Why Did the Government Give Land Grants to Railroad Companies

Why did the government give land grants to railroad companies? In the 1850s, state governments in Illinois and Wisconsin gave land grants to entice railroad builders. In 1862, the federal government also offered land grants for building railroads that stretched across the country.

The idea was that the railroads would sell the land to new settlers to raise money for building the tracks. But in reality, government rules often made it tough. So, the railroads usually decided not to sell the land. Instead, they used the land grants as collateral to get loans, like bonds or government-backed mortgages.

These land grants from railroads don’t usually have records that genealogists find helpful. When railroads did sell or transfer parts of their land grants to individuals, those transactions were usually recorded in the appropriate county land office.

Different railroads had different rules for their land grants. The most famous type of land grant was given in a checkerboard pattern along the path of the first railroad tracks. In 1862, the Central Pacific and Union Pacific railroads were initially promised ten miles of checkerboard land on each side of the tracks.

But to cover their expenses, they got that changed to twenty miles on each side in 1864. Because of the checkerboard pattern, this meant there were ten blocks of railroad-owned land on each side of the tracks, and the government kept most of the non-railroad land blocks. In 1864, the law also gave the railroads the mineral rights to their land. If a railroad didn’t meet certain requirements, like finishing the railroad by a certain deadline, they could lose these land grants.


About Railroad Land Grants

Throughout U.S. history, the government has sometimes promoted the building of roads, canals, and railroads to aid the country’s growth. When the government decided that a transcontinental railroad was necessary, it encouraged private businesses to construct it.

Railroads were private companies seeking profitable ventures. To support them, the government passed the Pacific Railroad Act, granting them land. In exchange for building tracks in specific areas, these railroad companies received public lands.

Why did the government give land grants to railroad companies was that as railroads extended into new territories, settlers would follow, create communities, and boost the value of the land. Railroads could then sell parts of the land to make a profit and hopefully reinvest these profits into further expansion.

The U.S. government organized and divided public lands into one-mile square sections. It retained some of these sections while granting alternate sections to the railroads, forming a checkerboard pattern. The government’s land could be offered for homesteading or sold for profit. Supporters of the land grant program believed it would benefit everyone.

However, some people were worried about the relationship between the federal government and private companies. While most railroads served specific regions, they could make money by transporting goods to and from communities. Opponents of the land grant program believed that the railroads were receiving too much government assistance. Between 1850 and 1870, 80 railroads received seven percent of the land in the United States, primarily in the western regions, and one-sixth of Kansas’s land was given to railroad companies.

How Does It Work

The government extended loans totaling $64,623,512 to the transcontinental companies. These loans were mostly repaid with a six percent interest rate. Additionally, the law allowed a company to receive up to twenty sections of land (with each section being equivalent to one square mile) for every mile of track that they laid down.

Furthermore, the companies were granted government bonds valued at $16,000 per mile for each twenty-mile section of track constructed on the plains. In the plateau area between the Rocky and Sierra Nevada Mountains, the amount per mile increased to $32,000, and in the mountainous regions, it rose to $48,000 per mile. These incentives were designed to encourage the construction of railroads in diverse and often challenging terrains.

The railroads received millions of acres of public lands from Congress, which assured them both land for laying tracks and land to sell. The proceeds from the land sales provided crucial financing for the construction of their railroads. However, it’s important to note that not all railroads were constructed with government assistance; some were built through private means and funding.

Land grants have typically been associated with various incentives. Historically, individuals could acquire land in exchange for cultivating farmland or conserving a specific area. In other cases, land grants were issued to serve the public interest, such as founding colleges and universities or enhancing transportation infrastructure. These grants were intended to encourage certain behaviors or projects that would benefit society as a whole.

Why The Government Gave Land Grants to Railroad Companies

Why did the government give land grants to railroad companies? Here are some reasons for this decision:

1. To Support Railroad Industry

The government’s choice to give land grants to railroad companies was a big deal. It supported the growth of the railroad industry in the 1800s in the United States. These land grants were essentially sizable pieces of public land that the government gave to these companies. Why did the government give land grants to railroad companies were to boost the economy, promote moving out to the west, and make transportation better.

2. To Boost The Economy

A major reason for giving land to railroad companies was to boost the economy. The government aimed to make it easier to build railroads, which would help move things and people more efficiently. This would lead to more business and trade, which, in turn, would help different parts of the country grow economically. The railroads didn’t just make it easier to move goods. Why did the government give land grants to railroad companies also to create new jobs and to give many people more economic opportunities.

3. To Support The Development of New Towns and Communities

Moreover, land grants were a crucial way to encourage the westward push of the United States. As the country expanded to the west, the government had to find a way to link the newly acquired lands with the existing parts of the nation. By giving land to railroad companies, it made it possible to build rail lines in areas that were hard to reach otherwise. This led to the growth of new towns and communities along the railroad routes. Thus, in turn, helped expand the frontier.

