Hazardous Business
Industry, Regulation, and the Texas Railroad Commission
The Railroads Come to Texas
The Fight for the Commission
John H. Reagan and Early Regulation
The Oil Wars
The Power Years
Other Responsibilities
The Railroad Commission Today


casing off
The practice of lining a borehole with tubing to prevent the entry and migration of gas, liquids, or other debris between subsurface formations.

common carrier
A private company that provides services to the public at large, generally in the field of transportation or communications infrastructure. Under the law, a common carrier is required to make its infrastructure available to everyone willing to pay to access it.

A legal argument made by the railroads that held that the rates set by the Railroad Commission did not allow them enough profit to operate, pay off debt, or reinvest in the company, thus depriving the railroads of their property without due process of law.

correlative rights
A legal doctrine holding that certain rights of land owners over a common resource such as oil or gas are coequal, or correlative. No one owner can take more than his share.

A practice in which railroads charged higher rates for one set of shippers than for another. The most common form of discrimination was long-haul/short-haul discrimination, in which the railroad charged more for shipping freight or passengers between two intermediate points on a line than for shipping the same cargo the full length of the line, including the intermediate section. Railroads also charged more to ship finished goods than raw materials, more to ship to popular destinations, and more to ship partial car loads than full carloads.

A practice in which large shippers received the rebate from their competitor’s shipments, after the competitor paid full price.

free passes
A form of discrimination in which influential people were given free railroad passes as a form of bribery. In 1901 there were 271,285 free passes issued by the railroads – enough for every third or fourth male in Texas. Legislators, tax assessors and collectors, county commissioners, sheriffs, judges, and even local doctors, lawyers, and clergymen were all offered free passes. The pass was revoked if the recipient acted contrary to railroad interests.

hot oil
Oil produced above the limits set by the Railroad Commission or other regulatory bodies.

Small petroleum producers who receive their revenue from production at the wellhead, and who generally have no refining or fuel marketing subsidiaries.

land grants
Texas is the only state in the Union that retained ownership of its public lands when it was admitted as a state. In the early days of statehood, it was a cash-poor and land-rich state. Texas recognized the potential economic value of its public land, and set much of it aside for the support of public schools. Revenue was slow to materialize, however, because the land was virtually inaccessible for development. Texas financed railroad construction through land grants, which were regarded not as subsidies, but as investments in the future of Texas. The railroad construction would make the land accessible for development, thus making the land valuable and bringing in revenue for public schools.

Large petroleum companies that not only produce oil but also control related infrastructure such as pipelines, refineries, and service stations.

Although ownership of the railroads in Texas was never exclusive to one company, railroad opponents often referred to the industry as a monopoly. The railroads controlled the means of transportation, the rates for shipment, and many related industries such as steel, oil refineries, copper plants, and lumber companies.

National Industrial Recovery Act (NIRA)
Passed in 1933, the NIRA was the centerpiece of New Deal legislation. It created the National Recovery Administration to promote cooperation among corporations and established codes of fair competition for numerous industries. Businesses that voluntarily complied with the codes could display the famous NRA Blue Eagle with the slogan, “We Do Our Part.” The NIRA was declared unconstitutional by the U.S. Supreme Court in 1935.

A political party formed in 1891 to represent agrarian interests. The Populists were most famous for their advocacy of the free coinage of silver money and government control of monopolies.

A practice in which competing railroads made agreements to divide up the traffic and maintain freight rates.

A political philosophy advocating moderate political change and social improvement by governmental action. Progressives believed that the government should ride herd on corporate interests such as railroads, insurance companies, and oil companies, and act as an advocate for ordinary people. The progressives did not want to change the basic American system of property rights and capitalism, but they did want to make the system more equitable.

The ability of a state to limit oil and gas production, usually based on market demand. The term comes from the word “prorate,” and refers to the practice of limiting production proportionally to a fraction of the total capacity of each producer.

A practice in which railroads gave price breaks to large shippers.

rule of capture
A legal doctrine that said that oil and gas pumped from a well belonged to the operator of the well, even if the volatiles had been drained from beneath another owner’s land. Because of this rule, wells were drilled very close together. The race to produce oil often resulted in damaged reservoirs and the waste of both oil and natural gas.

stock watering
A practice in which railroad companies issued more stock than the company was worth, diluting the value of all shares, which they then bought back at a lower price.

The joint development of an oil field that includes territory controlled by different owners. A unitized field allows participants to share both royalties and risks in the development of the field and to utilize the field’s natural features without damaging the field through excessive competition.

An exploratory oil well drilled on speculation in an area not previously known to produce.



Page last modified: August 17, 2011