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Texas and Pacific Railway and Texas Pacific Land Trust – a History of Railroads in Texas

TP-ticketOnce the largest landowner in Texas with 3.5 million acres of land, Texas Pacific Land Trust now owns 888,333 acres of land in West Texas. The Trust is owned by holders of “shares of proprietary interest” traded on the New York Stock Exchange. TPLT’s story is a window into the history of Texas and railroads in the 19th century.

Texas and Pacific Railway was created by federal charter in 1871. Its charter was to build a southern transcontinental railroad between Marshall, Texas and San Diego, California. Railroad companies were given land grants in exchange for building rail line, and the U.S. Congress granted T&P twenty sections of land per mile in California and forty sections per mile through the territory that is now Arizona and New Mexico. The State of Texas (where there were no federal lands) agreed to grant T&P twenty sections per mile for the portion of the line crossing Texas. The panic of 1873 caused financial difficulties, and by 1876 only 444 miles had been built. In 1879, Jay Gould bought the company and began laying track west. Gould merged T&P with Southern Pacific Railway, and by 1881 it had built a total of 972 miles of track, entitling it to 12.4 million acres of land. But because it had not built all of the line within the time required by its charter, T&P was awarded only 5,173,120 acres, later reduced to 4,917,074 acres – 3.5 million of that in Texas.TP-map

In 1888, the T&P went through bankruptcy and receivership, and the bondholders who financed the railroad were awarded the land in Texas that had been granted to T&P. The bondholders created a trust, Texas Pacific Land Trust, to liquidate those lands for the benefit of the bondholders, receiving 3.5 million acres of land. The certificates of trust issued to the bondholders were later listed on the New York Stock Exchange. The mineral estate under the land was spun off into a separate entity and later sold to Texaco, now Chevron. TPLT owns a royalty interest in almost 500,000 acres of its land.

Grants of land to railroads were done on a checkerboard pattern, granting the railroad every other section in portions of the State not yet settled. The idea was that, when the railroad sold off the land, settlement and development would be encouraged along the rail line, making the sections retained by the state more valuable and ripe for settlement.

Most TPLT lands are in El Paso, Hudspeth, Culberson, Reeves, Pecos, Winkler, Excor, Midland and Glasscock Counties. TP-landsMuch of TPLT’s land is now in the heart of the Permian Basin, the hottest area of oil and gas exploitation in the nation. As a result, the value of share certificates of TPLT have soared, from a low of $156.60 per share in August 2015 to $318.11 at close on July 21, 2017. TPLT paid a cash dividend of $0.35 per share payable on March 16, 2017, and a special dividend of $1.00 per share payable on March 16. TPLT’s royalty income in 2016 was $22 million. It also made $27 million from easements, grazing leases and damage payments from oil and gas activities, and $3 million from land sales. Net after-tax income in 2016 was $37.2 million.

TPLT has a board of three trustees elected by the certificate holders. Its offices are in Fort Worth. Its old office building, now being considered for renovation as apartments, is an iconic landmark on the Fort Worth skyline.TP-office-building

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