Texas Railroad Commission

The Texas Railroad Commission, (TRC) founded 1891, is a regulatory agency of the state of Texas. It is the most important regulatory agency of any state, primarily because it controls oil and gas production in Texas, as well as sets in-state rates for trucks, buses, and railroads. From the 1930s to the 1960s it largely set world oil prices, but was displaced by OPEC (Organization of Petroleum Exporting Countries) after 1973.

Origins

Governor James S. Hogg, a liberal Democrat, won the hotly contested 1890 gubernatorial election promising to reign in the railroads. In 1891 the legislature created the Railroad Commission,' giving it jurisdiction over rates and operations of railroads, terminals, wharves, and express companies. In 1919 it was given authority over the state's oil industry. The governor appointed the first members but in 1894 it became elective, with three commissioners serving six-year, overlapping terms. It did not have jurisdiction over interstate rates, but Texas was so large that the in-state traffic it regulated was of dominant importance.

John H. Reagan, the first head of the TRC, had been the most outspoken advocate in Congress of the Reagan bill to regulate railroads in the 1880s. He feared monopolies in transportation and considered their control a moral problem. His advocacy of legislation was based on an emotional response to real and imaginary evils. In later years, as chairman of the TRC, he changed his views when he became acquainted with the realities of the complex forces affecting railroad management. Reagan, established 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.

Expanding roles

That regulatory approach evolved as the agency took over responsibility for regulating pipelines (in 1917), oil and gas production (1919), natural gas delivery systems (1920), bus lines (1927), and trucking (1929). It grew from 12 permanent employees in 1916 to 560 by 1939.

A crisis for the petroleum industry was created by the East Texas oil boom of the 1930s, as prices plunged to 25 cents a barrel. The traditional TRC policy of negotiating compromises failed; the governor was forced to call in the state militia to. Texas oilmen decided they preferred state to federal regulation, and wanted the TRC to give out quotas so that every producer would get higher prices and profits. Pure Oil Company opposed the first statewide oil prorationing order, which was issued by the TRC in August 1930. The order, which was intended to conserve oil resources by limiting the number of barrels drilled per day, was seen by small producers like Pure as a conspiracy between government and major companies to drive them out of business and foster monopoly in the oil industry. Ernest Thompson, head of the TRC from 1932 to 1965, took charge of the agency and indeed the oil industry by appealing to a mythic ideal of Texas's role in the global oil order--the civil religion of Texas oil. He cajoled, harangued, and browbeat recalcitrant producers into compliance with the TRC's prorationing orders. The New Deal allowed the TRC to set national oil policy.

Operations

Regulation was a practical rather than ideological affair. The TRC typically worked with the regulated industries to improve operations, share best practices, and address consumer complaints. Radical activities like rate setting to favor shippers or producers or consumers, and heated court battles, were the exception rather than the rule.

Segregation

From the 1890s through the 1960s, the Texas Railroad Commission found it difficult to enforce fully Jim Crow segregation legislation. Because of the expense involved, Texas railroads often allowed wealthier African Americans to mix with whites, rather than provide separate cars, dining facilities, and even depots. In addition, West Texas authorities often refused to enforce Jim Crow laws because few African Americans resided there. In the 1940's, the railroad commission's enforcement of segregation laws began collapsing further, in part because of the great number of African American soldiers that were transported during World War II. The trains were integrated in the early 1960s.

Bibliography

• Childs, William R. The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century. (2005). 323 pp.
• Childs, William R. "Origins of the Texas Railroad Commission's Power to Control Production of Petroleum: Regulatory Strategies in the 1920s." Journal of Policy History 1990 2(4): 353-387. Issn: 0898-0306
• Norvell, James R. "The Railroad Commission of Texas: its Origin and History." Southwestern Historical Quarterly 1965 68(4): 465-480. Issn: 0038-478x online edition
• Prindle, David F. Petroleum Politics and the Texas Railroad Commission. (1981). 230 pp., focuses on relations with independent oilmen
• David F. Prindle, "Railroad Commission," Handbook of Texas Online (2008)