How did the government encourage the building of the transcontinental railroad?

Railroads, as private companies, needed to engage in profitable projects. So the federal government passed the Pacific Railroad Act that provided land grants to railroads. This provided public lands to railroad companies in exchange for building tracks in specific locations. The idea was that with railroad expansion in new territory, settlers would follow, establish communities, and increase the value of land. Railroads could sell their portions of land and profit from their investment. The federal government hoped the railroad profits would be reinvested for further expansion.

The U.S. government provided the survey of public lands and divided them into one-mile square sections. The government kept a portion of the sections. The railroads received alternate sections, in a kind of checkerboard pattern. The government lands could be offered for homesteading or sold for a profit. Supporters of the land grants program believed it would be successful for all parties.

Others were concerned about the relationship between the federal government and private companies. Most railroads provided service to specific regions, but they could profit from shipping goods to and from communities. Those who opposed the land grant program felt railroads were receiving too much of a subsidy. Between 1850 and 1870, seven percent of the land in the United States was given to 80 railroads; mostly in the west. Railroad companies were given one-sixth of the land in Kansas.

Portions from The Kansas Journey.

Entry: Railroad Land Grants

Author: Kansas Historical Society

Author information: The Kansas Historical Society is a state agency charged with actively safeguarding and sharing the state's history.

Date Created: March 2011

Date Modified: March 2019

The author of this article is solely responsible for its content.

Andrew J. Russell Railway construction in Wyoming near Citadel Rock, 1868

The federal government was not the only group attempting to bring settlers west.  Railroad companies campaigned tirelessly to attract newcomers to the many small towns that sprang up along the rail routes—mostly to provide business for the freight trains. 

This map depicts lands grants the federal government gave to railroads.

To encourage development of rail lines westward, the government offered railroad companies massive land grants and bonds. Railroads received millions of acres of public lands and sold that land to generate money for the construction of the railroads. The government's decisions to use public lands, including mineral rights, as an incentive to build railroads not only contributed to the development of the West, but it also constituted a massive transfer of public lands to private corporations, with repercussions for the history of the West that are still felt today. In the end, the federal government gave 134 million acres of land as incentives to the railroads. To further assist the railroad companies, the federal government offered the companies bonds. Essentially long-term low-interest loans from the government, the bonds provided railroads with capital for the construction of rail lines westward.

The Central Pacific Railroad meets the Union Pacific Railroad at Promontory Point, Utah in 1869

Americans had long dreamed of a transcontinental railroad to connect one side of the country with the other. Congress passed the Pacific Railroad Act in 1862, committing the nation to building a rail link between the East and West coasts.  The measure authorized the Union Pacific Railroad—controlled by Sidney Dillon and Thomas Durant—to build westward from Omaha, Nebraska. Leland Stanford, Collis P. Huntington, Mark Hopkins, and Charles Crocker (the “Big Four”) received authorization to build their Central Pacific Railroad eastward from California. The facilitate construction of the lines, the act issued government bonds and provided land grants to both companies. The two companies started building the rail line from opposite points in the country and came together at Promontory Point, Utah, in May 1869. To meet labor needs, the Union Pacific relied heavily on hiring Irish immigrants, while the Central Pacific employed many Chinese immigrants.

Once these two companies completed the first continuous track, a transcontinental railroad began regular service, connecting Omaha, Nebraska and Sacramento, California.  An overland trip that had once taken six to eight weeks to complete now took a week. Eventually five transcontinental lines provided rail transportation across North America.

Learn more about the building of the transcontinental railroad at PBS’s site “The Race to Utah.”  An interactive map with photographs will carry you on the journey.

Laying tracks on the Prescott and Eastern Railroad in Arizona Territory, circa 1898

Railroad companies heavily promoted the lands that ran alongside their tracks, encouraging Americans to settle and build towns, mainly because these communities provided the train’s freight cars with needed businesses and consumers. Railroad land departments functioned much like modern public relations offices, providing free tickets to newspapermen in exchange for upbeat stories about the territories, sending representatives to Europe to attract immigrants, and handing out handbills that described the fertility of the land available.  Railroads even went so far as to offer special passenger rates and credit terms to Americans who settled on railroad lands.  The promotions worked.  The population of Kansas, for example, increased more than five times in less than 20 years. 

How does the government motivate the companies to complete the railroad?

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What policy did the US government use to support the construction of the transcontinental railroad?

Why did the federal government support the transcontinental railroad quizlet?