H-NET BOOK REVIEW

Published by H-Energy@h-net.msu.edu (December 2006)

William Childs. _The Texas Railroad Commission: Understanding
Regulation in America to the Mid-Twentieth Century_.  Kenneth E. Montague Series in Oil and Business History. 
College Station: Texas A&M University Press, 2005. x + 323 pp.  Photographs, notes, index. $35.00 (cloth), ISBN
1-58544-452-9.

Reviewed for H-Energy by Christopher Jones, Department of History and
Sociology of Science, University of Pennsylvania

 The Little Agency That Could?

  The history of American regulation has been a contentious affair.  The
rancor of Americans over time regarding the wisdom and legality of
government regulation of private business has been reproduced within the
historical literature.  Regulation has alternatively been seen as a
success story demonstrating the power of the people, a conspiratorial
move by capitalists to control competition, and an inefficient interference
into business operations.  Recent trends in the scholarship have focused
on industry structure as the central factor in the development of
regulation.[1]

  Within the context of these debates, William Childs's new book, _The
Texas Railroad Commission: Understanding Regulation in America to the
Mid-Twentieth Century_, is a welcome addition to the literature.
Without clinging to ideological extremes, Childs explores the history of the
Texas Railroad Commission (TRC) in order to illustrate the rise of
commission-style regulation in America.  His account is a rich social
history that combines law, politics, economics, policy, people, and
culture to tell a complex and balanced story.  In particular, Childs
argues that law and culture have shaped American regulation in ways that
accounts focused on ideology or industry structure often fail to grasp.

  Childs argues that the rise of American regulation is best understood
through the lens of "pragmatic federalism."  This concept has two main
components.  First, in most cases American regulation was a practical
rather than ideological affair.  Regulators spent the vast majority of
their time working with the regulated industries to improve operations,
share best practices, and address consumer complaints.  Radical
activities like rate setting and court battles that have drawn the attention of
contemporary and scholarly commentators were the exception rather than
the rule.  American regulation consisted mostly of negotiation, expert
advice, and collaboration.  Second, Americans debated whether regulation should
be controlled by the states or the federal government.  This question was
resolved piecemeal in a gradual process that saw some powers allocated
to the federal government and others left with the states.  Constitutional
law and judicial rulings were particularly significant in resolving
these questions.  In both cases, Childs argues that close attention to the
historical record reveals that practical considerations, local
contingencies, and legal restrictions shaped the development of
regulation.

  Childs's analysis is grounded in a history of the TRC.  For energy
historians, this is a particularly attractive feature of the book
because of the importance of the TRC in the history of oil production.  Widely
credited with controlling excess production in East Texas during the
1930s, the TRC is often called the most important institution in setting
national and even global oil prices during the four decades spanning
mid-century.  The TRC has also been seen as a critical model for OPEC.
A deeper knowledge of this agency, therefore, is important for anyone
wishing to understand the development of our current global energy economy.

  As Childs describes, the TRC was created by the Texas legislature in
1891 with the purpose of regulating railroads.  Texas was following the
lead of many other states which had established commission-style
regulatory agencies in an effort to control the perceived abuses of the
large railroad companies including unfair rates, poor service, and
dangerous operations.  The TRC's first commissioner, John H. Reagan,
established a pattern of regulatory practice that would influence the
agency for many years.  Reagan believed that the TRC had two main goals:
to protect consumers from unfair railway operators and to support the
state's overall economic growth.  The key to achieving these goals, he
believed, was the collection of facts, direct negotiation with railway
executives, and compromise.  The agency did not have the legal authority
to set rates, nor did it have the resources to spend much of its time in
court battles.  The carrot was far more important than the stick.  As
Childs shows through citing agency records, the day-to-day activities of
the commissioners consisted mainly of writing letters, meeting with
executives, and gathering data on operations.

