Potomac Company

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The Potomac Company (spelled variously as Patowmack, Potowmack, Potowmac, and Compony) was created in 1785 to make improvements to the Potomac River and improve its navigability for commerce. The Potomac Company built five skirting canals around the major falls. When completed it allowed boats and rafts to float downstream towards Georgetown, a major port of the time on the Potomac River, now in the District of Columbia. George Washington was its first president, as well as an investor in the company. Tobias Lear, Washington's personal secretary, was its chairman for a period. Other principals of the company included Thomas Johnson of Maryland.[1]

The Potomac Company had the goal of linking the East Coast with the Old Northwest. The endeavor eventually failed due to a combination of factors such as an unstable American economy, unreliable government aid, and conflicts between states. Although the charter was surrendered to the Chesapeake and Ohio Canal Company in 1828, it is significant because it serves as an example of how a deficient amount of support from the federal government can undermine a large, desirable infrastructure project. The U.S. government was more conscious of the effects of its involvement in developing infrastructure in the fledgling republic.

While slim boats called bateaux could be poled up-river in even the shallowest of waters, they could not traverse the fall line, the area where an upland region (continental bedrock) and a coastal plain (coastal alluvia) meet, typically in waterfalls.

One of the major constructions of the Potomac Company was the Patowmack Canal. A major engineering feat of the time, the Potomack Canal permitted boats to navigate around Great Falls, where the Potomac River drops a treacherous 75 feet through the unnavigable Mather Gorge.

After 21 years, the Potomack Canal was sold, along with the other assets of the Potomac Company to the Chesapeake and Ohio Canal Company, which built a canal on the opposite, Maryland side of the Potomac River.


As early as 1749 many leaders in Maryland and Virginia had been interested in making the Potomac River into a major transportation route to the trans-Appalachian West. The project to improve the Potomac was seen as a major opportunity strategically (it would transport troops to the frontier with the French or the Indians more rapidly) and economically (it would increase fur trade and improve real estate values). A lack of technology, a severe shortage of labor, conflicts with foreign and colonial powers, and internal rivalries would prevent the project from being started until the 1780s, thirty years later.

In 1784, a year after the Treaty of Paris was signed, George Washington and Horatio Gates traveled to Annapolis to seek the state's assent to the project. Washington urged Virginia Governor Benjamin Harrison to bring the matter to the Virginia Assembly, citing the "commercial and political importance" of the project. Washington's formidable reputation in the U.S. during the time after the Revolution persuaded the governor to present a letter to the Virginia Assembly asking for support for the project. The Virginia Assembly appointed Washington, Gates, and Thomas Blackburn to seek Maryland's agreement. Washington's subsequent visit to Annapolis was successful and led to the incorporation of the Potomac Company in 1784 Maryland and in 1785 in Virginia. These meetings would continue and have a major impact on national development; in 1908 the Inland Waterways Commission notes the following significance:[2]

"The earliest movement toward developing the inland waterways of the country began when, under the influence of George Washington, Virginia and Maryland appointed commissioners primarily to consider the navigation and improvement of the Potomac; they met in 1785 in Alexandria and adjourned to Mount Vernon, where they planned for extension, pursuant to which they reassembled with representatives of other States in Annapolis in 1786; again finding the task a growing one, a further conference was arranged in Philadelphia in 1787, with delegates from all the States. There the deliberations resulted in the framing of the Constitution, whereby the thirteen original States were united primarily on a commercial basis — the commerce of the times being chiefly by water."

While it was not the first or only project started after the end of the American Revolution, its incorporation was a milestone because it was the first project that connected different regions and required the cooperation of multiple state governments. While the Potomac Company’s charter eventually failed, the Maryland and Virginia acts of incorporation were very similar—the company stated it was going to raise 220,000 Spanish dollars (50, 000 pounds sterling) through 500 shares and also stated its plan and timeline. In the charter, the Potomac Company had three years to clear the upper Potomac, and ten years to build a bypass canals and locks around the Little and Great Falls (a distance of 175 miles). Both states passed additional laws to go further—building roads and connecting headwaters in order to link the Potomac River to the Ohio River.

