Introduction

In July 2025, Union Pacific (UP) announced plans to purchase Norfolk Southern (NS), merging the two railroads into one, linking an eastern and western Class I railroad to form a transcontinental railroad under one company for the first time in U.S. history. This merger will have implications for railroads, shippers, the larger freight network, the transportation network, and perhaps the traveling public. The process to finalize this behemoth of a merger will take time, and those interested in the process related to this railroad merger can find more information in this week’s edition of ETW.

Union Pacific’s announcement refers to the new railroad as the nation’s first “transcontinental” railroad. According to UP CEO Jim Vena, railroads have been an integral part of building the country and the deal to purchase NS is the “next step” in advancing the rail industry.

What exactly does “transcontinental” mean and what are the implications of a transcontinental railroad? Despite the claim, this is not the first time that a transcontinental railroad in the United States has been discussed. Understanding the history of the transcontinental railroad in the United States is useful for policymakers and railroad enthusiasts alike to understand its significance today and make informed conclusions about the UP/NS merger.

Laying the Foundation

In the 19^th century, railroads dramatically changed the transportation landscape in the United States. Railroads made the world smaller, allowing goods and people to travel greater distances in less time. By the 1840s, railroads were abundant in the eastern United States, providing freight and passenger services from the large eastern cities like Baltimore and New York to Chicago. However, connections from the Midwest to points on the west coast did not exist. In 1847, Dr. Hartwell Carver of New York proposed the idea of a railroad connecting Lake Michigan to the Pacific Ocean. Congress supported the idea, conducted surveys and debated which cities and routes would make up the new transcontinental railroad. The concept of a transcontinental railroad at this time was a continuous railway route that crossed an entire continent, regardless of how many companies owned the tracks.

In 1862, during the American Civil War, President Abraham Lincoln signed the Pacific Railway Act, which authorized the construction of a transcontinental railroad and telegraph line. The Act selected two companies to build the east-west line— the Union Pacific would start in the Midwest building westward and the Central Pacific railroad would build eastward from the Pacific, and they would meet somewhere in the mountain-west. To assist in funding the project, the Act issued 30-year U.S. bonds, which the companies would pay back in full with interest. In 1863, a subsequent Pacific Railway Act established a uniform track gauge across the line so cars could run end‑to‑end—an early nod to interoperability.

Construction began in 1863 with the Central Pacific Railroad beginning its section of track in Sacramento, California, and building eastward through Northern California, the Sierra Nevada, reaching the Donner Pass in 1867, and finally to Utah in 1869. The Union Pacific (the very same UP of 2025) began its construction westward from Omaha, NE and Council Bluffs, IA on the Missouri River in 1863, passing through Iowa and Nebraska before reaching the railroad’s highest point at Sherman Summit in 1868 and then making their way through the Wasatch Mountains and reaching Ogden, UT in 1869. On May 10, 1869, railroad officials, important dignitaries, and the many Irish and Chinese immigrants and Civil War veterans who built the railroad gathered at Promontory Summit, UT to witness the meeting of the Central Pacific and Union Pacific and the completion of the first transcontinental railroad in the United States. The president of the Central Pacific railroad drove a ceremonial “golden spike” as Union Pacific’s No. 119 and Central Pacific’s No. 60 “Jupiter” steam locomotives met each other.  A journey that would have likely taken months from Baltimore to San Francisco could now be done in a week or so.

Transcons Galore

In the years following the completion of the first transcontinental railroad in 1869, several railroads completed transcontinental railroads of their own. The Atchison, Topeka, and Santa Fe railroad completed a “southern” transcontinental railroad to Los Angeles in 1881 by connecting with the Southern Pacific railroad in New Mexico. The Southern Pacific completed its own “southern” transcontinental railroad with its Sunset route connecting New Orleans, Texas, and California. (That one required the federal government to purchase additional land from Mexico to make the route possible.) The Northern Pacific Railway completed the first northern transcontinental railroad in 1883, linking the Great Lakes with Montana and the Puget Sound in Washington. The Great Northern railroad was the last railroad in the 19^th century to establish a coast-to-coast link in 1893.

There were other railroads to build transcontinental lines in the 20^th century. For example, the Chicago, Milwaukee, and St. Paul railroad (affectionately known as the Milwaukee Road) completed a transcontinental line of its own with the completion of the Pacific Coast Extension in 1909, linking Chicago with the Pacific Ocean via Montana and Idaho. By 1910, the Western Pacific opened its own line to Oakland, a late capstone in a now‑redundant, multi‑route national grid.

Each of these routes was transcontinental in the sense that they provided a continuous railroad infrastructure route across the nation. However, in each case, components of the routes were owned and operated by separate companies, with ownership typically terminating and switching in the Midwest.

Impacts on Railroading

Railroads, and in particular, the transcontinental railroads, were a physical manifestation of the United States’ desire to expand its reach and build its civilization all around. For good and ill, the transcontinental railroad helped to achieve the country’s so-called “manifest destiny” and usher in an industrial revolution.

