Texas Railroad Commissions Politics - Research Paper Example

Texas Railroad Commissions Politics The commission is among the most influential agencies in the U.S. The agency underwent several reforms to transform it to regulate new industries. The adaptations featured in reforms experienced during the America’s federalism system. Starting the 1910s, there were reduced powers of the state commission and subsequent allocation of such powers to the national commission. Pragmatic federalism refers to the process when there were progressive reforms in regulation in America. Texans and the federal government struggled over the control of oil reserves. In the 1920s, there was a sporadic pattern of cooperation between the state and federal governments. Tensions were high in the coordination of the state activities and those of the federal government over the control of resources. Mandates of the commission The commission is the central state agency with regulatory jurisdictions over the operations of the oil and natural gas industry. It also has jurisdictions over pipeline transporters in the nation. The commission controls the operations of the natural gas and hazardous liquids industry in the country. It controls natural gas utilities and the LP gas in the nation. All coal and uranium-mining operations in the U.S. are under the commission’s mandate1. The commission controls all the research and education aimed at encouraging the use of LP gas as an alternative energy form. Its operations are under the federal legislations such as the pipeline and safety act. According to the Texas archives, the commission is the first to be set in the country2. The commission’s regulatory roles are responsible for the prevention of waste of resources. It serves to protect property rights in environment. The commission operates and maintains plat and survey maps that provide information on oil and gas reservoirs in Texas. Protection of the correlative rights of interest owners’ rights is a vital role of the commission. The commission also ensures safety in the operations of gas and oil including that of hydrogen sulfide. It has a mandate to regulate hazardous pipelines. Material and natural gas pipelines should be clean and conform to standards. Oil supplied to the population should be safe and supplied at a reasonable price. Regulation of surface coal mining is under the commission’s jurisdiction. Oil boom in Texas in the 1930s Also referred to as the Gusher age, the east Texas oil boom was a historic time of economic prosperity, experienced in the state at the onset of the 20th century3. Beaumont, Texas, experienced an escalated production level of oil after drilling companies defied the commission’s conservation orders. High oil production promoted the local economy of the state and caused escalated wealth circulation. There was massive regional development in states around Texas, as well. Oil boom promoted serious industrialization and development in the U.S. The incident was unpredicted since oil gushed out when drillers almost declared failure to discover oil. This made Texas the greatest oil producing state in the nation. In October 9, oil discovery at Kilgoire strike was a success. The oil boom effect was extensive across sectors of the economy. A crash in the stock market was a serious impact of the spill, for instance. Mass unemployment was the ultimate effect of the stock crash. Independent oil firms exploited the boom to produce massive amount of oil. National oil prices changed significantly and affected the oil market in the country. The cost of oil per barrel dropped extensively between 1930 and 1931. Independent oil firms’ high production level destabilized the world oil markets. East Texas oil reserves produced a large a massive amount of oil comparable to the total oil production in the country. The depression turned worse in 1931 and 1932 and the Hoover administration seemed incapable to solve the situation. Farmers experienced the effects of the depression and business declined all over the nation. Regulation too technical for a single commission Childs explores the politics of the control of the commission over the production activities4. Technically, many argued that the regulatory roles were too much for the commission to handle singly. East Texas was an extensive field that produce high amount of oil. Its discovery outdid other aspects of the Texas Oil Heritage. The commission’s oil and gas division had approximately a decade of operation by the time of Texas oil boom. Between 1890s and 1929, Texans already had recognized economic and legal policies in place to control industrial development. There were regulatory policies to address cultural patterns that affected the industry. The legal framework and policies were to control the oil production beyond 1930. The economy of the state before the boom was stable because of the strong link between legal and institutional frameworks in set to control oil production. There was proper coordination of activities from exploration, through production, transportation and finally to refining and marketing of oil in Texas. The progressive reform agenda were influential in maintaining the complex structure in the extraction of oil. The industry, before the boom was in a straightforward and vertical structure of