The mineral lines: L & N system in Alabama, 1890.
While the bankers pondered and fretted, Smith worked busily at implementing his own version of developmental extension. His view of the overall strategic situation was as simple as it was comprehensive. He assumed that the future success of the system depended first and foremost upon the development of local resources in the primary territory traversed by its lines. In this task the L & N should help locate valuable resources, assist new enterprises even to the point of direct investment, provide access to markets through a liberal branch extension policy and cheap rates, and supply any other services needed. If this approach was followed, the L & N could assure itself permanent sources of local income and identify itself with the growth and prosperity of the region. Equally important, it would probably secure these local territories from invasion by rival systems.
On this basis Smith pushed extension branches in a number of regions, notably Alabama, Florida, Kentucky, and Tennessee. His main projects included two Alabama mineral roads, the Birmingham Mineral and the Nashville, Florence & Sheffield, and an ambitious Kentucky line, the Cumberland Valley. All were mineral roads reaching out for untapped fields. Usually Smith built only when industrialists were already committed to opening new mines or furnaces, but occasionally he extended his branch ahead of demand if he knew the region to be a rich one. To those businessmen organizing enterprises Smith furnished a variety of services not commonly provided by most railroads. He constructed spur lines on request if a mine looked promising and hired geologists to survey the fields for him. He bought stock in enterprises, granted credit, and arranged loans for struggling firms. When necessary he performed special services and drew up contracts to suit individual needs. Budding entrepreneurs, whose plea for transportation had been denied by other systems, received a warm reception from Smith. The result of this individualized policy, unique among large southern systems, was a pattern of developmental growth unmatched by any of its rivals.
By 1880 the fledgling Birmingham district had won its struggle for survival. The Elyton Land Company found a steady stream of buyers for its properties. Its stock reached par in 1880 and began to pay dividends three years later. Outstanding bonds were called in and cancelled. So prodigious had the demand become that in 1884 the stock reached 500 premium and was then withdrawn from the market because the holders found it too valuable to sell. The pioneer coal and iron men such as Truman H. Aldrich, Henry F. DeBardeleben, Enoch Ensley, James W. Sloss, and William T. Underwood had weathered their early hardship and looked expansively to the future. They were soon joined by a host of ambitious newcomers eager to stake their claim in Alabama’s industrial future. Veterans and fresh blood alike believed firmly that the surface had only been scratched, that the opportunities were unlimited. Smith shared their optimism and pledged the L & N’s resources to the task of development. At last the company was ready to reap the full benefits of its controversial plunge into Alabama.
The Nashville, Florence & Sheffield traced its corporate origins to the Nashville & Florence Railroad Company, which was formed in 1879 to construct a 79-mile line from Columbia, Tennessee, to Florence, Alabama. Since the Nashville & Decatur passed through Columbia, the proposed road veered to the west, paralleling the Decatur through a largely unsettled region rich in timber and possibly iron ore. Envisioning the road as a potentially valuable feeder, the L & N soon acquired a majority of stock and advanced the cost of construction. By 1884 the Florence had built fifty-six miles of track from Columbia to St. Joseph, Tennessee. For three years the project lay dormant, awaiting the slow development of mineral fields in the area between St. Joseph and Florence. Meanwhile several iron and coal entrepreneurs were opening mines and furnaces in the region around Florence and Sheffield, a small town across the Tennessee River. To expedite their work, the Tennessee & Alabama Railroad was chartered in 1887 to build from Sheffield to the proposed Nashville & Florence terminus at the Alabama-Tennessee state line.
Smith watched these developments closely, offering assistance to the new enterprises wherever possible. In this light he closed a contract in 1885 for building a spur line from the Florence road to some of the ore fields. Since the terms comprise a rough model of many similar contracts he would later draw up for developing Alabama ore fields, they merit attention. First, the industrialists were to donate a 100-foot-wide right-of-way and deliver all necessary trestles, crossties, and other related materials. They were then to lend the Florence money to locate and grade the line, erect bridges and trestles, prepare the roadway and superstructure for iron, and pay for other material not donated. These funds were to be lent at no interest. When this was done, the Florence would furnish iron, splices, switches, and related material and lay the track promptly. The Florence and L & N agreed to haul the ore jointly to Nashville (where it would go to the furnaces of Tennessee Coal & Iron Company) for fifty-five cents a ton and apply half the proceeds from this traffic to pay off the original loan.
So successful was this arrangement that Smith appealed to the board for funds to complete the entire line to Columbia. In May, 1887, the L & N consolidated the Florence road with the Tennessee & Alabama (which had not yet begun construction) to form the Nashville, Florence & Sheffield. Having already approved contracts with several local iron companies for spur line extensions, the L & N hastened to complete the road between St. Joseph and Florence by July 1, 1888. The company also arranged to use the bridge and facilities of the Memphis & Charleston Railroad across the Tennessee River. A 12-mile branch from Iron City to Tuckers was also constructed. The L & N operated the Sheffield as a separate road from 1887 to 1900, when it purchased the property outright. The cost of its construction came to $2,556,585.
Penetration of this northwestern region by the L & N undoubtedly spurred its development. In 1887 Florence was a town of about 2,500 inhabitants where a single iron furnace was just being constructed. Sheffield, too, had no furnaces in operation but could boast of five under construction. By the 1890s the tri-city area of Florence, Sheffield, and Tuscumbia seemed ready to challenge Birmingham as the center of iron manufacture. A group of veteran Birmingham promoters, led by Enoch Ensley, migrated to Sheffield in 1889 and erected several blast furnaces there. In 1891 Ensley formed the Lady Ensley Coal, Iron & Railroad Company. Subsidiary iron works soon surrounded the blast furnaces, and eventually a network of related industries sprang up. In 1895 the Nashville, Florence & Sheffield road opened a 2½-mile branch line between Sheffield and Tuscumbia.
Impressive as the growth of the tri-city region appeared, it paled before the blossoming of Birmingham as an industrial complex. The L & N played as crucial a role in that city’s growth as it had in its origins, and in Birmingham’s maturation could be found the apotheosis of Smith’s developmental policy. Smith’s connection with Alabama went back to the Civil War. During the L & N’s initial commitment to the southern connection, he had worked closely with Fink in formulating developmental policy. As the L & N’s traffic manager in the late 1870s, Smith advocated the setting of low rates to encourage growth. For farmers he drastically reduced the rate of fertilizer until it ultimately fell into the L & N’s lowest classification with brick and stone. He also provided low rates on pig iron for the struggling Oxmoor furnaces, and in the process instituted what was perhaps the South’s first sliding scale rate.
