The Republic of Texas granted the first government charter on December 16, 1836 to the Texas Rail-Road, Navigation and Banking Company. The company soon dissolved without any stock being sold or a single mile of track laid.
In 1838, the Brazos and Galveston Railroad Company was granted the next charter which included the provision "Congress...shall have the sole power of regulating rates of tolls." Later charters required "good and sufficient causeways" at road crossings, signals with locomotive bell and steam whistle, brake upon hindmost car, "good T- or U-shaped iron rails" of defined minimum weight, and the provision of connection between intersecting railroads.
The great difficulties attending the construction of the first railroads caused many of the early charters to be forfeited for failure to fulfill the conditions of the charters. The first company to begin actual railroad construction was the Harrisburg Railroad and Trading Company which was chartered January 4, 1841. Construction had progressed to the extent of some grading of the right-of-way and the contracting for some cross-ties when the project was abandoned because of lack of funds and the "threat of invasion of Texas by Mexico." On February 11, 1850, a charter was issued to the Buffalo Bayou, Brazos and Colorado Railway, the successor of the Harrisburg Railroad & Trading Company. Grading was begun the following year, track laying the next, and by August 1, 1853, the first twenty miles of railroad in Texas was in operation between Harrisburg and Stafford.
Despite the relatively early date at which the operation of the Buffalo Bayou, Brazos & Colorado Railway was begun, the Texas Legislature had already enacted rather comprehensive laws pertaining to railroads. On February 7, 1853, the Legislature approved, "An Act to Regulate Railroad Companies." Its provisions included requirements for annual reports, legislative regulation of rates (allowing a 12 percent profit), directors being liable for debts, fixed regulations covering uniforms, crossings, facilities, bells, etc., and allowing the state to purchase railroads.
The recognition of the people of Texas that railroads were urgently needed to carry forward the development of the State is reflected in the subsidies which were granted the railroad companies, subsidies of both land and the use of money from public funds at a low rate of interest.
Although much of the early legislation regulating railroads was adapted to control inherent abuses in a monopolistic form of business enterprise, the administration of the laws left a great deal to be desired. Since there was no agency especially created to administer the provisions of the Act to Regulate Railroad Companies, the railroads generally did not comply with the regulations. As the abuses of the carriers became progressively worse, especially after the Civil War, various groups were organized for the express purpose of fostering regulatory measures to which the railroads would be directly amenable. One of these groups was a farmers organization called, the Patrons of Husbandry, commonly known as the "Grange", organized in 1873, and having a membership of 40,000. The Grange directed its attack against the "fearful rates of freight," "profligate and greedy management," and "efforts to control legislation, influence courts or override law and justice." The agitation of the Grange resulted in a resolution calling on the Constitutional Convention of 1875 to prescribe a remedy to eliminate the abuses of the railroads.
The character of some of the constitutional provisions points significantly to the nature of some of the abuses practiced by the carriers. And it also indicates the increased ability of the peoples' representatives to cope with the problems of railroad regulation.
However, as sometimes happens in the passage of new laws, there was a very considerable lag in time between the enactment of the regulatory provisions and the effectual implementing of them by the government or one of its agencies. As yet no agency or commission had been created and especially charged with the responsibility of administering the new regulations. Although the setting up of a railroad commission to administer the railroad laws had been recommended as early as 1876, the recommendation was strongly opposed by some interests, especially the financial backers of the railroads, who considered such legislation hostile and branded the proposals as "injudicious interference with business by legislatures."
After much agitation the office of State (railroad) Engineer was created in 1883, but the office had no power to order or compel obedience of the laws. Its function was to investigate and make reports to the Attorney General. The office was destined for failure, and after two years it was abolished. Bills calling for a railroad commission were passed by the House in 1887 and 1889; however, the Senate refused to pass the bills on the grounds of constitutionality. This objection was circumvented by the adoption of a constitutional amendment authorizing the creation of a railroad commission. With the last obstacle out of the way, the Legislature passed an act creating the Railroad Commission of Texas in 1891. The fight for its creation had taken sixteen years. Some say it was the predominant political issue of the time.
[The Caption from the Act Passed by the Texas Legislature in 1891]
An Act to establish a Railroad Commission for the State of Texas whereby discrimination and extortion in railroad charges may be prevented, and reasonable freight and passenger tariffs may be established; to prescribe and authorize the making of rules and regulations to govern the Commission and the railroads, and afford railroad companies and other parties adequate remedies; to prescribe penalties for the violation of this act and provide means and rules for its enforcement.