governance. Before the boom, there were strict rules and policy regulations in the transport of oil in the state. Texas lawmakers placed focused on the adaptation of land-use laws that controlled exploitation of oil in the state. Transport and land-use pattern laws were effective before the boom. Effective policy implementation was notable in Texas before the beginning of overexploitation. Industry-based regulations of exploitation of non-renewable resources were effective in most parts of Texas. Conservation of oil was a controversial agenda among Texas lawmakers. The state ordered control on the number of barrels of oil drilled, daily. However, the order faced opposition from firms such as Pure Oil Company5. Petroleum-conservation policies in Texas Controversy over the formulation of conservation policies in Texas delayed political intervention. Policy makers had controversies over the definition of conservation of oil. Controversy over the definition of oil conservation created a stalemate among policy makers. Political responses to the crisis were slow because of the delayed deliberations over the best way to define conservation of oil. Formulation of petroleum-regulation legislations dragged because of diverse challenges. Land under state ownership was extensive and large. This was a challenge for policy makers and the commission to formulate a regulation agency that would ensure its substantive utilization and control of oil overexploitation. The state’s size was too huge for the commission to monitor effectively. Geographical and agricultural regions were extensive and challenging to monitor and control. This affected the formulation of petroleum regulation legislations. Oil production in the state of Texas had uncoordinated relations with similar activities in other state. Lack of coordination with the midcontinent areas hindered the formulation of policies to conserve petroleum in Texas. Uncoordinated southern progressivism The concern over oil conservation in Texas in the 1920s sparks several political critiques and concerns. First, it depicts the difference between Texas and southern progressivism. Business progressivism in the south did not sideline the old new south. Instead, it was inclusive to all southern states. Southern progressivism embraces cooperative initiatives between the business and governments. Cooperation among south states during the southern progressivism focused on embracing initiatives the focused on industrializing the south. It involved diverse initiatives to bring efficiency and harmony in coordinating state efforts to draw industrial enterprise. This was the boosterism agenda in southern progressivism. Oil discovery in the southern states after the civil war was an opportunity for development. Southern political leaders and businesspersons, however, did not use the opportunity to promote a truly progressive regional development in the south. The racial orientation of the south hindered success of coordination among southern states. Texas policymakers, on realizing the hindrance to success, demanded the formation of an independent prospect for development in the state. The commission had a mandate of controlling growth in the oil industry. Political change in the state during the twentieth century Second, improper regulation of oil in the sector depicts the transformation of politics in the state. Agency and regulatory cultures evolved considerably throughout the history of the state. Evolution of the commission’s roles altered the regulatory culture during the twentieth century. Regulations between 1917 and 1929 show an altered notion in regulation during the twentieth century. Regulation in the twentieth century was different from the current regulation. In the early twentieth century, the commission had overworked staff to undertake conservation roles. Inadequate staff to regulate the production in the state was a source of conflict that erupted in the future. Political economy of oil in Texas The political economy of the 1920s in Texas escalated the overexploitation of oil. It promoted a cynical pattern of overproduction that promoted two types of waste. Physical waste emanated from poor drilling method6. Physical waste resulted in unsustainable methods of drilling. Pollution of water resources was a prevalent in most parts of Texas. Political economy also resulted in economic waste. Overproduction of oil resulted in reduced prices and improper marketing to drilled oil. Overproduction was a central cause of wastage of potential oil resources. Productive oil resources went untapped and unutilized. Low-priced oil had extensive effects on the economy. The market price of oil did not bring returns of drilling investments. Loss of investment funds by drilling firms caused serious unemployment in the industry. This affected the commission’s efforts to control the exploitation of oil in the state of Texas. Economic politics influenced Texas lawmakers to separate conservation roles from economic regulation. There were speculations by Texas lawmakers of possible corruption of state officials to approve exploitation projects. According to the lawmakers, separation of conservation powers from economic regulation roles was a means of controlling corruption. State officials, however, viewed the decision as inappropriate. There