Why would a railroad company want land grants?

At the same time that homesteaders were getting free land from the government, large tracts of land were granted to railroads by both the states and the federal government. The goal was to encourage the railroads to build their tracks where few people lived, and to help settle the country.



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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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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.

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In 1862 the federal government offerred land grants for building transcontinental railroads. The expectation was the railroads would quickly sell the land to settlers to raise the money to pay for the building of the railroad.

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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.

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Approximately 130 million acres were awarded to railroad companies under the Pacific Railroad Act.

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To encourage rapid construction, the government offered each company land along its right-of-way. (About 1-5 miles on either side of the tracks) The railroads sold the land on either side of the tracks to settlers to pay for the cost of building the railroad.

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To entice investors into building a continuous line from the Mississippi River to the Pacific shore, Congress agreed to give the railroads 10 square miles of land for every mile of track.

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Railroads profited in multiple ways from the population influx that they encouraged. For example, they charged fares to passengers migrating to the region; they sold land to many of the newcomers; and they shipped back east the produce or natural resources that the newly enlarged population generated.

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