Despite its recovery from the Depression of 1873, Birmingham’s future was by no means assured. A turning point came in 1878 when Truman Aldrich, having demonstrated a succession of coal seams in the Warrior Fields, formed the Pratt Coal & Coke Company along with Henry DeBardeleben and James Sloss. Within the next four years eight important enterprises commenced operation in the Birmingham area. In July, 1880, the Birmingham rolling mills opened, the first such facility in the area. That November the region’s first furnace, the Alice, went into blast. At first Alice turned out about fifty-three tons of mill and foundry iron per day; by 1886 she reached a record daily output of 150 tons. There followed such enterprises as Sloss Furnace Company, Pratt Coal & Iron, Cahaba Coal Mining, Williamson Furnace, Woodward Iron, and Mary Pratt Furnace. The Pratt Coal & Iron Company represented a consolidation by Enoch Ensley of Pratt Coal & Iron, the Alice Furnace, and the Linn Iron Works, which adjoined Alice. The Cahaba Company, organized by Aldrich, embraced more than 12,000 acres of coal land in the South Cahaba fields in Jefferson, Bibb, and Shelby counties. Capitalized at $1,000,000, it was the largest coal company in the South.
By 1886 new enterprises were sprouting everywhere, accompanied by a frenzy of real estate speculation. DeBardeleben, recovered from his latest siege of consumption, joined with David Roberts to incorporate the DeBardeleben Coal & Iron Company. Excited over the possibilities of making steel in Alabama, the partners founded a new town in which to house their plant and named it Bessemer. In fact the Henderson Steel & Manufacturing Company had produced Alabama’s first steel in March, 1888, but the quality was poor and the cost of production too high to be competitive. Even so, the achievement kept the iron men buzzing with excitement over the possibility.
The indefatigable DeBardeleben outlined plans for a mammoth industrial complex at Bessemer, only thirteen miles from Birmingham. He envisioned railroad connections, coal and ore mines, limestone quarries, furnaces, rolling mills, pipe works, and every conceivable industry that relied upon coal and iron. He started the rolling mill and a water works, incorporated the Bessemer Steel Company even though he did not make steel, organized the Little Belle Furnace Company, and bought up over 40,000 acres of mineral land, including the Oxmoor furnace properties he had once owned. He journeyed to New Orleans, persuaded the mayor to sell him what remained of that city’s cotton exposition buildings, and hauled the entire layout to Bessemer. His blast furnaces utilized the most up-to-date practices, and by 1887 one of them was turning out 195 tons of pig iron daily. Eventually he reorganized all his properties under DeBardeleben Coal & Iron Company, capitalized at $13,000,000. As his vision moved swiftly towards becoming a reality DeBardeleben boasted, “I was the eagle and I wanted to eat all the craw fish I could—swallow up all the little fellows, and I did it!”1
DeBardeleben’s feat complemented Birmingham’s own amazing growth. By 1887 the mineral district contained thirty-three coal and iron companies, a host of subsidiary manufactories, and a plethora of real estate and development firms. Into this surging boom came another company destined to leave a deep imprint on the region: Tennessee Coal & Iron. Descendant of a small firm founded in 1852 to mine coal on the Cumberland Plateau near Sewanee, Tennessee, T.C. & I. had compiled a colorful history of turnovers and reorganizations. During the Civil War the property had been alternately worked by federal and Confederate authorities. Obtaining a new charter from the state in 1870, the company pursued a modest course until the fall, of 1881, when John H. Inman acquired a majority interest in its stock. A Tennessean and ex-Confederate, Inman had migrated to New York after the war. In short order he rose to senior partner in his own firm, Inman, Swann & Company, one of the largest cotton houses in the country. He helped found the cotton exchange, plunged deeply into southern railroads, and acquired a wide reputation as a promoter of investment in the South.
During the 1880s Inman emerged as president of the sprawling Richmond Terminal system of railroads. For four years, 1885–89, he also served as a director of the L & N. These rail enterprises complemented his interests in mineral lands and industrial development. Taking charge of the Tennessee company in 1881, he reorganized it under the name Tennessee Coal, Iron & Railroad Company. That same year he purchased the Sewanee furnace and produced the first iron in the company’s history. In 1883 he acquired a larger neighboring company, Southern States Coal, Iron & Land, through an exchange of securities and merged it with the Tennessee. An experienced manipulator, Inman promptly raised the Tennessee’s capitalization to $3,000,000 and listed the stock on the New York Exchange, where it quickly attracted attention. He talked optimistically of further expansion, especially in the region served by the L & N and the Nashville. He even sold the Tennessee Company’s railroad to the L & N in 1886.
Inman’s opportunity to extend the Tennessee’s influence into the burgeoning Alabama scene came in 1886. The formation of the Pratt Coal & Iron Company in 1884 by Enoch Ensley and his Memphis associates resulted in the gradual ouster of T. T. Hillman from control over the Alice Furnace Company. Lacking sufficient capital to retaliate, Hillman enlisted Inman’s backing in taking up $2,250,000 in options on the Pratt Company. In 1886 the Tennessee Company obtained control of Pratt and absorbed it as it had the Southern States Company earlier. The advent of Tennessee Coal & Iron into Alabama was a significant development. It committed that growing firm to the Birmingham district and furnished the region with important new sources of capital. Inman’s extensive rail interests, especially his seat on the L & N board, further cemented the relationship between the railroads and the mineral entrepreneurs. The Tennessee’s arrival accelerated the district’s already frenetic development.
At every stage of the Birmingham district’s evolution Smith worked closely with the coal and iron men. In 1881 the L & N invested capital in the founding of the Sloss Furnace Company, and two years later it subscribed $100,000 to one of DeBardeleben’s projects. To service these nascent industries, the L & N agreed to build an 11-mile feeder branch through the mineral district. Known as the Birmingham Mineral road, it consisted of two branches, the North and the South. Construction was completed in July, 1884, with the L & N securing the financial arrangement by purchasing 150 of the road’s first mortgage bonds at the high price of 90. The original North branch extended from a junction with the South & North Alabama at Magella, Alabama (about three miles south of Birmingham) for a distance of seven and a half miles along the northern base of Red Mountain to Bessemer. The South branch left the South and North at Graces, Alabama (four miles south of Birmingham) and traversed the southern edge of Red Mountain for three and a half miles to the town of Redding.