were differences in the use of state power was a great problem to the commission. There was limited power of the commission to control all aspects of the crisis. Power tension between state officers and Texas lawmakers escalated the condition of uncontrolled oil exploitation. Commissioners identified the challenge early enough but their roles in oil conservation had limited impacts. Challenges as controlling land-use in was a hindrance against the commissioners’ roles. Power tension also hindered the commission’s ability to control oil producers operating on a low scale. Power separation hindered the protection of small producers from predatory exploitation by established producers. Commissioners had limited jurisdiction to match oil exploitation levels to the market needs. Established producers, instead, controlled the oil extraction levels with insignificant regards to market demands. Established producers extracted more oil than the pipelines could release. Pipeline firms had a notable challenge because of the excess production levels. Transportation to refineries was a blast. Creation of regulatory agencies The commission’s formation emanates from the necessity to satisfy the public interest that required the regulation of railroads. In 1890, the governor Stephen Hogg came into office with an agenda of regulation. Hogg’s election promoted the passage of article X under the second chapter of the Texas constitution7. Amendment of the article allowed the creation of regulatory agencies by the legislative. Government regulation came started after the amendment’s passage, on April 3, 1891. An act to set up a government agency to regulate the oil in the state passed under the Texas Revised Civil statues. At inception, the commission’s administration was under the management headed by three members appointed by the governor. The first three members appointed by governor Hogg included John Reagan, who served as the first head of the commission. He served until 1903. Initially, leaders of the commission served for a three-year term. In 1894, an amendment to change the leadership structure of the commission passed. Amendment applied to section 30 of article XIX of the constitution of Texas. Under the amendment, leaders of the commission served for six-year terms. The commission was the first government regulatory agency formed under the constitution of the state. At its time of formation, the commission had jurisdiction over the operations of railroads and express companies. Management of terminals and wharves also formed part of its mandate. Its operations focused on intrastate freight businesses. They were distinct from interstate freight and businesses controlled by the commerce commission in the country. For its first twenty years, the commission focused on railroad regulations. It set rates and attended to complaints upon which it launched investigations. By 1915, controversies emerged over the right mandates of the regulations. The legislature in Texas determined whether the commission offered full service to fulfill the public interest. Part of the legislature decided that it was right if the commission had expansive roles and additional duties. Designation from intrastate to interstate regulatory agency Beginning 1917, the commission’s operations became broad and extensive. Additional duties of the commission were effective after the passage of the pipeline petroleum law. That was the Senate Bill 68, 35th Legislature. The law rendered pipelines in the country as common carriers similar to railroads that were under the commission’s management. The Act designated the commission as the chief agency to manage the country’s conservation laws that relate oil and gas in the nation. The second law that reinforced the commission’s mandate was the oil and gas conservation law. That was under the senate bill 350 that became effective in 1919, June 18. Senate Bill 350 placed, under the commission, the mandate to oversee oil and gas production activities in the nation. Based on the legislation, the commission formulated its countrywide regulations to be effective in the oil and gas industry in 1919. Countrywide regulation in the oil and gas industry promoted conservation and safety. Rule 378 was effective in enhancing safety and conservation. The rule created a minimum distance to maintain between wells situated at the drilling sites. Proposed distance ensured the maintenance of correlative rights. The commission’s oil and gas division works to prevent pollution of natural resources such as fresh water from oil and gas operations. It is responsible for holding hearings on the market demand for oil and gas. It sets allowable limits for oil and gas production in the country. Drilling permits issuance is a role of the oil and gas division of the commission. The division reviews all completed oil and gas drilling projects. Data on the operations of oil and gas companies is a mandate of the division. These operations promote public safety. Site remediation operations and acreage assignment is under the operations of the division. It implements the federal act that ensures safe drinking water. Underground hydrocarbon stores are under the commission’s management. The cooperative approach to regulation The congress, in 1920, conferred power upon the Interstate Commerce