Union Pacific Railroad Company

UNION PACIFIC RAILROAD COMPANY

The Union Pacific Railroad Company (UP) came into existence in response to the widely held belief, fully formed by the 1850s, that the United States needed a rail link between its older, eastern states and the distant but rapidly growing states of the far west. Various proposals were made for northern, southern, and central routes but Congress could not agree on a plan. Following the southern states' secession from the United States in 1861, the remaining congressmen from the North quickly agreed on a route, and U.S. President Abraham Lincoln (1861–1865), urged on by military considerations as much as by those of economics, signed the Pacific Railroad Act of 1862.

The act called for the creation of a public corporation, called the Union Pacific Railroad Company, to build a railroad from Nebraska to the California-Nevada border and there to meet the Central Pacific rail line, building east from Sacramento, California, and later linked with San Francisco. The meeting place of the two railroads was eventually set at Promontory Summit, Utah Territory. As amended by a second piece of legislation, the act specified that the company would be supported by a loan of U.S. bonds from the federal government, to be paid back in 30 years, and by the issuance of its own bonds and capital stock. Further, the company would receive land grants in the amount of 6400 acres on alternating sides of every mile of track laid, a checkerboard swath of land across the middle of the country that would eventually total around 12 million acres of valuable minerals, grazing land, and metropolitan real estate.

While the logic and value of a railroad across the western United States seemed obvious in the late twentieth century, it was much less so in 1864. The men who became involved in the leadership of the UP—chiefly Thomas C. Durant (1820–1885) and brothers Oliver Ames (1807–1877) and Oakes Ames (1804–1873)—did so largely in order to make handsome profits off the railroad's hurried construction. Durant was the vice president and dominant figure in the company's early years; it was he and a handful of others who formed a construction company called Crédit Mobilier of America (CMA) to receive contracts from UP for the building of its vast railroad. Estimates vary as to precisely how inflated these contracts were, but later congressional investigations left no doubt that the backers of CMA intentionally siphoned off far more of the UP's capital than was fair to its investors or good for its future financial health. The investigations of the early 1870s also revealed that the CMA principals bribed members of Congress with company stock. The railroad that was built was a splendid success, and so vast a project might never have been undertaken without the promise of equally vast profits to be made.

In five years the UP crews laid more than 1000 miles of rail between Omaha, Nebraska, and Promontory Summit, Utah Territory, where on May 10, 1869, a golden spike completed the first transcontinental rail line. The railroad's completion supplied a critical impetus to the development of the western United States, which to that time had been settled only on the Pacific Coast and in areas of unusual mineral wealth, such as Colorado. With the arrival of the railroad, farmers, ranchers, and manufacturers were able to transport their goods to the great eastern metropolitan markets cheaply and quickly, and the West began to fill with pioneers. As the area's most significant railroad for almost 15 years, UP enjoyed rapid growth and excellent earnings for its scandal-ridden promoters, who were dominated from 1873 to the mid-1880s by financier Jay Gould (1836–1892).

Under Gould's direction UP expanded considerably during the 1870s, with its main route from Omaha, Nebraska to Ogden, Utah, joined by a host of feeder lines extending into neighboring territory. The most significant of these was a line running to the Pacific Ocean through Idaho and Oregon and a branch that progressed in the general direction of Los Angeles, California, which it reached in 1901. Unfortunately, Gould's tenure was also marked by mismanagement and an increasingly burdensome debt. After the financial panic of 1893 strained the U.S. economy to the utmost, UP was forced into bankruptcy.

Union Pacific was reorganized in 1895, with Edward H. Harriman acting as chairman. Under Harriman's leadership, UP became one of the best run, as well as one of the largest, U.S. railroads. Harriman first set about retrieving the various pieces of UP lost during bankruptcy and soon reassembled the company's three basic networks: those running between Omaha and Ogden, Ogden and the Pacific Northwest, and Ogden and Los Angeles. Seeking control of the Central Pacific run between Ogden and the San Francisco bay area, he gained control of Central's owner, Southern Pacific (SP) in 1901. Between 1898 and Harriman's death in 1909, the UP increased its track miles from 2000 to 6000.

An anti-trust case brought against UP resulted in a 1913 U.S. Supreme Court decision that the company was inhibiting competition and must divest itself of its SP holdings. Union Pacific was thus once again reduced to its three main routes—Omaha to Ogden, Ogden to Portland, and Ogden to Los Angeles— although new lines between Portland and Seattle were soon added.

In the 1930s an increasing portion of earnings were generated by UP's oil and gas holdings and industrial real estate, businesses that were an outgrowth of the generous land grants the railroad had received upon its formation. With the outbreak of World War II (1939–1945) Union Pacific had little to worry about in the financial realm. The need to shuttle huge amounts of personnel and heavy equipment around the United States gave UP all the business it could handle; company employment nearly doubling to 60,000 and revenue pushing to more than $500 million by war's end.

During the postwar period, UP restructured its holdings into three divisions: transportation, land development, and natural resources. In the mid-1960s the company began a concentrated program of mineral, oil, and gas exploration. To reflect its diversified nature, the company changed its name to Union Pacific Corporation (UP) in 1969. By the 1970s UP had moved into refining, thus completing the formation of a fully integrated oil and gas business. Eventually known as Union Pacific Resources Company, this subsidiary was spun off into a separate entity in 1995, enabling UP to once again concentrate on its core railroad business.

Beginning as far back as the 1930s and continuing through the end of the twentieth century, truck and automobile traffic eroded the railroad's share of both freight and passenger miles. This long-term trend, coupled with U.S. President Ronald Reagan's (1981–1989) deregulation of the railroad industry, led to a new era of railroad consolidation in the 1980s and 1990s. In 1982 Union Pacific acquired the Missouri Pacific and Western Pacific railroads, gaining a Chicago to Omaha line, three gateways to Mexico, and a route between Ogden and San Francisco. The original transcontinental railroad was again back under complete UP control. An even larger acquisition came in 1996, when Union Pacific paid $4 billion to once again join forces with Southern Pacific. The UP-SP marriage created the largest railroad in the United States, with 36,000 miles of track in 23 states, Canada, and Mexico.

See also: Oakes Ames, Oliver Ames, Thomas Durant, Jay Gould, Railroad Industry, Railroads (Federal Land Grants to), Robber Barons, Transcontinental Railroad

FURTHER READING

Bailey, Edd H. The Century of Progress; A Heritage of Service: Union Pacific, 1869–1969. New York: Newcomen Society in North America, 1969.

Cook, William S. Building the Modern Union Pacific. New York: Newcomen Society of the United States, 1984.

Kenefick, John C. Union Pacific and the Building of the West. New York: Newcomen Society of the United States, 1985.

Klein, Maury. Union Pacific: The Rebirth, 1894–1969. New York: Doubleday, 1990.

——. Union Pacific: Birth of a Railroad. New York: Doubleday, 1987.

Willoughby, Jack. "The Rebuilding of Uncle Pete." Forbes, November 14, 1988.