How would land grants help the railroad pay for the building of the transcontinental railroad?

The states were to transfer land to the railroads upon the completion of each twenty-mile section of track. The railroad company would then receive alternate sections (a square mile each), six miles on both sides of the track. The price for the alternate sections kept by the government was doubled.



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The government loaned a total of $64,623,512 to the transcontinental companies. These loans were for the most part paid back at six percent interest. The law also provided that a company could be given up to twenty sections (a section is a square mile) of land for every mile of track put down.

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The Railroad Act of 1862 put government support behind the transcontinental railroad and helped create the Union Pacific Railroad, which subsequently joined with the Central Pacific at Promontory, Utah, on May 10, 1869, and signaled the linking of the continent.

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The rail line was built by three private companies over public lands provided by extensive US land grants. Building was financed by both state and US government subsidy bonds as well as by company-issued mortgage bonds.

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The railroad grants helped companies raise the capital they needed to build lines into sparsely settled areas like Nebraska. In exchange, the railways agreed to carry the mail at rates set by Congress and to transport US soldiers and freight without charge.

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The two lines of track would meet in the middle (the bill did not designate an exact location) and each company would receive 6,400 acres of land (later doubled to 12,800) and $48,000 in government bonds for every mile of track built.

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