Commission to oversee all railway operations. The congress also required the commission to cooperate execute its roles in coordination with state agencies. State regulators, however, remained cynical and maintained their call to maintain the constitutionals powers of the state. The state exempted the federal government from the control of petroleum products and oil in the country. Tensions between the two levels of government prompted discussions to adopt a cooperative approach to contain the tension. The commission’s failure to prorate oil Occurrences during oil boom occurred after the establishment and expansion of the Texas railroad commission during the populist era. By 1930, the commission had full mandate under the state law to determine the allowable amount of oil from drilling. The commission had power, conferred by law, to prorate oil by 1930 when the boom occurred. It was under the commission’s jurisdiction to control the level of extraction of oil to avoid its implications on the economy of the state and the country. It had powers to control oil production levels in the country. The level of petroleum increased from an estimated 69 million barrels in 1901 to an approximate volume of one billion barrels by 1929. Oil was in high demand to fuel automobiles. It elevated the country to industrial supremacy since it fuel tractors used in farmlands. Maritime transportation gadgets turned to petroleum from coal as the source of fuel. There was escalated fuel consumption in operating maritime vessels between 1919 and 1929. The U.S. navy used a lot of gasoline in the 1930s. The commission regulated the number of days per month when wells could produce but failed9. It was under the commission’s jurisdiction to regulate the amount of oil from individual wells. The boom and its subsequent economic implications resulted from the commission’s failure to perform its mandate effectively. It was the commission’s jurisdiction to contain the national oil production at allowable levels. Excess production affected the country’s economy by depressing the global market for oil. In 1931, the commissioned issued an order for independent oil companies to stop the over production. It issued a proration order to control oil production at Kilgore. Texas governor, Ross Sterling, intervened and sent guards and officers to the oil production area with a mission to control the situation10. The two legislations By 1917, two notable legislations came into effect. One of the laws required separation of pipeline companies from firms that produce oil. Initiation of the legislation emanated from public glamour that there was a relationship between Texas Company and Standard Oil. According to the law, only interstate mergers between firms were permissible. Companies from Texas could not merge operations. The second legislation changed the state of oil transporting firms operating under other firms as common carriers. The commission’s mandate in the enforcement of the laws was to devise regulations that govern oil transportation. Should the level of oil production exceed the capacity of pipelines, the commission had a mandate of rationing the production levels. Enactment of regulatory legislations There was an unprecedented decline in cotton prices in the country. Decline in cotton prices was a source of unemployment to many Americans. The simultaneous drop in oil and cotton prices in Texas prompted the necessity to strengthen the commission by granting it the jurisdiction to stabilize prices. The speaker, Fred Minor, aided in the adoption of the legislation that granted the commission power to control and regulate the prices of oil in the nation besides managing the level of production. A serious challenge affected the process. Conservative democrats heightened the powers of the government instead. Their refusal and lack of cooperation was because of economic anxiety as opposed to progressive idealism. After 1896, the Democratic Party dominated the politics of Texas. Conservatives had a business-oriented agenda and expressed resistance against progressive legislations. Conservative democrats campaigned for continued control of the East Texas oil wells and fields by the independents. In July 1933, there was an executive order issued by the Roosevelt to uplift hot oil shipment. In 1934, the Texas state legislatures approved a legislation to regulate the operations of refinancers. Refiners, under the legislation, had an obligation to disclose the amount of oil refined and their source. The National Industrial Recovery Act of 1933 The act, enacted by the federal government, aimed at regulating the transportation of oil in different states in the nation. It prohibited transportation of oil above the state’s quotas of production. NIRAct required a controlled production quota for the industry. The first quota, implemented in 1933, was under the commission’s mandate. There were no price controls issued to address oil overproduction in Texas. The commission faced several challenges in enforcing the issued orders because of low cooperation from other parties. It had limited access to refinery records. It, therefore, could not track down any violation by the refinery firms. Controlling overproduction was a challenge to the commission. There were insignificant penalties for violation of