To all the enterprises along the road Smith granted low rates and other services designed to promote a large traffic. So successful was the enterprise that in 1885 he obtained the board’s approval to extend the line another ten and a half miles to reach new mines and furnaces. Before any work was done, however, the arrival of Inman’s Tennessee company in the region changed the situation dramatically. The ubiquitous Inman purchased large tracts of ore land on and around Red Mountain. He began construction on several furnaces and owned limestone quarries as well. Envisioning a massive growth of output for the Tennessee Company if adequate transportation facilities were assured, he put the terms to Smith squarely: Tennessee Coal & Iron would sign an exclusivity contract with the L & N if the latter would complete and extend the Birmingham Mineral road.
The idea appealed to Smith. He submitted to the board a plan of developmental extension based upon lengthening the South branch until it completely encircled Red Mountain. The new line would rim the southern base of the mountain, passing through Reeder’s Gap, until it reached the North branch. The board gave its swift assent. “By encircling the Red Mountain in this manner with a railroad on each side,” Norton explained in the Annual Report, “the mining and transportation of the immense deposits of iron ore therein contained, will be greatly facilitated and the cost much reduced.”2 In addition, Smith planned to extend the road from the point where the branches met to a junction with the South & North Alabama near Boyle’s Station. This branch would pass through the works at Bessemer, Woodward, and Ensley as well as the Thomas Furnace. It would also help form a large belt railway around Birmingham. A smaller spur line would be run to the Edwards Furnace at Woodstock, Alabama. The mileage to be built amounted to fifty-four miles, and the L & N obtained contracts to supply the ore, coal and limestone for these furnaces as well as to haul their output.
When Norton submitted his Report outlining the proposed extension of the Birmingham Mineral, there existed twenty-one coke and eleven charcoal furnaces already in operation along the combined lines of the L & N and the Nashville, Chattanooga & St. Louis. Another twenty-two coke and six charcoal furnaces were under construction. The operating coke ovens produced an average of 115 tons of pig iron a day and the charcoal furnaces fifty. Since each ton of iron required as raw material about two tons of ore, a ton and a half of coke, and half a ton of limestone, the eagerness of the L & N to spur this development is understandable.
But there was more to come. The most ambitious project to date, an attempt to construct four blast furnaces at once, was commenced by the Tennessee company in the spring of 1887. Known immediately as the “Big Four,” the furnaces represented an unprecedented effort. Despite many obstacles the first furnace was blown in on April 11, 1888, and the last one on April 29, 1889. The capacity of each furnace was 200 tons a day. Other facilities were also going up elsewhere, prompting Smith to request a host of extensions for the Birmingham Mineral. A 27-mile branch, known as the Blue Creek Extension, was built in 1888 from the North Branch to Blocton Junction by way of Valley Creek and Yolande. The L & N added another sixty miles in 1889 and twenty-four miles in 1890, at which time the Birmingham Mineral was deemed complete. It totalled 156 miles and cost altogether $6,063,890.
The finished line was a far cry from its modest eleven-mile progenitor. Besides encircling Red Mountain, it reached the Black Warrior and Blue Creek coal fields, the Gate City limestone quarries, and other extensive ore beds. The flood of raw materials that converged upon the ten-mile radius called the Birmingham district helped double pig-iron production between 1886 and 1888. By adhering firmly to its policy of low rates and a modest profit margin, the L & N spurred production on to even greater heights. “While higher rates would have given a better return on the capital invested,” Norton explained in 1889, “they would probably have prevented development, or else produced active competition by other roads which would have been built in that section.”3
That was the gist of Smith’s developmental strategy. On one hand low rates attracted investment capital that might well have gone elsewhere had not favorable transportation rates prevailed. If that were the case immense resources would remain undeveloped and the L & N would gain nothing in the long run. On the other hand, low rates and reliable service guaranteed a close working relationship with the coal and iron men, thereby freezing out rival roads eager to capitalize upon discontent shippers. With the L & N first on the premises and charging reasonable rates, no rational competitor could afford to incur the high cost and risk of building in the region. The result was a valuable regional monopoly. Norton emphasized its importance by noting that in 1889 the L & N transported 1,438,292 tons of raw materials for the Alabama mineral district. By his calculation the average annual cotton crop for the entire United States during the past fifteen years amounted to only 1,434,126 tons. And in the opinion of many observers, the mineral business was growing a lot faster than the cotton crop.
The Birmingham Mineral furnished excellent facilities for the region west and southwest of Birmingham, but it did not tap the valuable ore fields, mines, and furnaces east and southeast of the city. To remedy this shortcoming, Smith persuaded the board to create a second auxiliary system, the Alabama Mineral Railroad. Incorporated in July, 1890, the road began as a consolidation of two lesser properties, the Anniston & Atlantic Railroad and the Anniston & Cincinnati Railroad. The former, chartered in 1883, was a 53-mile narrow-gauge line running from Anniston southwest to Sylacouga. The latter road, incorporated in 1887, extended thirty-five miles northwest of Anniston to Attalla. Both had been built by the founders of Anniston, Alfred Lee Tyler and Samuel Noble, and traversed a meandering bowl-shaped course through the eastern mineral district. The region contained extensive fields of brown hematite ores, numerous iron industries, and twelve furnaces.
The mineral lines: L & N system in Alabama, 1890.
Scarcely had the new company been formed when Smith moved to fashion it into a complete and efficient line. He changed the Anniston & Atlantic to standard gauge, replaced the 30-pound rail with 50-pound rail, and altered the road at crucial points. In January, 1891, he completed a 34-mile extension of the southern portion of the road from Sylacouga to a connection with the South & North Alabama at Calera, thirty-four miles south of Birmingham. Completion of the lopsided circle around Birmingham had to await further development of the district northeast of the city. There remained a 26-mile gap between Attalla and Champion, Alabama, the northern terminus of the Birmingham Mineral’s Huntsville Branch No. 2. In sporadic fashion the L & N absorbed small roads and built extensions to piece together the final link by May, 1905. At Attalla the Alabama Mineral connected with the Tennessee & Coosa Railroad, which was acquired by the Nashville, Chattanooga & St. Louis and extended northward until it reached the parent company’s main stem. The resulting line shortened the distance between Anniston and Nashville, created a new line to Chattanooga, and penetrated the mining region around the Sequatchie Valley.