The immediate and intuitive benefit of a transcontinental railroad in the late 19^th and early 20^th centuries was speed. Railroads could move goods and people all over the country in a matter of days or weeks compared to months. Moreover, the requirement in the Pacific Railway Act to have a uniform track gauge made it so that trains could run from one part of the country to another without having to offload and reload cargo due to different track sizes. A uniform track gauge that spans across the country helped railroads move goods efficiently and quickly to where they needed to go.

The transcontinental railroad also connected regions and markets that would not otherwise interact due to distance. Eastern railroads like the Baltimore and Ohio could now have access to the resource-rich west. Western railroads like the Great Northern could have access to the large industrial cities of the eastern seaboard and the Great Lakes.

Multiple transcontinental lines created redundancy and competition. With multiple lines, there was surge capacity, and work‑arounds when floods, fires, or labor disputes hit a single route.

As railroads built transcontinental lines, the cost-per-mile of freight shipping declined. The Federal Reserve Bank of St. Louis provides data showing the average revenue per freight ton‑mile on U.S. railroads dropping from about 1.24 cents in 1882 to roughly 0.75 cents by 1911—a 40% decline in less than 30 years. It is important to note that this decline in cost reflects economies of scale, better operations, and technology, not just the existence of any single route connecting coast-to-coast. But the additional transcontinental lines added redundancy and competition that may have reinforced the fall.

While beneficial to shippers, the shrinking revenues also posed challenges to railroads. Railroads sought new ways to improve efficiency including improving coordination with other railroads. It also created pressure to remove unprofitable lines of business, including closing underutilized branch lines and offloading unprofitable activities such as passenger movement, which they succeeded in doing with the creation of Amtrak in 1970. By the second half of the 20th century, in the face of increased competition from trucking, numerous railroads faced bankruptcy or acquisition as a result of challenges to profitability.

The 21^st Century Transcontinental Railroad

Proponents of the proposed UP/NS transcontinental railroad claim some of the same impacts discussed above: time savings, increased efficiency, and cost reductions. The distinguishing feature of the proposed UP/NS merger is the creation of a transcontinental railroad under one company. But for that important distinguishing feature, a transcontinental railroad already exists; in fact, there are multiple. A carload of coal can originate from a mine in Wyoming and end up at a plant in Florida. However, the process historically required (and currently requires) the car to change hands between railroads.

Even without a single transcontinental company, railroads have developed tools and agreements to facilitate the movement of goods and people across the continent and across multiple rail companies, known as trackage and haulage agreements.

A trackage agreement refers to when the owner of a rail line lets another railroad run its locomotives and crews over the owner’s track, typically for a fee. Rights can be overhead/bridge in which the guest railroad may move over the host railroad’s track, but may not serve customers on the host railroad’s tracks. There are also local/full‑service rights, which allow the guest road to serve the host railroad’s customers.

A haulage agreement refers to when the host railroad (the railroad that owns the tracks) uses its own crews to move a guest railroad’s traffic over the host’s tracks. The guest railroad typically has permission to negotiate rates with shippers directly, and often supplies the cars while the host retains dispatching and operational control and is paid a fee.

The emergence of a transcontinental railroad under one company would reduce the need for trackage and haulage agreements, but only in the case of freight being moved between UP and former NS tracks. If the new company wanted to run trains on BNSF or CSX-owned tracks, it would still need to have trackage or haulage agreements with other railroads.

Rail’s Share of Freight Moved by Distance

Another consideration for the new proposed merger is the extent of rail traffic that is truly “continental.” The Bureau of Transportation Statistics provides a breakdown of total value, weight, and ton-miles of freight moved in the U.S. by distance:

Figure 1. Rail Statistics for Freight Movements

Source: USDOT, Bureau of Transportation Statistics, “Moving Goods in the United States.”

Although the transcontinental rail network enables long-haul trips, trips under 1,000 miles still account for a large share of rail’s total economic value and tonnage. Long‑haul moves (over 1,000 miles) remain significant contributors to both, but in aggregate, rail carries more tonnage and value on trips under 1,000 miles. The larger share of ton‑miles for trips over 1,000 miles reflects continent‑spanning unit trains—grain, coal, ethanol—and intermodal services. By contrast, shorter‑distance trips include local movements and manifest (mixed‑goods) trains between cities. Overall, the data indicate that both local and long‑distance movements are valuable to a railroad. Put another way, a large intermodal train from California to Illinois and a local train between two California towns each create value.

Conclusion

Why does a railroad build a transcontinental line? In the early days of railroading, tracks that linked the country together opened different markets to each other, allowed goods to move large distances easily and created redundancies. Those impacts still hold true today and a transcontinental railroad can save time and reduce costs. But a new transcontinental railroad may still want to move goods on another railroad, retaining the need for trackage agreements. Also, railroads move goods great distances across the continent and at short distances between localities.

The recent announcement of the “first transcontinental railroad” involves a significant amount of psychology.  A transcontinental railroad harkens back to the era of the railroad empire. It can evoke a sense of unification, economic strength, or national pride. While the golden spike has already been driven to unify tracks across the country, with this merger for the first time, this coast-to-coast railroad empire would be under one banner.