John H. Reagan and Early Regulation

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The Supreme Court Upholds the Commission

This letter from commissioner L.J. Storey reveals much about the role of politics in the early operations of the Railroad Commission

When the legislature convened in 1894, two of Hogg’s campaign proposals were at the top of the agenda. First, an amendment was passed to allow the railroad commissioners to be elected rather than appointed, serving staggered six-year terms. Secondly, a law was passed giving the Railroad Commission authority over the ability of the railroads to issue stocks and bonds and eliminate the practice of stock watering.

Before the new regulations could be enforced, Texas waited for a ruling from the U.S. Supreme Court. It came in 1894, a full eighteen months after a federal court had blocked the Railroad Commission from setting or enforcing rates. In Reagan v. Farmers Loan and Trust Company, the Supreme Court ruled that the Texas Railroad Commission was constitutional. While not a total victory for advocates of regulation – the court also ruled that the rates set by the commission were too low and had to be reworked – the Railroad Commission was finally free to go about the business of determining rates, investigating abuses, and enforcing regulations.

Progressive Regulation

The commissioners worked to resolve problems such as this 1896 dispute over hauling coal

Under the leadership of John H. Reagan and later commissioners, the Railroad Commission came to embody progressive ideas. Unlike the Populists, Reagan and other progressives were not out to slay the dragon. Rather, Reagan and his successors slowly began to build a staff of experts who could investigate problems, develop a deep understanding of the industry, and help put the industry on a sound, business-like footing. Cooperative negotiation, not confrontation, was the key to this approach.

The early railroad regulators relied on the written word, producing reports to the legislature and thousands of letters to Texans responding to railway complaints. Such work was time-consuming, but it also built public support for the agency and its work.

Early railroad tariffs. These notices of rates were required to be posted prominently in shipping depots

The influence of the Railroad Commission was less than its supporters hoped for and its enemies had feared. The commission did have some success at setting intrastate freight rates, securing more equitable rates for those in remote areas that were served by only one railroad. But interstate railroads with headquarters outside of Texas could still set rates at will outside the jurisdiction of the commission. Rates that were too low could be as problematic as those that were too high. Interstate railroads sometimes set rates well below those set by the commission, touching off rate wars that threatened to put smaller in-state lines out of business.

Life and work at the Railroad Commission, early 20th century

The Railroad Commission was also limited by its budget and staffing. The commission could take constituent complaints but did not always have money or staff to investigate the complaints. For example, in 1897, the commission was given $5000 with which to conduct investigations. Reagan used the money to hire three accountants to examine railroad books. The accountants found evidence of discrimination, especially in the area of rebates. The commission went after the companies and collected fines of $67,500. Nevertheless, it would be several years before more money was appropriated for investigations. In 1916, after more than 20 years in existence, the Railroad Commission still had only 12 employees.

The courts also limited the commission’s ability to act. Although the 1894 Reagan decision had empowered the commission to act, railroads constantly sought injunctions against specific regulations. A great deal of the commission’s time and money had to be devoted to arguing these lawsuits and persuading the courts to allow commission actions to go forward.

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