The Railroad Commission of Texas (RRC) is one of the oldest regulatory agencies in the country and the oldest in Texas. Established in 1891, the RRC has a long and interesting history overseeing the activities of several different industries, including oil and gas. Find out some of the intriguing things the RRC has accomplished in the last 125 years.
The Commission’s Origin Story
The RRC had a bumpy start. Texas state legislators attempted to establish a railroad commission back in 1876. After five failed attempts, lawmakers finally put an amendment to the state constitution providing a railroad commission on the ballot in 1890. Voters passed the amendment, creating the RRC and giving it jurisdiction over the operations and rates of wharves, express companies, terminals, and railroads. The RRC could prohibit and punish company extortion and discrimination, as well as set rates, require accurate railroad reports, and issue rules regarding freight.
An independent “Jeffersonian Democratic” candidate for governor, George Clark, publicly denounced the RRC in 1892. Clark stated that it was unrepublican, undemocratic, and “wrong in principle.” He believed that its only function was to harass, and he regarded it “essentially foolish… and vicious.” Clark lost the election to the incumbent governor, James S. Hogg, a liberal Democrat who had passed the 1891 legislature to create the RRC.
In 1892, a federal judge ruled the RRC illegal. However, the Supreme Court of the United States overruled this judge, permitting the RRC to continue. In 1984, the RRC appointed its first members – three commissioners who would serve overlapping six-year terms. Chairman John H. Reagan was the first head of the RRC and advocated two main goals: to support the state’s economic growth and to protect consumers from excessive rates and unfair railway practices. The RRC used Reagan’s regulatory practices for decades.
Texas’s Expansion to Oil
By 1907, the Texas railway system was in a steady decline. The RRC did not have the authority to set railway rates, which began to decrease dramatically. In 1891, the average rate was 1.403 cents per ton-mile. In 1907, this rate had declined 25% to 1.039 cents. The Texas railway system did not have the money to upgrade its equipment and could not keep its rates competitive enough to face competition from cars, trucks, and pipelines.
From 1916 to 1929, the RRC expanded its reach to include oil pipelines, oil and gas production, natural gas, bus lines, and the trucking industry. The RRC grew from a mere 12 employees in 1916 to 566 in 1939. On October 9, 1930, the East Texas Field was discovered. “Dad” Joiner brought in the first well in Rusk County, on Mrs. Daisy Bradford’s farm. The Oil Boom of the 1930s, spurred by the discovery of the East Texas Field, plunged prices down to 25 cents per barrel. The RRC issued Texas’s first proration order in August 1930, limiting the number of barrels drilled per day to 750,000.
In 1932, Ernest O. Thompson became the head of the RRC. From 1932 to 1965, Thompson did everything in his power to force producers to comply with the proration orders. The RRC could set the national oil policy with the passing of the New Deal. In the 1950s, it controlled more than 40% of the U.S. crude production and about 50% of estimated national proved reserves.
The Railroad Commission of Texas Today
The RRC lost its function as overseer of railways to the Texas Department of Transportation in House Bill 2702 in 2005, however, it retains its traditional name. Today, the RRC still regulates the oil and gas industries, as well as natural gas utilities, pipeline industries, and coal and uranium mining. The RRC currently has enforcement responsibilities pertaining to the Clean Water Act, Safe Drinking Water Act, Resource Conservation and Recovery Act, Pipeline Safety Act, and Surface Mining Control and Reclamation Act.
