studies in which we have faith showed a sufficient gas supply." A few years later more pipelines were put in and more cities added to the natural gas network. Chairman Todd may or may not have been serious about the possibility of public ownership of natural gas pipelines, but his broad hints did greatly increase the number of Michigan's markets that had access to locally produced natural gas.