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The History of Texas Railroads and the Railroad Commission of Texas

1836 - 2005
Year Event
 
1836 - 1890

After Texas had won her independence from Mexico in 1836, among the most pressing matters faced by the young republic were improvements in the roads, rivers and seaports. A new method of transportation just coming into prominence was the steam railroad. In 1838, the Republic of Texas set up the first regulations over railroad operations.

On February 7, 1853, the Texas Legislature approved “An Act to Regulate Railroad Companies.” This law provided that the principal office must be on the line of road, that trains be run on schedules, and an annual report compiled regarding capital stock, dividends, indebtness, inventories, land purchases, sale of lands donated by the State, construction and repair costs, revenues from passengers, freight and other sources, mileage operations, number of employees and accidents and for legislative regulation of rates.

By 1873 Texas had 1,068 miles of railroad of which 750 miles were owned by four companies. The railroads had obtained great power and were accused of running the state through bribery, hidden monopolies and controls, and favoritism to officials while profits, such as they were, went to outside capitalists. 

In 1881, responding to widespread demands from the shipping public, the Texas legislature gave the first serious consideration to creating a railroad commission. The railroads were quick to perceive the threat and act against it. The railroads predicted industrial disaster unless hostile legislation quit frightening investors, and preaching the perils of “injudicious interference with business by legislatures.” The bill was defeated.

In the election of 1890, a constitutional amendment was placed on the ballot to make it legal to create a state railroad commission, but it was still up to the Texas Legislature to create the commission. Hogg was elected governor promising the establishment of a state railroad commission as the main issue in the race.

1891

In 1891, five commission bills were introduced, each differing in details. Hogg compared the situation to a wagon that had lost its coupling pin and was trying to go in five directions at once. One of the main sticking points was whether the commission should be appointed or elected. Hogg insisted on an appointed commission, in order to shield it from elective politics. Railroad allies were equally determined that if a commission passed, it would be elective, because an elected commission might be easier to control.

The Texas Legislature on April 3, 1891, passed an Act “to establish a Railroad Commission … to prescribe and authorize the making of rules and regulations to govern the Commission and the railroads … to prescribe penalities … and to provide means and rules for its enforcement.” 

The Railroad Commission's responsibilities were to administer the state’s railroad laws; determine passenger fares, freight rates, and charges; hold public hearings; and receive reports, make investigations, and keep records on the financial aspects of trains, terminals, and other traffic services such as wharves and express companies.
Governor Hogg now had the task of appointing commissioners to the new commission. The law stated that none of the Commissioners were permitted to hold interest in any railroad companies. To head the commission, Hogg picked U.S. Senator John H. Reagan. Joining him were Lafayette L. Foster and William Pinckney McLean.

The Railroad Commission (RRC) met on June 10, 1891, and organized the Commission for business. Employees of the RRC were appointed.  RRC staff members were appointed on July 1, 1891, September 30, 1891, October 14, 1891 and March 2, 1892 for a total of seven employees and the three RRC Commissioners.

By December 31, 1891, there were 8988.47 miles of tracks in Texas and 42 rail companies operating within the State.

Shortly after the first meeting of the Commission, the railroads sought an injunction to block what they called confiscatory rates. According to the suit (Reagan v. Farmers Loan and Trust Company), the Railroad Commission’s rates were too low and did not allow the railroads to pay their operating expenses or the interest on their bonds.
1892

On August 22, 1892, the 5th Circuit Court of the United States issued a temporary order enjoining and prohibiting the Railroad Commission from performing the duties required of the Act. The lawsuit went all the way to the United States Supreme Court.

1893

During the legislative session in 1893, two amendments were passed affecting the Railroad Commission. The first amendment allowed the railroad commissioners to be elected rather than appointed, serving staggered six-year terms. The second amendment gave the Railroad Commission authority over the ability of the railroads to issue stocks and bonds and eliminate the practice of stock watering.

1894

On May 26, 1894, the Supreme Court ruled that in the case Reagan v. Farmers Loan and Trust Company, the Texas Railroad Commission was constitutional. The court also ruled that the rates set by the commission were too low and had to be reworked.

The Railroad Commission produced Annual Reports providing the Legislature with a complete account of the Commission responsibilities along with writing thousands of letters to Texans responding to railway complaints. The work was time-consuming, but it also built public support for the agency and its work.

1897

The RRC was appropriated very little revenue to conduct investigations. In 1897, the commission was given $5000 with which to conduct investigations. Chairman Reagan used the money to hire three accountants to examine railroad books. The accountants found evidence of discrimination, especially in the area of rebates (a practice in which railroads gave price breaks to large shippers). The commission went after the companies and collected fines of $67,500.

1900 One of the main activities of the Railroad Commission was to hold public hearings. The Commission handled an average of 80 cases (called "dockets") a year involving rates, rules, and regulation of rail carriers, and covering every commodity from cotton to livestock to grain to sand. To illustrate a case, in 1900, Chairman Reagan presided over an official hearing concerning the safety of the use of "doubleheaders," the use of two engines to run a train. Railroad employees objected to the practice and were especially concerned over the safety of the crew in the second engine. Railroad companies defended the practice, citing the use of doubleheaders on many railroads outside Texas, denying that safety problems were any greater than on single-engine trains, and pointing to the greater pulling power and increased efficiency of larger trains. The typed transcript of this hearing is over 500 pages long and consists entirely of witness testimony.

