Washington, DC — Thanks to the classic board game Monopoly, four American railroads are gone but not forgotten: B&O Railroad, Reading Railroad, Pennsylvania Railroad and Short Line. While the first three are no longer in operation—and Monopoly’s “Short Line” actually comes from the Shore Fast Line—railfans know that “short line” is still a catch-all term for hundreds of railroads throughout the country. But what is a short line railroad? Isn’t a railroad, by definition, long and winding?
The U.S. Surface Transportation Board (STB) organizes railroads into three classes according to operating revenue. America’s Class I railroads include the seven major railroads that account for just under 70% of U.S. freight rail mileage. But also operating in every state (except Hawaii), Class II and III “short line” railroads are critical connectors employing 10% of U.S. rail workers. The distinction between a Class II and a Class III railroad comes down to annual operating revenue above or below about $39 million.
The Association of American Railroads (AAR) further classifies short line railroads into regional and local.
Regional railroads are line haul railroads that either operate at least 350 miles of road while earning at least $20 million in revenue, or earn upwards of $40 million annually (but below the threshold for Class I railroads). Local railroads are any other freight railroads that do not meet Class I or regional criteria, often fondly referred to as mom and pop rail operators. Local railroads can be further subdivided into local line-haul carriers and switching and terminal carriers (S&Ts) that typically provide services for other railroads.
So why are short lines such an important part of the American rail network? According to the American Short Line and Regional Railroad Association, these 600+ small businesses operate some 50,000 miles of track, handling one out of every four rail cars moving across the U.S. rail network.
As the term implies, short lines don’t often operate over long distances, but they’re a key component in the “first and last mile” of freight rail transportation. For example, local railroads that operate S&T carriers or port services are vital parts of the supply chain, connecting the port, farmer, quarry or mill to the next step in the transportation of vital goods. These smaller operators continue to help the U.S. rail network maintain flexibility and customer-focus.
For the past few months, short lines have quietly supported the movement of COVID-19 goods, delivering the alcohols necessary for hand sanitizer production (Indiana & Ohio Railway), paper products (Portland & Western Railroad), groceries (California Northern Railroad), pharmaceuticals (Columbus and Ohio River Railroad), and so much more all across the nation.
During a pandemic, the first-and-last-mile short lines are even more essential. Unpredictable events happen in every industry every day, but resilience is a historic hallmark of railroading—even when the Mississippi River’s water levels are up (New Orleans and Gulf Coast Railway Company).
Modern short lines are also part of the legacy of the Staggers Rail Act of 1980 and the partial economic deregulation of U.S. railroads. When the federal government stopped mandating that railroads serve unprofitable lines at unsustainable rates, it made way for small railroad operators to enter the industry by taking over light-density branch lines. This helped create and preserve regional and local rail lines. In fact, short line rail miles have grown from 8,000 in 1980 when the Staggers Act was passed to 50,000 today.
Many short lines inherited track that had experienced years of deferred maintenance. To help rehabilitate their infrastructure to accommodate today’s rail needs, Congress passed the “45G” tax credit. Recently extended by Congress until 2022, 45G provides for a 50% tax credit incentive, capped at $3,500 per mile, easing some of the financial burden inherent to necessary, continued investments into network safety and productivity. Short lines typically operate within a much smaller margin than Class I railroads, so this smart policy is critical to their viability—and to the survival of the countless businesses that rely on short lines to connect them to markets and suppliers. Since its inception in 2005, 45G has helped short lines privately invest over $5 billion, supporting thousands of jobs and businesses across the nation.
Like 45G generally, support for making the credit permanent via the BRACE Act (H.R. 721 and S. 407) is bipartisan across Congress. Many of our policymakers recognize what railroaders, manufacturers, farmers, businesses and small towns across the country already know: short line railroads are a crucial link in the nation’s supply chain.