oil rules. Agents tasked with enforcements could not manage the role because of the extensive size of the Texas state. However, the Supreme Court nullified the legislation. Supreme Court verdict on the legislation prompted the enactment of another key legislation to control hot oil and contain the production level in Texas. The bill introduced by Senator Connally acted as the next move to implement control on oil overexploitation. The three legislations In 1934, the state government passed three vital control legislations to enhance the commission’s jurisdictions and functionalities. The three legislations conferred authority on the commission to undertake inspection of hot oil at the refineries. The bills also sort to improve the hot oil production cost through taxation measures. Tax from production would be important to help pay for the staff engaged in oil production. Taxation was a revenue source for enhancing enforcement measures. Violation of any order by the commission, as envisioned in the bills, was tantamount to felony. Such felony, upon conviction, carried a punishment of jail time. The Cole Committee The congress, in an attempt to control oil supplies in the country, sort to conclude whether control of oil should be under the federal or state governments’ control. This was the mandate of the Cole Committee. The committee conducted sessions in all producing states to get their views over oil control jurisdictions. One of the key recommendations of the committee was a possible union by all producing states to deliberate on the concern over control of oil in the country. From its findings, the committee suggested an interstate law to implement conservations laws. It also suggested the intervention of a national agency to oversee and monitor the management of petroleum reserves in the state. The agency, as proposed by the committee, would be responsible for controlling the transportation of hot oil from its reserves. It would also inspect production methods used in oil production. The Federal tender board The federal government, in 1934, booted its control measures on oil production. It constituted the Federal tender board. The board summoned all refiners and transporters to scrutinize their documents of operations. This was inclusive of producers. All summoned by the board were under obligation to submit their transaction particulars. The board had to approve all shipment of hot oil. Companies trading in hot oil and transporters were under obligation to ensure open books with all transactions being transparent. Regulatory actions of the board were effective in reducing the number of oil shipments conducted in violation of regulations. The new deal initiatives After assumption of office, Roosevelt had commitments to address the aftermaths of the Great Depression11. NIRA was one of the legislations that President Roosevelt used to enact the new deal initiatives in the 1930s. One hundred days after assuming office, Roosevelt enacted NIRA to implement economic recovery programs in the country. NIRA was among the key initiatives by the Roosevelt administration to address the impacts of the Great Depression12. It became effective on June 16, 1933. After its passage into law, NIRA’s implementation was under the mandate of the federal agencies. Roosevelt’s administration intended to implement the law on two fronts. The codes aimed at creating federally funded programs that would boost employment in the country. Public works funded by the federal government were initiatives aimed at addressing unemployment caused by the great depression. Employment would help boost and stimulate the economy that suffered after the Great Depression’s effects. The second front applied by NIRA related to the affecting reforms in the Federal regulation roles in different sectors. Federal controls were effective in industrial and manufacturing sectors. This included federal regulation of oil exploitation in Texas. The senate opposed the legislation and with some progressives proposing alternative strategies to address the great depression’s effects. Supreme Court decision against NIRA In 1935, the Supreme Court ruled against the constitutionality of NIRA rendering it unlawful. The court maintained that NIRA was against the constitution. The ruling cited particular reference to defiance of the constitution’s provisions on the separation of powers. According to the ruling, congress’ decision to pass the legislation was unconstitutional since it regulated what was the beyond the congress’ mandate13. According to the ruling, it was beyond congressional mandate to set the minimum wage as well as provide the maximum hours of work. The congress’ commerce authority did not allow it to pass the codes provided in the legislation. The decision was a major setback to Roosevelt’s new deal initiatives. This hampered previous regulatory efforts to control shipment of hot oil and illegal trade. It scrapped off all federal penalties for the violation of the act. This initiated unrestricted production, transportation and shipment of hot oil in East Texas. This prompted the initiation of a bill by the state government introduced by Connally. The Connally Hot Oil Act The act, passed by the state government in 1935, aimed at controlling the 1930 oil overproduction in the state14. It granted