Today there are more than 500 North American short line and regional freight railroads. These small businesses have carved out specialized niches within the overall U.S. rail network (and now Canada, too). The short line and regional railroads have a long, proud history of being scrappy competitors and service-focused innovators in the railroad business. In many cases they have found a way to succeed where others have failed, and have saved thousands of miles of rail lines that were near abandonment.

Short lines and regionals represent the "growth segment" of the rail industry. The number of small railroads has more than doubled since the Staggers Rail Act of 1980, from about 220 companies in 1980 to more than 500 today. Today 29 percent of the rail mileage in the U.S. - - 50,000 miles of track - - is owned, maintained and operated by non-Class I railroads. A change in the law in 1980 revised the line sale mechanism and abandonment provisions. The effect of these changes has been to encourage sale of lines that were identified as surplus or slated for abandonment by their Class I owner.

This approach worked remarkably well and has helped to transform the rail industry. Entrepreneurs bought hundreds of light density lines across the country. With business plans that typically include more attention to customers, innovative marketing, flexible and "user friendly" service, lower operating costs and a "can do" attitude, these new operators have been able to turn around the majority of these lines.

Rail lines across the country made the transition from being money losers and abandonment candidates for their previous Class I owners, to being viable small businesses for their new owners. In the process, many thousands of miles of rail lines have been preserved and rail jobs have been saved, predominantly in rural areas. Traffic kept on the rails benefits the entire rail system, including the Class I's which almost always participate in moving the freight the small railroads originate or terminate. This phenomenon, which has seen small railroads proliferate and prosper over the past two decades, has yielded multiple winners - - small railroads, large railroads, shippers, rural communities and rail employees have all reaped the benefits.

At the same time, the railroad industry has undergone a transformation and restructuring. The light density gathering network feeds traffic to the high volume trunk line core system. Today, the restructured U.S. rail industry is the envy of the world, and widely studied as a model of restructuring for rail efficiency.

The operators of the new, small railroads are able to profitably provide specialized, community-oriented service not practical for the larger railroads. The communities served by the railroads keep rail services that help their businesses stay competitive in the world market. A small, local company performs the service. It has a stake in the community, provides local jobs, appreciates the business and strives to satisfy the precise transportation needs of its shippers.

The major railroad systems are streamlining their operations and focusing on what they do best - - long-haul, high volume, high speed service. At the same time, they continue to participate in moving most of the freight that originates or terminates on small railroads.

The Many Roles of Small Railroads

For thousands of shippers in thousands of towns across the nation, small railroads provide the initial, cost-efficient connection to markets all over the globe. Small railroads can be viewed as the "retail" portion of the railroad industry. They pick up and deliver rail traffic for a variety of shippers. Commodities like grain, coal, ores, lumber, paper products, steel and chemicals, often start their rail journeys on a small railroad where the locomotive engineer is on a first name basis with the railroad president - - and the shipping company president.

Small railroads are also involved in intermodal service and provide transfer facilities in many areas. Many short lines are diversifying into warehousing, storage and other value-added services in order to meet shipper needs.

Switching and terminal companies - - some of which have been in operation for decades - - play an important role in the efficient, timely interchange of traffic among major railroads and through busy terminal areas.

As the rail network nears capacity in some areas of the country, small railroads can help bypass congested areas to keep freight moving. The 50,000 miles of short line and regional railroad infrastructure in the U.S. is an underutilized asset that offers opportunities for future growth.