4. Transportation Infrastructure

In addition, the government understood the vital role of transportation infrastructure in the nation’s growth. Railroads were a critical connection that could bridge the vast distances between different parts of the country. By offering land grants to railroad companies, the government ensured that rail line constructions went quickly and extensively. This not only made it easier to transport goods and people but also enhanced communication and connectivity, bringing the states together and fostering a sense of national identity.

Qualifications for Railroad Companies to Get Land Grant

Railroad companies made use of the land obtained through grants mainly for building railroad infrastructure. They then sold or leased the land to the companies at a reduced cost or, in some cases, given to them outright. The companies then utilized this land to lay down railroad tracks, construct stations, and set up other essential facilities for the operation of the railroad.

Not all railroad companies received land grants from the government. Land grants were typically provided to companies engaged in substantial railroad projects, especially those that aimed to connect various regions of the country or encourage westward expansion. These grants were the incentives to motivate companies to take on the expensive and challenging task of building railroads.

To qualify for land grants, railroad companies had to meet certain criteria established by the government. These criteria typically involved building a specified length of railroad track within a set timeframe and following specific construction standards. Additionally, companies needed to show they had the financial capacity to finish the railroad project.

More Facts about Land Grants for Railroad industry

Here are more facts you should know about land grants for railroad industry:

The Benefits of Land Grants for Railroad Industry

Land grants were pivotal in the development of the railroad industry. They offered railroad companies the essential resources and incentives needed for significant railroad projects. The construction of these rail lines made it easier to transport goods, people, and information, which, in turn, promoted economic growth and national cohesion.

Besides, the government benefited from granting land to railroad companies in various ways. Firstly, the construction of rail lines enhanced transportation infrastructure, resulting in increased trade and economic growth. Secondly, the sale and development of the land surrounding the railroads generated additional government revenue. Furthermore, the expansion of the railroad industry created new jobs and increased tax contributions, which also financially benefited the government.

More than that, land grants played a pivotal role in the settlement of the western frontier. The construction of rail lines made it significantly easier for people to travel to and settle in previously remote areas. The presence of railroads also contributed to the growth of towns and the development of agriculture and other industries in the West, which, in turn, led to the expansion of the frontier.

Land grants significantly impacted the growth of the United States. By promoting the expansion of the railroad network, these grants facilitated the efficient transportation of goods and people. Thus, in turn, stimulated economic growth and promoted national unity. The improved transportation made possible by the railroads also encouraged further westward expansion, leading to the exploration and settlement of vast territories, further contributing to the nation’s growth.

The Drawbacks of Land Grant for Railroad Companies

One reason the United States government provided subsidies and land grants to railroad companies in the 1800s was to encourage the development of an extensive railroad network that would span the entire country. This expansion was vital for promoting economic growth, westward expansion, and national unity.

The legislation that authorized the Union Pacific and Central Pacific railroad companies to build the rail lines provided them with government bonds to support the project, along with substantial land grants.

Alongside their positive impacts, there were negative consequences to granting land to railroad companies. The generous land grants resulted in rushed and subpar construction practices, with many railroads are under the constructions without proper planning and engineering. Furthermore, these land grants gave rise to significant corruption, as individuals with inside connections used construction companies to bribe government officials and personally profit from the deals.

Government grants for railroad construction did lead to significant production, but they also had negative consequences. The wealth amassed by railroad entrepreneurs fueled bribery and greed. Some investors resorted to bribing members of Congress to secure more grants, resulting in a cycle of corruption. In some cases, investors signed contracts with their own companies, which then forced the railroads to pay inflated bills, exacerbating the issues associated with corruption and unethical practices.

Some companies exploited their privileges. Even these companies involved in corrupt activities such as land speculation and making fraudulent claims. Moreover, the allocation of substantial land to these companies sometimes had adverse effects. For example, the disruption of the lives and rights of Native American communities.

Why Railroad Land Grants, Not Money?

The government determined the amount of land to grant to each railroad company by considering several factors. These factors included the length of track that the company intended to build, the challenges posed by the terrain, and the significance of connecting specific regions. In general, the more extensive and ambitious the railroad project, the larger the amount of land grant the company got.

The railroad industry, powered by these land grants. It became a significant role in shaping the development, economic growth, and westward expansion of the United States.

The government opted to grant land rather than offer direct financial assistance to railroad companies for several reasons. Firstly, land grants didn’t demand immediate financial resources from the government, making it a more feasible option. Secondly, the government believed that land grants would motivate companies to invest in railroad construction while also allowing them to profit from the eventual development and sale of the surrounding land, creating a sustainable long-term approach.


In summary, the government’s choice to give land to railroad companies aimed to boost economic growth, support westward expansion, and enhance transportation infrastructure. In doing so, the government played a pivotal role in the swift development. Even the government supported an expansion of the railroad industry in the United States.