The Alabama Mineral proved a valuable supplement to its companion road. The brown hematite ores were carried to the Birmingham furnaces to be mixed with the red hematite ores found in Red Mountain. The resulting blend yielded a better quality and larger quantity of iron than either single ore. Moreover, the process produced a maximum use of rolling stock. Cars transporting coal and coke to the facilities at Anniston, Talladega, Shelby, Gadsden, and Attalla could be unloaded and promptly refilled with brown ore.
Here, as elsewhere, Smith lost no chance to promote new enterprises promising traffic for the L & N. While progress on the Attalla-Champion link of the Alabama Mineral languished some operators were already staking out the undeveloped ground in western Etowah and Blount counties. In the spring of 1900 William T. Underwood secured control of large coal tracts in that region. Eager to open mines but miles from available transportation, he went to the nearest road to his property, the Alabama Great Southern (owned by the Southern Railway) and asked for help. The Southern offered neither trackage nor assistance. Going next to Smith, Underwood got a ready response. “If you have the quality and quantity of coal you think you have,” Smith said flatly, “I will build you a road.”4
The problem, Underwood responded, was that he could raise no more than a third of the capital needed to open and operate the mines. Smith said he would have to think about that, but he ordered Underwood to haul some thirty wagons of his coal twelve miles to a rail junction. Smith then sent experts to test the coal and verify Underwood’s claims about its quality. Satisfied that Underwood was correct, he arranged for a Louisville bank to give the Alabama company a large loan. In May, 1900, Smith started construction on a 12-mile extension; by October coal was moving on it. Within four years Underwood, who had started the venture with only a few thousand dollars, paid off the Louisville loan, spent $80,000 for coal land, and sold the entire property for a large profit. Small wonder that he concluded that “the prosperity of the people of the Alabama mineral district is very largely due to the liberal policy of M. H. Smith.”
On a grander scale Smith involved the L & N in the most important breakthrough by the Birmingham district during the 1890s: the manufacture of steel. That possibility had excited the region since the Henderson Company’s crude success at producing steel in 1888. A giant step forward occurred in 1891 when the Little Belle furnace at Bessemer produced the first basic iron made in Alabama. Basic iron differed from regular iron in its low silicon content (½per cent compared to 2½ per cent) which rendered it much more suitable for manufacturing steel. Little Belle’s feat was still experimental, designed to show that Alabama could produce basic iron without using any special patented process. A more compelling reason for manufacturing steel emerged with the Depression of 1893–97. The market for pig iron vanished, and the price dropped to below six dollars a ton at the furnace.
The Panic of 1893, coupled with a long strike soon afterward, drove nearly all the companies in the Birmingham district to the wall. The Tennessee company fared no better than smaller firms as its credit evaporated while the directors haggled and unsold iron stacked up in its warehouses. Nat Baxter, president of Tennessee, struggled desperately to keep the firm solvent. The only friendly source of credit in Birmingham proved to be Braxton Bragg Comer, who later became governor of Alabama and incurred the lifelong wrath of Milton Smith. In New York Truman Aldrich persuaded the Tennessee directors to lend the company $175,000 at 6 per cent, accepting the unsold iron as collateral. Only Inman, deep in financial woes of his own, deviated from the terms; he charged the company 16 per cent for his share. Smith did all he could to keep the companies operating. Calling the coal and iron men together, he is reputed to have said, “Keep in blast! It don’t make a deuced bit of difference what the freight rate is—keep in blast! I’ll carry the product to market if I’ve got to haul it on my back!”5
The fate of the Tennessee company deeply affected the entire district, for in 1892 it had acquired the entire DeBardeleben Coal & Iron Company and the Cahaba Coal Company. Both Aldrich and DeBardeleben joined the Tennessee company but neither lasted long. Aldrich resigned in 1894 to enter politics. When the Panic of 1893 hit, DeBardeleben made his maiden venture into Wall Street. He tried to buy up the blocks of Tennessee Coal & Iron being dumped on the market and gain control; instead he was wiped out in the effort. As the pioneers departed, Baxter assumed greater authority. The entire management realized that the existing situation was hopeless. The company had no market for its iron and no use for it (except as collateral) at home. Although the New York directors successfully handled the most pressing financial needs, some new direction was needed. The obvious possibility was to produce basic iron on a commercial scale. If that were done, then perhaps steel could be manufactured locally.
Eagerly the Tennessee company tackled the problem. The most serious obstacle to manufacturing basic iron was to find a method that reduced both the silicon and sulphur content. The prevailing practice of lowering the silicon tended to increase the amount of sulphur almost proportionally. After an arduous period of trial and error the company achieved a large cast at the Alice Furnace in July, 1895. Soon afterward it sold a test load of 4,000 tons to the Carnegie company, which found the quality of the sample batch superior enough to order another 21,000 tons. These sales betokened the emergence of a new era in the district, for there had long existed a legend that Alabama ores were not suited for the production of basic iron. In short order the Tennessee company found ready customers in steel mills at Pittsburgh and elsewhere.
Once the breakthrough in basic iron occurred, it was only a matter of time before the Tennessee company contemplated the erection of its own steel mills. The logistics of the situation favored the step. As the Depression lifted, new coal and iron companies were opening in the district. Labor was cheaper in the South, the L & N stood ready to offer cheap rates, and state governments were inclined to grant favors to promote industrial development. Why should the district’s basic iron be hauled over a thousand miles to Pittsburgh to be transformed into steel? This added a substantial cost for transportation and also increased the cost of conversion, since it was both easier and cheaper to convert the basic iron while it was still in the molten stage. In 1896, when pig iron reached the low price of six dollars a ton, the Tennessee company, in cooperation with the L & N, undertook the ambitious task.
At the time the Birmingham rolling mills were completing two small open-hearth furnaces designed to operate almost exclusively on scrap. After considerable experimenting the company succeeded in casting its first steel in July, 1897. Satisfied by the results, the Tennessee company subscribed $100,000 to enlarge the mills for commercial production. But the subscription was to be paid in coal and iron and only on condition that the Tennessee company itself stay out of the steel business. The L & N agreed to subscribe an equal amount. Despite the early enthusiasm, a year passed with no results. Finally President Baxter of the Tennessee company asked Smith and Samuel Spencer, president of the Southern Railway, to help raise capital for constructing the steel plant. After some negotiations each railroad agreed to subscribe to $250,000 in Tennessee company bonds.