1910 -1914

The Commission often found itself in jurisdictional disputes with the federal Interstate Commerce Commission (ICC), disputes that often had to be ironed out in court and that were usually resolved in favor of the ICC. An example of this is the Houston, East and West Texas Railway Co. v. United States, Texas and Pacific Railway Co. v. United States), 234 U.S. 342 (1914) or better known as the 1914 Shreveport Case. The case arose from a dispute between merchants in Shreveport, Louisiana, and several Texas railroad companies. At issue were freight rates set by the Texas Railroad Commission that were significantly higher for out-of-state merchants using Texas rail lines than for in-state companies. The Supreme Court's decision in June 1914 gave the ICC jurisdiction over Texas rates.

1916 - 1940

The railroads now had a rival -- the automobile -- and Texas now had more than 3500 miles of paved road in the early 1900’s. Construction of roads accelerated after the passage of the Federal Aid Road Act of 1916 and the Federal Highway Act of 1921. Both Acts provided funds to state highway agencies to assist in road improvements.

Railroads reached their peak in Texas in 1930’s. In 1932, there were 17,078.29 miles of main-line railroad track, the greatest total mileage in the history of Texas.

In 1930, diesel locomotives were first placed in use. The invention and use of this type of locomotive is considered one of the greatest forward steps in the progress of railroads in the United States.

The Railroad Commission was largely concerned with regulating railroads, setting rates, receiving complaints, and making investigations. As other controversies arose where the Legislature deemed that the public interest could best be served by regulation, additional duties were assigned to the Railroad Commission. The Railroad Commission's authority was broadened beginning in 1917 with the passage of the Pipeline Petroleum Law (Senate Bill 68, 35th Legislature, Regular Session) that declared pipelines to be common carriers like railroads and placed them under the Commission's jurisdiction. This was the first act to designate the Railroad Commission as the agency to administer conservation laws relating to oil and gas. The Commission's regulatory and enforcement powers in oil and gas were increased by the Oil and Gas Conservation Law (Senate Bill 350 of the 36th Legislature, Regular Session), effective June 18, 1919. This act gave the Railroad Commission jurisdiction to regulate the production of oil and gas. The Commission's regulatory and enforcement powers in oil and gas were increased by the Oil and Gas Conservation Law (Senate Bill 350 of the 36th Legislature, Regular Session), effective June 18, 1919.

The Gas Utilities Act of 1920 (House Bill 11, 36th Legislature, 3rd Called Session) gave the Commission regulatory and rate authority over individuals and businesses producing, transporting, or distributing natural gas in Texas. In 1937, following a large natural gas explosion in a school in New London, Texas, the 45th Legislature passed legislation giving the Railroad Commission the authority to adopt rules and regulations pertaining to the odorization of natural gas or liquefied petroleum gases (House Bill 1017, Regular Session).

Regulation of liquefied petroleum gas was added to the Commission's responsibilities in 1939 by the 46th Legislature (House Bill 792, Regular Session). The legislation authorized the Commission to adopt and enforce safety rules and standards in the storage, handling, transportation, and odorization of butane or LP-gases.

1970 – 2005

The role of the Railroad Commission was changing, moving from economic regulation to safety regulation with the passage of the Federal Railroad Safety Act. The Act authorized the States to work with the Federal Railroad Administration to enforce Federal railroad safety regulations.

On May 1, 1971, the National Railroad Passenger Corporation, doing business as Amtrak, was a government-owned corporation organized to provide intercity passenger train service in the United States. In 1973, Amtrak was running three passenger trains in Texas. The Sunset Limited ran between New Orleans and California via Houston, San Antonio and El Paso. The Inter-American ran between St. Louis and Laredo via Texarkana, Dallas and Austin. The Lone Star ran between Chicago and Houston via Fort Worth and Temple.

In 1973, there were 30 railroads operating in Texas on 13,301.09 miles of track. The total freight carried was 253,365,741 tons which produced $882,563,759 in freight revenue. The railroads were operating in 228 of the 254 counties in the state.

The Staggers Rail Act of 1980 marked the most significant change in rail policy since the Interstate Commerce Act of 1887. It eliminated most common-carrier obligations, granted railroads greatly increased commercial freedom, and generally reversed previous policy. The act was an effort to deregulate the nation's railroads. The intent of the Staggers Act was to replace federal regulation with market competition.

In 1983, the Railroad Commission began a cooperative process with the federal government, implementing a rail safety program. The RRC continued to monitor the state’s rail lines, inspecting railroad equipment, operations, and track along with maintaining the state’s rail planning program and overseeing the use of federal funds for track rehabilitation projects.

In 1984, the Railroad Commission ceased its historic role in economic regulation of the Texas rail industry.
The Interstate Commerce Commission Termination Act of 1995 abolished the commission and transferred most of its remaining responsibilities to the Surface Transportation Board of the Department Of Transportation.

On October 1, 2005, the 79th Legislature in HB 2702 transferred the remainder of railroad safety oversight from the Railroad Commission to the Texas Department of Transportation, leaving the Commission with no regulatory authority related to any aspect of the rail industry.