The decade from 1880 to 1890 witnessed a steady growth of the system formed in 1879 under the name of the St. Paul, Minneapolis and Manitoba. The 600 odd miles which it embraced when Hill and his coterie made their big stock division had grown in 1890 to 2775 miles. It then consisted of a main line reaching from St. Paul and Minneapolis across Minnesota and the northern part of North Dakota, far into Montana, with a second main line from Duluth across Minnesota to a junction with the St. Paul line in North Dakota, besides numerous branches reaching points of importance in both these States.
But the development of the Hill properties had by no means reached its limit at this time. Hill's dream had been to construct a through line across the northern tier of States and Territories to the Pacific, and this plan had been constantly in his mind while he was building up the system in Manitoba. The original line running up into Manitoba and reaching Winnipeg was all very well as a start. It had paid so well that the original group of men had become millionaires almost overnight. But Hill meant to show the public that, after all, the early success was only an incident and merely a stepping-stone to the really great thing.
Practical railroad men everywhere ridiculed the idea of a railroad running across the far northern country, climbing mountain ranges, traversing hundreds of streams and extending for great stretches through absolutely wild and uninhabited regions. Especially did they deem it absurd to attempt such an undertaking without government aid, subsidies, or grants of land, pointing to the experience of such roads as the Union Pacific, Northern Pacific, and Santa Fe. All these had received financial assistance and large land grants, and yet all had gone through long periods of financial vicissitude before they had become profitable and stable enterprises.
But Hill was more farseeing than his critics. In 1889, the name of the company was changed to the Great Northern Railway, and under this title the extension to the coast was rapidly carried forward and was opened in the panic year of 1893. When all the other transcontinental lines went into bankruptcy, Hill's road not only kept out of the courts but actually earned and paid annual dividends of five per cent on its stock. The five years from 1896 to 1901 were years of uninterrupted prosperity for the Great Northern Railroad. Each year its credit rose; each year it grew to be more of a force in the Western railway situation. In these years the control of the property had somewhat changed and a few of the original promoters had died or had withdrawn. But Hill, Lord Strathcona, Lord Mount Stephen, and John S. Kennedy of the original group, all held their large interests, and Hill in particular had added to his holdings as the years had gone by.
The secret of Hill's striking success with his Western extension was the method by which the line was constructed. Hill had a theory that it was far better to go around mountains and avoid grades than to climb them or to bore through them; it was always better to find the route which would make long hauls easy and economical. He thus built his road with the idea of keeping down the operating costs and of showing a larger margin of profit than the others. From the very start the Great Northern was noted for its low ratio of operating expenses and its comparatively long trains and heavy trainloads. It was by this method that it really made its money.
By the year 1901 the Great Northern Railway absolutely controlled its own territory. But it was still handicapped by lack of an independent entrance into Chicago, as its eastern lines terminated at Duluth and St. Paul. At the western end also, the situation was unsatisfactory. It seemed important for the Great Northern to control a line of its own into Portland, Oregon, because the Northern Pacific Railroad, which, as we have seen, had been reorganized several years before by the Morgan interests, had been rapidly extending its lines in Oregon and Washington. Hill and his associates, therefore, had been quietly buying a substantial interest in the Northern Pacific property and thus, in the course of time, had come into closer relations with the Morgan group in New York. Soon afterward, under Hill's influence, the Northern Pacific began the construction of further extensions in Oregon and reached into territory that the Harriman interests in the Union Pacific Railroad had regarded as their own. This move created much friction between the Harriman and Hill groups, and in order to forestall danger Harriman in turn began quietly accumulating an interest in the Northern Pacific property by purchases in the open market.
The story of the battle royal between the Hill and Harriman interests will be told in a subsequent chapter. It is not necessary to repeat the history of the famous corner of 1901 nor of the compromise effected by the formation of the Northern Securities Company. The final result of this contest was the complete harmonizing of the Western railroad situation, so far as the Hill and the Harriman interests were concerned. In the succeeding years the Great Northern system penetrated to the heart of Manitoba and constructed lines through British Columbia to Nelson and Vancouver. It built other branches to Spokane, Washington, and Helena and Butte, Montana. Moreover by the discovery of extensive ore deposits on the lines of the company in northern Minnesota and by subsequent purchases of other mines, the Great Northern acquired control of about sixty-five thousand acres and hundreds of millions of tons of iron ore. All the properties so controlled were leased on a very profitable basis to the United States Steel Corporation. The Great Northern Railroad itself did not retain control of the ore lands but, through a trusteeship, gave a beneficial interest in them to its stockholders in the shape of a special dividend.
The profits under this lease promised to be very large in the course of time, but the Steel Corporation had the option to cancel after a five-year period, and in 1912, as the result of a United States Government suit for the dissolution of the Steel Corporation, the lease was canceled. Since that time the trustees of the ore lands have executed other leases, and the Great Northern ore certificates are bringing in a substantial return to their owners.
The three Hill lines—the Great Northern, the Northern Pacific, and the Chicago, Burlington and Quincy—have been unusually profitable. The Great Northern and the Northern Pacific have steadily paid liberal dividends to their stockholders on increasing amounts of capital stock; and the Burlington, whose whole stock is owned by these two roads, has also handed over liberal profits year by year, at the same time accumulating an earned surplus of more than one hundred million dollars and spending an almost equal amount of profits on the improvement and maintenance of the property. The Burlington today controls the Colorado Southern, which extends southward from the Burlington lines in Wyoming, passing through Denver, Pueblo, Fort Worth, and other points southward to the Gulf.