Top: Ensley blast furnaces of the Tennessee Coal, Iron and Railroad Company, in 1900.
Bottom: Ensley Steel Works of the Tennessee Coal, Iron and Railroad Company, in 1900: Alabama’s first large-scale producer of steel.
The work commenced in 1898. The Alabama Steel & Shipbuilding Company was organized to construct the plant and received a special charter from the Alabama legislature. After selecting a site at Ensley, Alabama, the work was pushed rapidly. The plant opened late in 1899 and manufactured its first steel on November 30. It consisted of ten open-hearth furnaces, each with a daily capacity of 100 tons, and a blooming mill. Another milestone had been achieved in the district and, despite some financial difficulties, Birmingham’s future as a steel-producing center was assured. During the next decade there ensued a rapid consolidation of the region’s scattered properties into great concerns. In 1899 the Sloss Iron & Steel Company merged with twelve smaller concerns to form the Sloss-Sheffield Steel & Iron Company. Several Birmingham firms were required by the growing Republic Iron & Steel Company, and the Tennessee company added to its already extensive holdings. Other emerging giants included the Pratt Consolidated Coal Company, the Woodward Iron Company, and the Alabama Consolidated Coal & Iron Company. The pattern of consolidation culminated in the largest transaction in the district’s history, the acquisition in 1907 of the Tennessee company by United States Steel.
This giant complex of industries was a far cry from the wilderness into which the L & N had plunged in 1872. The army of searing furnaces and rows of belching smokestacks poured forth a steady stream of traffic for the L & N. For decades the Alabama mineral traffic was to be one of the L & N’s most lucrative and reliable sources of income. By the turn of the century the patience, foresight, and determination of Albert Fink and Milton Smith were amply rewarded. Fink shared only part of the glory. He returned briefly to the L & N as a director in 1895, but left the board the following year and died in April, 1897. As for Smith, he was widely acclaimed by all the mineral entrepreneurs as the patron saint of the district’s spectacular growth. DeBardeleben put their feelings simply enough: “M. H. Smith is the biggest, broadest man you ever saw in your life!”6 He was the angel of Birmingham but not of all Alabama. As will be seen later, some prominent citizens in the state capital at Montgomery had quite another opinion about him.
The Alabama experience had its counterpart in the Kentucky-Tennessee area, to which Smith devoted considerable attention. Believing that native territory to be no less ripe for industrial development than the Birmingham district, he pressed the board to launch a vigorous branch extension policy. In 1886 he spelled out his argument in clear terms:
I still think that the interests of the company demand that it be put in a financial condition to enable it to pursue a somewhat aggressive policy of extensions, and of aiding in the construction of branch lines, in what may be correctly described as its territory in Kentucky and Tennessee. If this be done, I believe the territory can be held exclusively for a number of years, and that the company during that time will so have established itself as to enable it to control the greater proportion of the large traffic which will, in my opinion, be developed during the next decade. If this policy is adopted and adhered to intelligently, it should result in greatly strengthening the credit of the company. … so important is this to the interests of the company that the Directors should, in my judgment, as soon as possible arrange some comprehensive plan for providing the means for this purpose.7
Developmental extension by the L & N in its home territory was overshadowed during the early 1880s by interterritorial expansion. The company leased the 10-mile Elkton & Guthrie Railroad in 1884, extended the Owensboro & Nashville to Adairville, and built some small spur lines in the coal mining region of western Kentucky, a main source of coal for L & N trains. The financial crisis and reorganization delayed progress, but by 1885 Smith was ready with a comprehensive program of extensions. His recommendations ranged from a variety of short branch lines to what would ultimately become one of the biggest, most expensive, and most controversial engineering spectaculars in the company’s history: the Cumberland Valley branch.
During 1885 and 1886 Smith obtained the board’s approval for a number of local projects. He built a 20-mile branch from Bardstown to Springfield, Kentucky, completing it in February, 1888, changed the narrow-gauge Louisville, Harrod’s Creek & Westport to standard-gauge, and leased the tiny 9-mile Mammoth Cave Railroad. The latter branch was unique in that its sole purpose was to convey tourists to the spectacular caves. The L & N relinquished control during the 1890s, and the road was eventually abandoned in 1931. Even its golden years were somewhat tarnished, however, as this description of writer Elbert Hubbard attests:
To reach Mammoth Cave you take the Louisville & Nashville Railroad to Glasgow Junction. There you change cars and take the Mammoth Cave Railroad, an institution that has an equipment of one passenger coach and a dummy engine. I was interested in seeing a Kaffir cutting the grass between the two streaks of rust, and was told this had to be done three times a year, and is the thing that keeps down the dividends.8
On a more ambitious scale, Smith succeeded in getting approval to purchase the misnomered Indiana, Alabama & Texas Railroad. A rickety, narrow-gauge sliver of rust, the I.A. & T. extended about thirty miles from Clarksville, Tennessee, toward Princeton, Kentucky. Smith wanted to rebuild some of the line, change it to standard-gauge, and complete the unfinished section into Princeton. However, the road’s owner, Major E. C. Gordon, artfully played the L & N off against Collis Huntington’s Chesapeake, Ohio & Southwestern in the negotiations. He first agreed upon terms of sale with the Southwestern only to break the pledge when Smith upped his offer by $100,000. Contemptuous of Gordon’s finagling, Smith still paid his price for strategic reasons. “Its indirect value to the company … will be very great,” he observed, “especially should its control prevent the construction of other lines in this territory for some years.”9
Smith returned to this point again and again in trying to sway his board. Companies in the territory needing transportation facilities naturally came first to the L & N. If the road responded favorably, interested parties would have no need to look elsewhere. If rejected by the L & N, they would either seek the assistance of other systems or organize their own company. Any local road built in this manner then became a prime target for some rival system to get a foothold in the territory: “Formerly, local lines which had been constructed, and which usually failed to be self-sustaining, could be acquired by the larger company in whose territory they were built. Now the tendency is for them to pass under the control of some competing system.” The L & N, he added, had always tried to foster neutrality by allowing other systems access to the territory over its own lines to avoid the construction of competing lines. The wisdom of continuing this policy was obvious to Smith, who reminded the board that “recent developments show that where territory is occupied by two competing lines there is a strong tendency for other systems attempting to enter.” His moral was clear: the first entering wedge into the territory could precipitate disaster, and it could be averted only by an energetic extension policy.
