The floor of the Texas House in 1889 and early 1890 was not a peaceful place. The battle had been joined between the railroad supporters and the supporters of Governor James S. Hogg. While he was Attorney General, Hogg had taken on the railroads, prosecuting several of them as well as the rate-setting organization of railroads, the Texas Traffic Association, for monopolistic actions and conspiracy to discourage competition. In the race for governor which he won in 1890, Hogg had campaigned for the creation of a commission to regulate the railroads.
In just a few decades, the railroads had turned from being the object of enticements by the state and many communities to being an object of derision. Why this change?
Notwithstanding Mr. Brown's remarks, Texas had early on encouraged the railroads. In 1850, Bexar county became the first of many counties issuing bonds to railway companies to encourage settlement and communication. In 1852, the State began to grant railroad companies land: 8 sections of 640 acres each for every mile of completed road. Within two years, that was upped to 16 sections per mile completed.
In the Eastern United States, the railroads followed the people, connecting already existing population centers. In most of Texas, it was the other way around. From the time of the Republic, it was a recognized policy to set about attracting settlers from back east and the countries of Europe. One way to do that was to have a transportation system already in place. But, railroads are heavily capital intensive--it took a lot of money to do the necessary grading, buy and install the ties and rails, purchase the steam locomotives and cars. Since the companies did not want to invest if there was no market--no people and no goods--the state sweetened the pot by land grants, bond issuances, and loans.
Some railroads were given right-of-ways and alternate sections of public land along them, with the off sections usually going for schools. The railroads advertised heavily back east and abroad to bring in settlers to whom they could sell land from their grant sections. To encourage purchases, the railroads sought to endow selected communities with an aura of stability by aiding in the building of sturdy courthouses, jails, and even churches.
Coming out of the boom in construction that followed the Civil War, the Texas and Pacific Railway finished construction of its railway line from Texarkana to Sherman and from Longview to Eagle Ford--a total of 251 miles--in 1873. The next portion of the Texas and Pacific began in 1881 as the line moved from Fort Worth toward El Paso, using a land grant from the State for 5,338,528 acres.
By the next year, the law authorizing land grants was repealed--there was no more available public land.
In the decades after the Civil War, the people of Texas began to recognize the power railroad companies held. Dirt roads for wagons were rough and most were short. The state had no navigable waterways. Railroads were the only way to ship materials in and products out. The major railroads had formed an organization, the Texas Traffic Association, which set rates at whatever level it was felt the traffic would bear. One result was an arbitrary cast to some rates: one railroad shipped lumber from East Texas to Nebraska for a lower rate than when it was shipped from East Texas to Dallas. M. M. Crane, a prominent Texas political leader of the time described the situation. "The owners of the railroads were like many other people," he said. "Having the power to charge what they pleased, they were never overly modest in fixing their compensation."
Such abuses and discriminatory rates primed the people of Texas for change. Let's take a more detailed look at those early Texas railroad years and trace the path leading to effective regulation.