Follow the Money

Oregon & California Railroad Land Grant Payments

Oregon & California (O&C) Railroad Land payments return a large proportion of federal timber receipts to eighteen counties in western Oregon.

In 1866, Congress passed the Oregon & California Railroad Act (PL 39-242), granting 6 million acres of checkerboarded land to two companies charged with building a road from Portland, Oregon to Marysville, California. The grant was the seventh largest of twenty-two railroad grants awarded in the nineteenth century. In 1869, however, Congress added (PL 41-27) a unique proviso restricting the O&C Railroad to selling parcels of 160 or less acres to “actual settlers” for no more than $2.50 per acre. The company violated all these terms for decades, so in the early 1900s state and federal officials sued the company, by then the Southern Pacific Company. In 1915 the Supreme Court declared the lands forfeited and instructed Congress to address the issue. The following year Congress passed the Chamberlain-Ferris Act (PL 64-86), “revesting” to the federal government 2.9 million acres of the original railroad grant. Three years later in 1919 Congress reclaimed (PL 66-241) another 93,000 acres from another road grant in western Oregon known as the Coos Bay Wagon Road (CBWR) grant.

The O&C lands hold a unique status in the history of Progressive-Era conservation. Unlike the timber, mineral, and hydroelectric sites that presidents withdrew from settlement in the 1890s and 1900s, most of the O&C lands had already been privately patented. Thus the revestment process took 2.9 million acres off local tax rolls, affecting the development of eighteen counties in western Oregon plus two port districts. To clear its title to these lands, Congress agreed to pay the Southern Pacific Company $2.50 per acre for all reclaimed lands and it promised the counties that it would use the receipts from timber sales to cover back taxes owed by the railroad to the affected counties.

The maps project scheduled payments for the period from 1917 to 1945. Actual payments during that period sometimes fell short. The reasons were manifold. Agriculture and Interior were mired in a tug-of-war over which department would control the O&C lands, federal foresters withheld public forest sales to leaven private timber prices, competitive bids for O&C timber were rare, and federal officials made a policy of trying to thwart legitimate homesteaders. By 1926 no back taxes had actually been paid. Congress responded in the late 1920s by passing two laws (PL 69-523 and PL 70-417) to expedite timber sales and payments, but the Great Depression intervened. Lumber prices collapsed and logging nearly ceased on the O&C lands. By 1931 there was a $9 million deficit in the O&C fund. Counties could not support their local social services, and port authority bonds failed, in part due to the scant tax base.

Neither the railroad nor the federal government had acted in good faith toward O&C counties, so in 1937 Congress passed new legislation regarding the county payments. The O&C Act (PL 75-405) instituted a sustainable-yield harvests on the O&C and CBWR lands and to bolster the county repayment and programs. By then the exhaustion of private forests and surging demand due to World War II enabled the Interior Department to generate revenues. The pre-1915 taxes were finally paid by the end of 1943, and the congressional promises from the late 1920s were finally fulfilled in 1951. By 1954 the revenue-sharing formula was funneling 75 percent of timber, grazing, and land sale receipts to the counties for schools and roads.

For the next half century O&C payments bolstered the budgets of eighteen counties in western Oregon, but that flow depended on sustained cutting in federal forests. The vulnerabilities in this system were bared by the timber economy downturn in the 1990s, brought on by a combination of mill retooling for smaller logs, a resurgent private lumber sector, and environmentalist concerns over shrinking old growth stands and endangered spotted owls (Strix occidentalis). Rural unemployment skyrocketed while funding for local social services plummeted. Congress responded in 1993 (PL 103-66) with a patchwork program dubbed “Owl Payments” that evolved into the Secure Rural Schools and Community Self Determination Act of 2000 (PL 106-393). The O&C revenue sharing formula remains on the books, however, and in 2014 it almost became germane again when Congress refused for many months to renew funding for SRS. That crisis was averted, but the SRS remains an interim solution to the problem of continuing declines in the amount of federal revenue shared with counties from the O&C lands. However, because the O&C counties receive SRS payments from both O&C lands and Forest Service lands, the two payments are lumped together in the SRS maps. For a breakdown of payments from the Forest Service and the BLM to each county each year of the SRS program, see the spreadsheet in the Notes section of the website.

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