Within a very short period of time after its creation, the Railroad Commission cut the rates railroads were allowed to charge. Almost immediately, the Commission was taken to court and placed under injunction. It was not until 1894 when the United States Supreme Court ruled that the act creating the Railroad Commission was constitutional that the lower rates were put into effect.
In the meantime, in 1892, the railroads made an unsuccessful run at having the legislature abolish the Commission. In 1893, the Commission was granted statutory authority to regulate issuance of railroad stocks and bonds. In 1894 the constitution was amended to change the office of the three Commissioners from appointive to elective, with six year staggered terms.
The Commission's responsibilities included:
1. Administration of laws relating to the railroads of Texas.
2. Determination of passenger fares, freight rates, and charges for all classes of common carriers in Texas.
3. Holding public hearings.
4. Receiving of reports, making investigations, and keeping of records regarding fiscal structure, valuation, revenues and expenses, and train, terminal, and traffic service of Texas railroads.
The legal focus of the Commission was on intrastate passenger and freight activities within the borders of Texas. Interstate moves fell under the jurisdiction of the U. S. Interstate Commerce Commission.
NOTE: John H. Reagan, first Chairman of the Railroad Commission, had been instrumental in the creation of the federal commission in 1887 while he was serving as U.S. Senator from Texas.
When the Commission was founded in 1891, there were some 8,700 miles of track. When the railroads reached their peak in Texas in 1930, there were 17,500 miles. Following World War II, increasingly goods began to travel by truck and people by buses and cars and the miles of track began to shrink.
Over recent decades, the role of the Railroad Commission in the regulation of railroads has changed, moving from economic regulation to safety regulation. The Federal Railroad Safety Act of 1970 vested rail safety responsibilities in the Federal Railroad Administration. In 1983, the Railroad Commission began a cooperative process with the federal government, implementing a rail safety program. The Rail Safety and Planning section of the Transportation/Gas Utilities Division monitors the state's rail lines, inspecting railroad equipment, operations, and track. This section also maintains the state's rail planning program and oversees the use of federal funds for track rehabilitation projects.
Under provisions of the 1980 Federal Staggers Rail Act, the Railroad Commission recognized that it could hold only a passive role in rate setting. In 1984, the Railroad Commission ceased its historic role in economic regulation of the Texas rail industry.
Effective 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.