Railroad Commission of Texas - Origins

Origins

Attempts to establish a railroad commission in Texas began in 1876. After five legislative failures, an amendment to the state constitution providing for a railroad commission was submitted to voters in 1890. The amendment's ratification and the 1890 election of Governor James S. Hogg, a liberal Democrat, permitted the legislature in 1891 to create the Railroad Commission, giving it jurisdiction over operations of railroads, terminals, wharves, and express companies. It could set rates, issue rules on how to classify freight, require adequate railroad reports, and prohibit and punish discrimination and extortion by corporations. George Clark, running as an independent "Jeffersonian Democratic" candidate for governor in 1892, denounced the TRC as, "Wrong in principle, undemocratic, and unrepublican. Commissions do no good. They do harm. Their only function is to harass. I regard it as essentially foolish and essentially vicious." Clark lost the 1892 election to Hogg but a federal judge ruled the TRC illegal; the judge in turn was overruled by the U.S. Supreme Court. The governor appointed the first members but in 1894 it became elective, with three commissioners serving six-year, overlapping terms. The TRC did not have jurisdiction over interstate rates, but Texas was so large that the in-state traffic it regulated was of dominant importance.

Senator John H. Reagan (1818-1905), the first head of the TRC (1891-1903), had been the most outspoken advocate in Congress of bills to regulate railroads in the 1880s. He feared the corruption caused by railroad monopolies and considered their control a moral challenge. His advocacy of legislation was based on an emotional response to real and imaginary evils. However as chairman of the TRC, he changed his views when he became acquainted with the realities of the complex forces affecting railroad management. Reagan turned to the Efficiency Movement for ideas, establishing a pattern of regulatory practice that TRC used for decades. He believed that the agency should pursue two main goals: to protect consumers from unfair railway practices and excessive rates, and to support the state's overall economic growth. To find the optimal rates that met these goals he focused the TRC on the collection of data, direct negotiation with railway executives, and compromises with the parties involved. The agency did not have the legal authority to set rates, nor did it have the resources to spend much of its time in court battles. The carrot was far more important than the stick. Freight rates continued to decline dramatically. In 1891, a typical rate was 1.403 cents per ton mile. By 1907 the rate was 1.039 cents – a decline of 25%. However the railroads did not have rates high enough for them to upgrade their equipment and lower costs in the face of competition from pipelines, cars and trucks, and the Texas railway system began a slow decline.