The board did not always agree. Unhappy with the high price of the I.A. & T. and dubious about its prospects, some directors opposed Smith’s request for money to rebuild and complete the road. After a hot debate on the question, Fred W. Foote, one of the New York directors, introduced a substitute motion to decline ratification of Smith’s request. It was defeated by a narrow margin, and the original resolution to approve carried by an equally small majority. The 53-mile road was completed in December, 1887, but in this case Smith proved a poor prophet. The Princeton branch never earned its keep, and in July, 1892, the portion between Princeton and Gracey was leased for ninety-nine years to the Ohio Valley Railway (later part of the Illinois Central). In May, 1933, the L & N abandoned the remaining trackage.
The projects in the central and western part of the state were but prologue to the huge project budding in eastern Kentucky, the Cumberland Valley branch. In a sense the Cumberland involved a revival of that alternative prong of the Lebanon extension traversing the Cumberland Gap to reach a through connection in Virginia (see Chapter 5). Since the abandonment of that plan nearly fifteen years earlier, the circumstances had changed remarkably little. The eastern counties remained unpenetrated by any substantial rail system and were still believed to contain rich deposits of coal and mineral ores. The lengthy Virginia road originally strung together by General Mahone had evolved into the powerful Norfolk & Western, and still stood waiting beyond the Gap for a through connection. The L & N had changed considerably in the intervening years, of course, and so had the competitive situation. Given the urgent need of railroad systems for new markets and fresh territories, the virginity of the eastern counties might not last much longer.
Convinced that time was running out, the board in 1885 heeded Smith’s incessant requests that something be done about the Cumberland Valley. It ordered the company’s chief engineer to survey a route from Corbin, a town on the Knoxville branch, to the Cumberland Gap, estimate the construction costs, and report on the potential coal, iron, and timber resources. The surveys were made, and a favorable account of the resources, especially coal, was submitted. Impressed by the findings, the board authorized construction of a 31-mile extension from Corbin to Pineville. It also ordered surveys made of the country between Pineville and the Gap to determine the most feasible route. Norton observed in the 1887 Annual Report that:
On good authority we learn that good coking coals exist in very large quantities in Bell and Harlan counties, and that they extend to the Cumberland range of mountains. … It is also stated that large deposits of iron ore are in Poor and Powell’s Valley in Virginia, immediately south of the Kentucky State Line, and also that an abundance of limestone and good water is found in that region… .10
Determined to push the project ahead, the directors soon bogged down in controversy over the most suitable route. Basically the dispute centered upon two alternative lines. The first of these ignored Cumberland Gap altogether. It headed northeast from Pineville, skirted the Cumberland River and its Clover Fork, curled southward through Black Mountain to the town of Big Stone Gap, Virginia, and proceeded on to Norton, Virginia. The second route went south from Pineville to the town of Middlesboro, turned east through Cumberland Gap, rimmed the south base of Cumberland Mountain through Poor and Powell’s Valley, and travelled northeast through Big Stone Gap to Norton. A report by two Philadelphia mineralogists, ordered by Smith in 1887, strongly favored the first route because the region it traversed seemed to contain clearly superior mineral deposits. But it took little notice of engineering or financial considerations.
At first the board voted to extend the Cumberland via the river route, but a few weeks later it rescinded the motion and ordered a new survey. Meanwhile it approved further construction from Pineville to the Cumberland Gap even though the final route had not yet been selected. On March 8 the directors approved a contract with the Norfolk & Western in which the traffic provisions differed from those made after the river route was first approved. The official announcement of the agreement in April, 1887, mentioned only that the L & N would extend its lines to meet the Norfolk’s New River Division (later called Clinch Valley Division) at some point in Wise County, Virginia.
Two factors apparently influenced the final choice. The second survey, made by a civil engineer named R. E. O’Brien, completely reversed the first report and strongly recommended the Poor Valley route. Weighing cost and engineering factors as well as mineral deposits, O’Brien argued that the second route would cost less, come closer to the iron ore deposits in Poor Valley, and lie about thirty-two miles closer to Atlanta and Knoxville, an important consideration for through traffic. At some later date, he added, the money saved by utilizing this shorter route could be devoted to a branch line up the Cumberland River. O’Brien estimated this saving at about $1,000,000 but in fact the construction costs far exceeded his calculations. For that reason the momentous penetration of the Harlan coal fields would be delayed several years.
The second factor concerned the amazing rise of the town of Middlesboro. The town site was nothing but wilderness in 1886 when Alexander A. Arthur, a young Scotch-Canadian living in Tennessee, surveyed the region for its mineral potential. Impressed by its potential, Arthur formed a syndicate and secured options on huge tracts of land in Yellow Creek Valley. Within a year the syndicate recruited the backing of several English capitalists, including Baring Brothers and some directors of the Watts Iron and Steel Company of Middlesborough, England (after which the town was named), and formed the American Association, Inc. Together the Association and its members acquired over 60,000 acres of mineral land in Bell County, Kentucky, Claiborne County, Tennessee, and Lee County, Virginia. The Middlesborough Town Company was then formed to sell lots in the proposed township.
In no time Middlesboro took on the aura of a boom town. In May, 1889, there were fifty inhabitants. Four months later the L & N’s extension reached the town, and by August, 1890, the population reached 6,200 and soared rapidly toward 15,000. Watts Iron and Steel was busily constructing two large iron furnaces and had contracted for the construction of a steel plant. Another iron furnace was going up, and several New Yorkers were building a tannery. The Middlesboro Water Works and several other industries were also under way. Lacking adequate facilities, the men flocking to the boom town camped in tents while construction projects rose around them. An incredible melange of humanity poured into its crude streets: Englishmen with impeccable Oxford accents, engineers, metallurgists, geologists, miners, farmers, lank, rifle-toting mountaineers, gamblers, barkeeps, hostelers, and the entire range of boom-town camp followers. The town was incorporated in 1890, whereupon a calamitous fire destroyed much of its infant construction.
