America’s Transcontinental Railroad: The Pacific Railroad Act

Last week, I explored Abraham Lincoln’s background as a railroad lawyer and the Republican Party’s zeal for a transcontinental railroad. This week, I will highlight the most important provisions of the Pacific Railroad Act of 1862 and subsequent amendments. And, lest we forget, the legislation passed in the midst of a very inconvenient civil war.

1862 Legislation

Right of way: Each railroad company received a 400-foot right of way for the railroad track.

Land Grants: 10 square miles (6400 acres) for each mile of track laid, provided in ten sections of 10-mile strips, in a checkerboard pattern with five alternate sections on each side of the railroad. The federal government retained the other strips of land for sale to the public.

Material Rights: Each railroad had the right to timber and stone on public lands, to be used for construction of the railroad.

Government Financing: The federal government would issue 30-year, 6% interest, first-mortgage bonds, in amounts determined by the terrain – $16,000 per mile for the “easy” work between Sacramento and the Sierra Nevada, and between Omaha and the Rocky Mountains; $48,000 per mile for the mountains; and $32,000 per mile between the two mountain ranges. The government would withhold 15% of the mountain funds and 25% of the other funds until completion of the entire railroad. The government would release no funds until each railroad company completed 40 miles of track and met certain capital requirements. Each company had to complete at least 50 miles of track within two years.

Construction Rights: If the Union Pacific reached the California-Nevada border before the Central Pacific, it could continue into California. If the Central Pacific reached the line first, it could continue construction beyond that point.

Forfeiture Provision: If the railroad was not completed by January 1, 1874, both companies forfeited to the federal government the entire railroad, “together with all their furniture, fixtures, rolling stock, machine shops, lands, tenements, hereditaments, and property of every kind and character.”

1863 Legislation The gauge of the track was set at 4 feet 8 ½ inches.

1864 Amendments

Land Grants: 20 square miles per mile of track, in 20-mile strips.

Funding: Funds were released after completion of 20 miles of track.

Company Bonds: The railroad companies were allowed to issue first-mortgage 30-year, 6% bonds, with the first 20 years of interest guaranteed by the federal government. The bonds could be issued 100 miles in advance of “continuous, completed track,” in increments of $24,000, $48,000, and $96,000, depending on the terrain.

Construction Limits: The Central Pacific was limited to building 150 miles across the Nevada line. Two years later, Collis Huntington successfully lobbied to remove that limitation. (14 Stat. 241, July 25, 1866)

Forfeiture: The 1862 forfeiture provision was removed.

Commentary:

In hindsight, many of the legislative provisions appear very generous, especially the land grants. But much of the land between the Rockies and the Sierra Nevada had limited value in the absence of a railroad. The checkerboard pattern of land grants allowed the government to raise the funds needed to finance the government bonds. The private bonds had to have priority over the government bonds to make them marketable. Investors had too many other options for easier money. The railroads needed both public and private funds to succeed.

In the end, i.e., at the golden spike ceremony, Americans could look with pride at a monumental accomplishment. They no longer had to risk the deadly diseases of Panama or the perils of the trail across the continent to travel between the Atlantic and Pacific coasts. During the California Gold Rush, East Coast prospectors endured a six-month ordeal to reach the Sierra Nevada diggings. That journey now took two weeks by rail. Commerce would soon follow.

In 1869, the transcontinental railroad was every bit as important as the internet and related developments of today. The nation’s newspapers followed the progress of the competing railroads every step of the way.

In the East, we’ve spent four years re-living the 150th anniversary of the Civil War. I look forward to sharing a happier 150th anniversary, the golden spike ceremony at Promontory Point. After all, who doesn’t love trains, whether it’s Thomas & Friends, The Little Engine That Could, or Hell on Wheels?

Sources:

  • Pacific Railway Acts, 12 Stat. 489 (July 1, 1862), 12 Stat. 807 (Mar. 3, 1863), 13 Stat. 356 (July 2, 1864), 14 Stat. 241 (July 25, 1866).
  • Central Pacific Railroad Photographic History Museum, cprr.org/Museum/Tunnels.html.
  • For a more detailed discussion of the railroad companies’ “greasing the skids” for favorable legislation, see David Bain’s Empire Express (Penguin Group 1999).
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