  In the first decades of the twentieth century, the mission of the TRC
was expanded to include regulation of oil production, motor carriers,
and the natural gas industry.  To accommodate these new tasks, the TRC
became a multi-divisional agency, expanding from 12 permanent employees in 1916
to more than 560 by 1939.  For a while, TRC commissioners sought to
apply similar models of pragmatic federalism to regulation of the oil
industry, for example working with companies to suggest ways they could grow by
controlling waste.  Nothing in the TRC's history, however, prepared it
for the challenge of the "black giant" oil field in East Texas in 1930.
With its mammoth output, production soared, the market flooded, and the price
of oil dropped from more than a dollar to less than twenty-five cents.
Chaos erupted in the industry as profits evaporated, transportation and
storage facilities were overwhelmed, and the environment was tarnished
with overflowing oil.  While the TRC tried desperately to work with
producers to restore the price of oil, their efforts were of little
avail and the governor was forced to call in the state militia.

  The crisis was resolved through a new approach in regulation--the rise
of a personality-based agency.  Ernest Thompson charged to the top of
the TRC through the force of his personality.  His claims were not to facts
and figures, but to Texas pride.  By appealing to a mythic ideal of
Texas's role in the global oil order--Childs calls this the civil
Religion of Texas oil--he cajoled, harangued, and browbeat recalcitrant producers 
into compliance with the TRC's prorationing orders.  The legal status of these 
orders was suspect, and many of the central ideas had come from
sources outside of the TRC.  However, none of this prevented Thompson
from arguing to the rest of the world that the TRC was the most influential
institution in controlling oil production.  While Childs shows that the
TRC did play an important role in resolving this crisis, he argues that
Thompson's fiery rhetoric has tended to overplay the agency's importance
and understate the influence of organizations such as the Interstate Oil
Compact Commission.  With Thompson as head of the TRC from 1932 to 1965,
the agency's influence became based more on personality and mythic
ideals than the practices of pragmatic federalism.

  Childs argues that a balanced understanding of the rise of regulation
Is key to analyzing events since the middle of the twentieth century, which
have been dominated by trends towards deregulation.  Although he does
not make this point explicitly, it is clear from the tone of his book that
Childs believes regulation still has an important role to play in
negotiating between citizens and industry.  His writing evokes nostalgia
for the era of John Reagan when experts acted pragmatically to negotiate
and compromise in order to forward everyone's interests.  One senses
that Childs wants to place some of the blame for the downfall of regulation
at the hands of Thompson by labeling him an egomaniac and suggesting that
he undercut the legitimacy of commission-style regulation.  Given the
important stakes of the deregulation debate and the number of implicit
references he makes to the issue, it would have been useful to see
Childs be more forceful in articulating his views on the topic.

  There are several compelling features of this book.  Childs is
Extremely knowledgeable about American regulation during this period, 
bolstering his argument with frequent comparisons to other state and 
federal agencies. Childs also looks beyond rhetoric to understand what the actual
Practices of regulation looked like.  He shows that regulators spent much 
of their time negotiating, gathering data, and offering advice, rather than
engaging in the public and contentious acts of rate-setting and court
battles.  In addition, he advances the study of American regulation by
arguing forcefully for the importance of law, people, and culture in
addition to the traditional focus on industry structure and ideology.
Finally, Childs provides a nuanced understanding of the TRC and its role
in the development of the oil industry, highlighting its history,
capabilities, and limitations.

  This book is highly recommended for anyone interested in learning more
about the history of American regulation.  In particular, energy
historians examining the role of regulation in energy markets as well as
the history of the TRC will find this work very valuable.

  Note

 [1].  Thomas K. McCraw, _Prophets of Regulation:  Charles Francis
Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn_ (Cambridge:  Belknap
Press of Harvard University Press, 1984); Gavin Wright, "Regulation in
American History:  The Human Touch," _Reviews in American History_ 14, 
no. 2 (June 1986): 163-68; and Richard H. K. Vietor, _Contrived Competition:
Regulation and Deregulation in America_ (Cambridge and London:  Belknap
Press of Harvard University Press, 1994).

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