The disaster, which might have permanently ruined a lesser settlement, scarcely disturbed Middlesboro’s accelerating tempo. New buildings went up amidst the ashes, and the Middlesboro Hotel was jammed to capacity before its walls even had plaster or its windows glass or sashes. Small satellite towns, like Cumberland Gap and Harrogate, Tennessee, arose to handle the human overflow. New trackage was laid throughout the valley to run suburban trains between the towns and link nearby coal mines to the furnaces, which ran at full capacity from the beginning. At Harrogate a plush 700-room resort hotel, the “Four Seasons,” was erected at a total cost of nearly $2,000,000. Opened in 1891 and replete with a luxurious casino and sanitarium, it became for a time a fashionable scenic retreat for the wealthy and boasted one of the nation’s first golf courses. Meanwhile Arthur and his associates concocted ever more elaborate schemes to publicize the splendor of Middlesboro, including a special 22-car train which toured major eastern and midwestern cities accompanied by lavish publicity, lecturers, guides, and exhibits.
With little warning the surging boom came to a cruel end after 1892. In that year Baring Brothers failed and thereby paralyzed the English capital in Middlesboro. The little momentum that remained was crushed by the onset of depression after 1893, whereupon the hordes of fortune seekers fled in droves. As business failed, factories closed, and buildings emptied of their tenants, only a small remnant of the more stubborn stayed behind to salvage their stake. The railroad, of course, could not leave so easily, and its continued presence assured the blighted town that survival was possible on a more modest scale once conditions improved. Its bubble burst, Middlesboro never became the second Birmingham envisioned by its promoters, but it endured. The coal and iron industry lingered on, and by World War I the population climbed back to about 15,000.
Unlike the boom town, the railroad could not undo its commitments so easily or quickly. The surging growth of Middlesboro virtually compelled the L & N to run its line there. This factor, coupled with O’Brien’s report, clinched the decision in favor of the second route. Construction plodded bravely on toward the Gap despite severe obstacles. At Log Mountain a landslide obliterated the nearly finished cut and forced the engineers to tunnel the mountain instead. With pardonable optimism, the company expected no such problems at its most formidable obstacle, the Cumberland Gap itself. To be sure, it was necessary to tunnel beneath the Gap, a historic passageway through the Cumberland Mountains, because the ascent to the breach was too steep for the railroad to negotiate. That imposing task, however, was being undertaken by the Knoxville, Cumberland Gap & Louisville Railroad (K.C.G. & L.), which owned a right-of-way through the Gap.
Since the K.C.G. & L. possessed connections to Knoxville as well, the L & N deemed it wise in 1888 to contract with that road for joint use upon completion. The ordeal of constructing the tunnel lasted until the summer of 1889 and resulted in an impressive but seriously flawed structure. The tunnel extended 3,741 feet and featured two distinct grades. The eastern aperture, only a few hundred feet down from the town of Cumberland Gap, led westbound trains up a 1,000-foot rise at a rate of .76 feet per 100 feet. At the summit of that rise a new grade, at the steeper rate of 1.18 feet per 100 feet, descended toward Middlesboro. As a result trains coming from either direction confronted an uphill climb part of the way, and the peak of each grade hindered ventilation by trapping the smoke. Nor was the tunnel erected as a monument for the ages. In very unpatriotic fashion it caved in on July 4, 1894, and again on the same date in 1896. For some time after the last collapse engines refrained from using the tunnel. Instead freight cars were pushed in one portal by an engine and pulled out of the other by a second locomotive, an arrangement that did nothing to speed timetables. Passengers travelled by wagon or horseback.
If the construction difficulties were not enough, there were tactical problems as well. A dispute arose between the L & N and the K.C.G. & L. over title to several hundred feet of trackage at both ends of the tunnel. Abruptly in 1889 the latter road decided to build its own line from the Gap to Middlesboro rather than use the L & N’s trackage. Since the American Association had donated rights-of-way to both companies through Bell County, the K.C.G. & L. could easily use the threat as leverage in the dispute. It may even have talked of constructing a new line all the way to Louisville, a disturbing thought since the aggressive East Tennessee, Virginia & Georgia (later part of the Southern Railway) was known to be interested in acquiring the little company. Unwilling to risk a major controversy, the L & N came to terms on June 30, 1890.
Two years later the K.C.G. & L. defaulted and went into receivership. This posed a serious threat, for if the East Tennessee gained control it might shut the L & N out of Knoxville entirely as well as build a line to Louisville. In May, 1893, a committee of the L & N recommended that the road be purchased to keep it out of the East Tennessee’s hands, but the reorganization process dragged out until 1895. Eventually the Southern Railway acquired the road. On November 4, 1896, the L & N resolved the tangled dilemma. First it purchased the Middlesborough Railroad, a 21-mile line that encircled the city and serviced most of the remaining industries. Then, in a complex transaction, it had the Middlesborough purchase from the K.C.G. & L. the tunnel and 3.8 miles of road embracing the tunnel and the trackage south to Middlesboro. The Middlesborough and the tunnel were promptly absorbed into the Cumberland Valley Branch, but most of the K.C.G. & L. trackage was soon abandoned. At the same time the L & N leased its own line between its connection with the K.C.G. & L. and Middlesboro to the K.C.G. & L. as a replacement for the portion sold to the Middlesborough Railroad. The lease was to run fifty years, renewable forever, and included joint use of the line and certain buildings, yards, and terminal facilities. When the smoke cleared, both companies shared one line between Middlesboro and the tunnel, the latter structure belonged to the L & N, and the Middlesborough Railroad became part of the Cumberland Valley. Twleve miles of the Middlesborough were quickly abandoned in 1897, and the L & N was forced to spend $125,000 improving the tunnel.
Long before these complications emerged, Smith had pushed the Cumberland Valley to completion. Once beyond the tunnel the road reached Big Stone Gap on April 15, 1891, and Norton one month later. It was not a large road in terms of mileage, measuring only 118 miles from Corbin to Norton. But it cost $4,397,329, created some nasty engineering and tactical problems, and paved the way for later extension into Harlan County. During the first six years of its existence the branch also generated nearly $2,500,000 in revenue from traffic interchanged with the main system. In this case Smith’s badgering of the board paid handsome returns.
