Pacific Railroad Act
Main article: Pacific Railroad Act
The Pony Express from 1860 to 1861 was to prove that the Central Nevada Route across Nevada and Utah and the sections of the Oregon Trail across Wyoming and Nebraska was viable during the winter. With the American Civil War raging and a secessionist movement in California gaining steam, the apparent need for the railroad became more urgent.
In 1861 Curtis again introduced a bill to establish the railroad, but it did not pass. After the secession of the southern states, the House of Representatives on May 6, 1862, and the Senate on June 20 finally approved it. Lincoln signed it into law on July 1. The act established the two main lines—the Central Pacific from the west and the Union Pacific from the mid-west. Other rail lines were encouraged to build feeder lines.
Each was required to build only 50 miles (80 km) in the first year; after that, only 50 miles (80 km) more were required each year. Each railroad received $16,000 per mile ($9,940/km) built over an easy grade, $32,000 per mile ($19,880/km) in the high plains, and $48,000 per mile ($29,830/km) in the mountains. This payment was in the form of government bonds that the companies could resell. To allow the railroads to raise additional money Congress provided additional assistance to the railroad companies in the form of land grants of federal lands. They were granted right-of-ways of 400 feet (100 m) plus 10 square miles (26 km2) of land (ten sections) adjacent to the track for every mile of track built. To avoid a railroad monopoly on good land, the land was not given away in a continuous swath but in a "checkerboard" pattern leaving federal land in between that could be purchased from the government. The land grant railroads, receiving millions of acres of public land, sold bonds based on the value of the lands, sold the land to settlers, used the money to build their railroads, and contributed to a rapid settlement of the West.[9] The total area of the land grants to the Union Pacific and Central Pacific was even larger than the area of the state of Texas: federal government land grants totaled about 5,261,000,000 square meters and state government land grants totaled about 1,983,000,000 square meters.[10] The race was on to see which railroad company could build the longest section of track and receive the most land and government bonds.
The bonds and land grants have been frequently characterised as a government subsidy. However, historian Stephen Ambrose has argued against this since the companies repaid both the capital and interest.[11] He also argues that although the companies were able to sell the land grants in the Sacramento Valley and Nebraska at "a good price", most of the land in Wyoming, Utah and Nevada was "virtually worthless".[12]