supremacy to the federal government to implement the commission’s directives. Directives issued by the commission on interstate commerce received reinforcement from the federal agencies. It proposed a compact for all interstate agencies in oil producing states to achieve a combined effort towards oil exploitation control. It required all oil-producing states to have coordinated efforts in controlling production. This led to the formation of the interstate oil compact. The act was effective in ending the long-term oil wars and political differences around regulations aimed at controlling production by oil companies. Interstate oil compact (IOC) Its approval by the congress in August 1935 marked the start of coordination among all states producing oil. The IOC’s function was to review demands for oil and establish allowable production standards. Its writing was effective after consensus among representatives from all oil producing states. In 1934, there was a meeting of representatives from oil producing states in Ponca, OK. The meeting aimed at discussing the instability in the industry in terms in relation to oil production. Representatives also aimed at finding out the possible intervention to address the challenge in the oil industry. Because of differences in opinion among representatives, there were no substantial resolutions at the Ponca City meeting15. The second meeting of representatives occurred in February 1935, then in Dalla, TX. Representatives from the states settled on a unanimous conclusion to form the IOC. In September 1935, there was a commission (IOCC) to implement the provisions of the compact. The governor of Oklahoman, E.W. Marland was the first to head the commission. Originally, the commission consisted of six member states but expanded to thirty-eight. There are other international affiliates to the commission. The compact’s member states produce an estimated twenty percent of the oil consumed in America. Achievements of the IOC At its formation in 1935, there were diverse challenges in the oil industry characterized by massive wastage and over exploitation. Discoveries of East Texas reserves alongside the Oklahoma City field were notable causes of excess supply of oil. Small fields discovered before massive reserves such as Eat Texas lacked market to dispose their oil. By 1935, the oil available exceeded the market’s absorption. The compact enhanced control of petroleum production within states. An advisory committee that constitutes of representatives from oil producing states channeled for the formation of the compact. The compact oversees strategies to solve petroleum conservation in all states. In 1937, President Roosevelt announced an agreement between the federal government and all oil producing states to control production and enhance conservation. Producing state administrations and the federal government agreed on coordination and cooperation in executing control in the oil industry. During the period of world turmoil, the compact was very important. By 1941, the country had surplus oil almost beyond one million barrels per day. Reserved oil was a source of security for various countries during the Second World War. Since 1941, the agency had shown several achievements in attaining controlled oil production. Bibliography Childs, Williams. The Texas Railroad Commission: Understanding Regulation in America to the Mid-Twentieth Century. College Station, Texas: Texas A&M University Press, 2005. Print. Folsom, Burton. New Deal Or Raw Deal?: How FDR's Economic Legacy Has Damaged America. New York, NY: Simon and Schuster, 2009. Print. Hinton, Diana and Olien, Roger. Oil in Texas: The Gusher Age, 1895-1945. Texas, TX: University of Texas Press Interstate Oil & Gas Compact Commission. 75 Years of History and Accomplishments. Web 14 November 2013. Accessed from :< http://iogcc.org/history-and-accomplishments> Malavis, Nicholas. Bless the Pure and Humble: Texas Lawyers and Oil Regulation, 1919-1936. College Station, Texas: Texas A&M University Press, 2005. Print. Prindle, David. Petroleum Politics and the Texas Railroad Commission. Austin, Texas: University Of Texas Press, 2011. Print. Railroad Commission of Texas. Railroad Commission Authority and Jurisdiction. Web 14 November 2013. Accessed from: Schlesinger, Arthur. The Coming of the New Deal, 1933-1935. New York, NY: Houghton Mifflin Harcourt, 2003. Print. Texas State Library. Railroad Commission of Texas, Oil and Gas Division. Web 14 November 2013. Accessed from: Texas State Library. Railroad Commission of Texas, Oil and Gas Division. Web 14 November 2013. Accessed from :< http://www.lib.utexas.edu/taro/tslac/20085/tsl-20085.html> Texas State Library. Railroad Commission of Texas, Oil and Gas Division. Web 14 November 2013. Accessed from :< http://www.lib.utexas.edu/taro/tslac/20085/tsl-20085.html> The Supreme Court. Landmark Cases: Schechter v. U.S. (1935). Web 14 November 2013. Accessed from :< http://www.pbs.org/wnet/supremecourt/capitalism/landmark_schechter.html> Utley, Dan. History Ahead: Stories Beyond the Texas Roadside Markers. Texas, TX: Texas A&M University Press, 2010. Print. Vassiliou, M. The A to Z of the Petroleum Industry. Plymouth: Scarecrow Press, 2009. Print. Warner, C. Texas Oil & Gas since 1543. Ingleside, Texas: Copano Bay Press, 2007. Print. Read More