Elsewhere Smith pursued the developmental policy no less consistently. In 1886 he gained approval for $1,000,000 worth of assorted spur lines to coal and ore fields along the lines of the Nashville, Chattanooga & St. Louis. Part of the work eventually linked with the northernmost portion of the Birmingham and Alabama Mineral roads. By the same token, however, the board was willing to cut its losses when developmental projects failed to pull their weight. Several examples have already been mentioned, but one other line, the northern division of the Cumberland & Ohio, deserves attention. Never a good earner, the 31-mile road between Shelbyville and Bloomfield became little more than an isolated link of an unfulfilled project. Since it served no purpose and produced little income, Smith initiated steps to discontinue operation late in 1895. Legal suits and financial complications delayed matters for four years even though the Southern Railway purchased the branch in December, 1897. By 1900 the L & N was free of the road, and Smith had demonstrated once more his ability, when necessary, to take a step forward by taking a step backward.
Throughout the late nineteenth century Florida remained on the perimeter of L & N development. The company had but one line into the state, and that in the western section. Other systems, especially the Atlantic Coast Line, were busily staking their claims to the region, and the L & N’s concentration on Alabama, Kentucky, and Tennessee left few resources for an extensive development of Florida. Moreover, the L & N’s auxiliary lines, the Pensacola & Atlantic and Pensacola & Selma, had compiled dismal earning records in the sparsely populated western region during the 1880s. Small wonder, then, that the board gave Florida short shrift in planning future developments.
But it did not neglect the region entirely. Some sawmills were going up along the line, and a modest turpentine industry was getting started. More important, there existed in Alabama at least one mine owner, Truman Aldrich, who was interested in exporting coal. From that commodity might come a profitable foreign trade in the Caribbean, especially tropical fruits and other food products and iron ore, which was being imported from Cuba in increasing quantities. Pensacola would be a logical port for the conduct of this trade. Even more, it might be a choice site for the erection of steel mills. Iron ore could reach the mills directly from Cuba without additional inland rail travel, and coal could be carried down from Aldrich’s Cahaba mines.
Intrigued by the idea, Smith persuaded the board to spend some money on the venture. In 1889 the L & N increased its coal car fleet, spent $30,151 dredging Pensacola harbor, extended and equipped the Muscogee Wharf, and added facilities for handling coal and fertilizer. It also purchased two ocean steam tugs, four large barges, and a barge for delivering coal to steamers anchored in Pensacola Bay. To handle this traffic Aldrich helped form the Export Coal Company, a Florida corporation to which the L & N subscribed $75,000. Proud of its new flotilla, the company sent its ships to Cuba, the West Indies, and selected Latin American ports with cargoes of coal, lumber, rice, sugar, bricks, and manufactured goods. The apparent early success of this trade brought home an early gusher of enthusiasm among L & N officials. For the first time the company could claim to be a transportation system rather than simply a railroad system (excepting the few boats afloat briefly on the Tennessee and Ohio rivers).
L & N wharves at Pensacola, Florida.
In November, 1889, the L & N created a foreign freight department for export-import traffic and appointed a foreign freight agent. Export Coal Company lasted until 1894 and produced $377,970 in revenue during its life span. On January 21, 1895, it was succeeded by a new firm, the Gulf Transit Company, the stock of which was all owned by the L & N. Gulf Transit in turn acquired the entire stock of a British corporation, Pensacola Trading Company, which had as its sole assets two steel screw steamers, the August Belmont (4,640 gross tons) and the E. O. Saltmarsh (3,630 gross tons). Soon afterward Smith expanded the Pensacola facilities to four wharves with docking space for nineteen vessels, and added enlarged warehouses and other equipment. Of this complex he later boasted that it was arranged “so as to furnish facilities for interchange of traffic with seagoing vessels in a manner that is superior to any similar structures at any port on the Gulf, Atlantic Coast, or the Great Lakes.”11
The Belmont and the Saltmarsh originally plied the Gulf and the Caribbean, carrying coal to Latin ports and returning to Pensacola with mixed cargoes. Some years later the ships adopted an Atlantic schedule as well, making regular runs to Liverpool and adjacent ports. For a short time Gulf Transit owned a third steamer, but the seafaring enterprise never reaped the profits anticipated for it. The third vessel, the Pensacola, was disposed of in 1906, and in 1915 the L & N sold both the Belmont and the Saltmarsh along with its entire interest in Pensacola Trading Company. Both steamers remained in the South American trade, and one of them took a German torpedo during World War I. The L & N retired from the overseas lanes, but Gulf Transit continued its vigorous pursuit of import-export business.
On land Smith made one long overdue extension. The long neglected 46-mile gap between Pine Apple and Repton, Alabama, in the Selma to Pensacola line finally received his attention in 1899. To be sure, there was little inducement to rush new construction in the area. The western part of Florida developed slowly, and title disputes and legal snags still held up the L & N’s claim to over half the land donated by the state in the Pensacola & Atlantic’s charter. By 1899, however, the growing export business and other conditions rendered the gap an annoying obstacle. Smith formed a new company, the Southern Alabama Railroad, to take up the old Pensacola & Selma division bonds and construct the remaining trackage. The work was finished in January, 1900. Less than a week later the L & N sold over 600,000 acres in western Florida to a Michigan syndicate at a dollar an acre.
One other Florida extension occupied Smith around the turn of the century: the construction of a line from Georgianna, Alabama, on the main line, southeastward to Graceville, Florida. Originally the Alabama & Florida Railroad tried to build this 100-mile line, but in January, 1899, it abandoned the effort and leased the twenty-eight miles it had completed to the L & N. Doggedly the L & N pushed the work through the piney region until it reached Graceville on July 16, 1902. Shortly afterward Smith built a road from Duvall, Alabama, on the Alabama & Florida line, to the town of Florala on the state line, where it connected with the Yellow River running to Crestview, Florida, on the Pensacola & Atlantic. Together the two roads totalled forty-nine miles and linked the Alabama & Florida with the Pensacola & Atlantic.
The modest triangle of Florida roads never achieved the growth and prosperity of the L & N’s other extension projects, but they bore the stamp of Smith’s developmental approach no less than their more affluent neighbors. Never one to apply his principles on a blanket basis, Smith perceived that Florida would never yield to the frontal assault that conquered Alabama. However overpowering his desire to promote traffic, Smith’s reach seldom exceeded his grasp. The scale of operations in Florida never seriously outran the available business. If Alabama provided a lesson in boldness, Florida furnished a lesson in restraint.