The Potomac Company originally wanted to hire only free labor, but due to the shortage of labor, the directors hired free, indentured, and slave labor to build the locks and canals and deepen the river. James Rumsey, a well known for his work with steam-propelled riverboats, was hired as the project’s chief engineer.

There was a large conflict with Virginia Governor Henry Lee (father of Robert E. Lee), who purchased 500 acres of land around Great Falls (he named it “Matildaville” after his wife) to build a warehouse for goods being transported down the Potomac (predicting the route would quickly become profitable after the project’s completion). The legal troubles of the Potomac Company kept its lawyers in and out of court incessantly.

The decline in public confidence in the project led to a more difficult economic position, because the Potomac Company relied on individually buying shares for funds. Maryland and Virginia continued funding the Potomac Company’s project beyond the original contract. However even continued investment by Maryland, Virginia, and some individuals could not offset growing expenses due to poor technical advice, labor problems, poor planning and incessant repair work. The work was stop and go because of the continuous need to raise more money. At many points in the project’s history (for example in) all work would stop as the company begged for economic assistance, settled lawsuits, and revised its plan.

Three of the canals, at Seneca Falls, House Falls (near Harpers Ferry) and Payne's Falls (Shenendoah) did not need locks, and were completed. The Little Falls canal was more difficult, and as a money saving measure, wooden locks were used.[3]

In February 1802, the locks at Great Falls were completed, and the Potomac Company was expected to be immediately profitable. Also in 1802, the Patowmack Canal was completed after 17 years of construction. However, the poor snow in the winter of 1801-1802 and little spring rain in 1802 meant the river was too shallow to navigate that year. The late realization of these unanticipated problems caused the company to give up its earlier goal to link the Potomac and the Ohio Valley, and the new goal was to improve other rivers in the watershed such as the Shenendoah, the Monocacy, and the Antietam.

A commission in 1821 agreed that water transport in the Potomac valley would only be possible with a still-water canal, and the Potomac Company announced it could not fulfill its charter. Virginia created the Potomac Canal Company. Maryland incorporated the Chesapeake and Ohio Canal Company in 1825, and congress quickly approved its charter.[4]

Economic Impact[edit]

The failure of the Potomac Company to make the Potomac River navigable does not mean that that project was without serious economic implications. The failure of the Potomac Company was largely attributed to a lack of federal support and oversight, and the U.S. government was much more careful to support interstate infrastructure projects thereafter. The significance of transportation in such a large country cannot be understated, and the failure of such a large project made clear that expensive (but in the long term, profitable) infrastructure projects would not be achieved without support from the federal government. Further, the Potomac Company’s plan made it possible for the Chesapeake and Ohio Canal Company to take over and complete the project. These two regions were linked, and goods and services moved through the Potomac for nearly a century.


In his will, Washington left fifty shares toward the endowment of a university in the District of Columbia. The shares were lost, however.[5]

The Potomac Company,[6] an investment bank based in Philadelphia, is not related in any way to the original Potomac Company referenced above.


  1. ^ George Washington; Archer Butler Hulbert (1905). Washington and the West: Being George Washington's Diary of September, 1784. The Century Co. p. 187. 
  2. ^ Preliminary report of the Inland Waterways Commission, February 26, 1908
  3. ^ Kytle, Elizabeth, Home on the Canal, Cabin John Press, 1983. p. 10
  4. ^ Douglas R. Littlefield (1984). The Potomac Company: A Misadventure in Financing an Early American Internal Improvement Project. The Business History Review. JSTOR 3114165&. 
  5. ^ "WASHINGTON'S LOST GIFT; Fifty Shares of Stock Willed by the First President to Endow a National University. BUT IT PROVED WORTHLESS". The New York Times. December 26, 1897. Retrieved 2008-02-28. 
  6. ^ "The Potomac Company, Potomac Business Brokers, and Bay Street Capital, LLC". 

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