Overview of the Railway Industry in the United States

1. History of Railway Development

The United States was among the pioneering countries in railway construction. The Baltimore and Ohio Railroad, the first line in the country with a total length of 21 km, started construction in 1827 and was then opened to traffic in May. By 1850, railways had become the nation’s most advanced mode of transport, as the country’s network hit 14,400 km. In the early period of railway development, the U.S. federal government adopted preferential policies such as land grants and tax incentives to encourage construction. Railway itself also attracted substantial private capital and spurred technological progress, industrial growth, and population movement, playing a crucial role in promoting economic expansion—especially in the development of the Western regions.

In 1887, the U.S. Congress passed the Interstate Commerce Act and established the Interstate Commerce Commission (ICC), making railways the first U.S. industry subject to comprehensive federal economic regulation. By 1916, the total length of U.S. railways reached 410,000 km, marking a historic peak. Back then, about 1,500 railway companies employed some 1.8 million people, far more than any other industry. After this boom, railway operations deteriorated rapidly, as railway construction all but stalled. Many redundant lines were demolished or closed, resulting in a sustained shrinkage of the national network. By 1937, some 112,000 km of lines had applied for bankruptcy, representing roughly 30% of the network.

Long‑standing and strict regulations undermined the market incentives for companies' behaviors and ultimately reduced the railways’ competitiveness relative to other transport modes. In the late 1960s, with the rapid rise of road and air transport, railways lost their market shares in passenger services to highways and aviation. It also faced fierce competition from road transport in the short‑distance freight segment, producing a full‑blown crisis in the U.S. railway industry. From the 1950s through the 1970s, the sector fell to its lowest point in history under continuous regulation. At that time, about 22% of companies went bankrupt, and the average profit margin of the survivors was squeezed to just 2–4%.

To address this dilemma, the United States enacted a series of legislation in the 1970s – including the Rail Passenger Service Act, the Regional Rail Reorganization Act, and the Railroad Revitalization and Regulatory Reform Act – to promote market‑oriented operation. These efforts aim to have dedicated passenger and freight services for intercity transport, facilitate the integration of freight services, and ensure the adequacy of infrastructure supports and the fairness of tariffs, etc. In 1980, the U.S. Congress enacted the Staggers Rail Act, which basically lifted all restrictions on rail operations. In 1995, the U.S. Congress passed the Interstate Commerce Commission Termination Act, abolishing the ICC and creating the Surface Transportation Board (STB) to assume remaining regulatory functions and reform economic regulation in the transport sector. Together, these deregulatory reforms put the U.S. railway industry on a path to a virtuous cycle: the government was relieved of a heavy financial burden, while the industry could survive and grow through independent operations.

2. Composition of the Railway Industry

Under the Department of Transportation Act of 1966, the U.S. Department of Transportation (DOT) exercises overall administrative authority for roads, waterways, railways, aviation, and pipelines nationwide. Among the DOT’s ten agencies, the Surface Transportation Board (STB) and the Federal Railroad Administration (FRA) share responsibility for railway governance: the STB handles economic regulation, while the FRA oversees rail safety as the competent industry authority.

(1) Surface Transportation Board (STB)

STB was established in 1996 to assume the regulatory functions transferred from the former Interstate Commerce Commission (ICC). It is responsible for overseeing railways, highways, waterways, pipelines, and other related transport modes. In the railway sector, the STB regulates market access and service rate, with the latter standing at the core of its economic oversight. Although created within the DOT framework, the STB does not function as its subordinate and has no direct business ties with other DOT agencies. It functions as a quasi‑independent economic regulator with both adjudicatory and regulatory authority.

(2) Federal Railroad Administration (FRA)

The Federal Railroad Administration (FRA) was established in 1966 and reports to the Secretary of Transportation and Congress. Its primary responsibilities include: enacting and enforcing railway safety regulations; implementing railway assistance programs; guiding research and development to enhance railway safety and inform national railway transportation policy-making; revitalizing passenger services on the Northeast Corridor; and consolidating federal support for railway operations.

(3) Railway Companies

Since 1971, the U.S. has implemented a separation of passenger and freight rail services. Among the two, the freight service dominates the industry, with the majority of tracks being privately owned and operated by these freight companies.

1) Railway freight carriers

The freight carriers in the U.S. are categorized into three classes based on their annual revenue adjusted to the 2023 price index. Class I carriers with operating revenue of USD 1.05 billion or more; Class II carriers, also known as regional railroads, with operating revenue from USD 47.3 million to USD 1.05 billion; and Class III carriers, also known as local or short‑line railroads, with operating revenue below USD 47.3 million. The last category also includes all of those engaged in collection, distribution, or terminal services, regardless of revenue.

In April 2023, the number of Class I carriers in the United States changed from seven to six. They are Burlington Northern Santa Fe (BNSF); CSX Transportation (CSXT); Grand Trunk Corporation (GTC); Union Pacific Railroad (UP); Norfolk Southern Corporation (NS); and Canadian Pacific Kansas City (CPKC). Among them, GTC is the U.S.-based subsidiary of Canadian National Railway (CN), while CPKC was formed by the merger of Canadian Pacific Railway (CP) and Kansas City Southern (KCS), both of which operate relatively small U.S. networks. GTC serves the Great Lakes region between the United States and Canada, with key connections to the country’s network at its Chicago terminal. CPKC operates the first and only single‑track cross‑border railway corridor linking the United States, Canada, and Mexico. In addition to these Class I carriers, there are approximately 621 regional and local railway carriers.

2) Railway passenger operators

National Railroad Passenger Corporation (Amtrak) is the sole U.S. operator providing nationwide intercity passenger service. It serves 46 states, the District of Columbia, and three Canadian provinces via a network of more than 500 stations. Its main business scope covers the Northeast Corridor service, short‑distance service of state corridors, long-distance service, and commuter route service. Amtrak owns most of the passenger stations in the United States and employs about 21,000 staff to operate roughly 34,000 km of railways. However, Amtrak owns only about 1,000-plus km of track, while most passenger services run on lines leased from freight carriers.

The U.S. passenger railway landscape also includes numerous commuter rail agencies. For example, the MBTA & Commuter Rail (a sub-division of the Massachusetts Bay Transportation Authority) operates the commuter rail service in the Greater Boston region.  New Jersey Transit runs the two commuter rail lines near New York City. The Metropolitan Transportation Authority operates and owns the busiest commuter rail system in the country—the Long Island Rail Road.