Freight Rail, Logistics, Union Pacific

The Ultimate Guide to Railroad Classes: Defining Class I, Class II, and Class III Railroads

March 24, 2023
Looking down the railway line of a Class I railway

Table of Contents

What are railroad classes?

Railways in the United States are designated as Class I, Class II, or Class III according to revenue benchmarks established by the Surface Transportation Board (STB). The STB originally set revenue thresholds in 1992 and has periodically updated both the thresholds and the methodology used to calculate them.

  • Class I – Revenue greater than $250M per year (1991 dollars)
  • Class II – Revenue between $20M and $250M per year (1991 dollars)
  • Class III – Revenue less than $20M (1991 dollars)

The STB adjusts these revenue amounts annually for inflation using a deflator factor derived from the Producer Price Index (PPI) for line-haul railroads, published by the Bureau of Labor Statistics. This ensures railroads are classified based on real business growth rather than inflationary effects.

As of 2024, the inflation-adjusted thresholds stand at US$1,074,600,816 for Class I carriers and US$48,237,637 for Class II carriers. Class III carriers are railways with less than US$48,237,637 in annual operating revenue.

At RailState, our network covers primarily Class I Railways.

The 2021 STB Reclassification

In April 2021, the STB made the most significant change to railroad classification in three decades by overhauling the revenue thresholds. The previous benchmarks, set in 1991, had not kept pace with the modern scale of the rail industry. The Board reset the base year from 1991 to 2019 and raised the Class I threshold from $250 million to $900 million (in 2019 dollars), while the Class II floor was adjusted from $20 million to $40.4 million. These new thresholds more accurately reflect the economic realities of today’s freight rail market.

What are Class I railroads?

Class I railroads are the largest railway carriers in North America, designated by the Surface Transportation Board (STB) based on annual operating revenue. As of 2024, the revenue threshold for Class I status is US$1,074,600,816 after inflation adjustment. These railroads form the backbone of the North American freight transportation network, operating extensive mainline systems that connect major ports, cities, and industrial centers.

Examples of Class I Railroads

There are six Class I Railroads operating in North America that focus primarily on transporting freight and cargo:

There is also a single Class I Railroad that is primarily focused on passenger transportation: Amtrak.

On April 14, 2023, Canadian Pacific Railway and Kansas City Southern Railway merged to form CPKC, creating the first single-line railroad connecting Canada, the United States, and Mexico.

What is the biggest Class I Railroad?

Union Pacific Railroad and BNSF Railway trade the top spot depending on the metric used. Based on the most recent full-year data (2024):

  • Union Pacific Railroad – $24.3 Billion Revenue, 32,100 route miles, 32,400 employees
  • BNSF Railway – $23.4 Billion Revenue, 32,500 route miles, 41,000 employees
  • Canadian National Railway – $17.1 Billion Revenue (CAD), 20,000 route miles, 24,000 employees
  • CSX Transportation – $14.5 Billion Revenue, 21,000 route miles, 20,900 employees
  • CPKC – $14.2 Billion Revenue, 20,000 route miles, 20,000 employees
  • Norfolk Southern Railway – $12.1 Billion Revenue, 19,400 route miles, 19,600 employees

The 2023 CPKC merger significantly reshaped the competitive landscape. Before the merger, Kansas City Southern was the smallest Class I with revenues of just $2.75 billion and 4,000 route miles. The combined CPKC is now comparable in size to CSX and CN, making the six freight Class I railroads much more evenly matched than at any time in modern history.

How has consolidation changed Class I railroads?

The North American Class I railroad landscape has undergone dramatic consolidation over the past century. In the 1920s, there were over 170 Class I railroads. By the 1980s, deregulation under the Staggers Rail Act of 1980 triggered a wave of mergers that reduced that number to just seven freight carriers today. See the detailed Railroad mergers and consolidation section below for a complete history of major mergers, including the 2023 creation of CPKC and the proposed 2025 Union Pacific–Norfolk Southern mega-merger.

Is it Class I or Class 1?

The railroad classes use the roman numerals I, II, and III. Some choose to use the numbers 1, 2, and 3, but the most common and official usage is Class I, Class II, and Class III railroads.

What does CSX stand for?

CSX is the short name for CSX Transportation, a Class I freight railroad company that primarily operates in the eastern United States and in eastern provinces of Canada. Its parent company is CSX Corporation, which is headquartered in Jacksonville, Florida.

In 1980, two railroads, Chessie System and Seaboard Coast Line Industries, merged to form CSX. The CSX name uses letters from the previous railroads’ names but does not have a specific meaning today.

What does BNSF stand for?

BNSF is the reporting mark for the BNSF Railway, one of the largest Class I freight railroads in the United States. The letters BNSF stand for Burlington Northern Santa Fe. The railroad was created when a holding company purchased the Atchison, Topeka and Santa Fe Railway (often called the “Santa Fe”) and Burlington Northern Railroad, merging them into the Burlington Northern and Santa Fe Railway in 1996. The company officially changed its name to BNSF Railway in 2005. Berkshire Hathaway purchased the railroad in 2009, and it remains a wholly owned subsidiary today.

What is Precision Scheduled Railroading (PSR)?

Precision Scheduled Railroading (PSR) is an operating model adopted by most Class I railroads that emphasizes moving freight on fixed schedules with fewer assets and lower costs. Originally pioneered by the late Hunter Harrison at CN and later CSX, PSR focuses on reducing dwell time, improving asset utilization, and lowering operating ratios. While PSR has delivered significant financial returns for shareholders, it has also drawn criticism from shippers, labor unions, and regulators.

A 2023 Government Accountability Office (GAO) report found that the effects of PSR on rail safety remain unclear, noting that while railroad representatives say the changes improved safety, labor unions and federal inspectors raised concerns about reduced staffing, longer trains, and shortened inspection times. The February 2023 Norfolk Southern derailment in East Palestine, Ohio, which involved hazardous materials, further intensified the national debate around Class I railroad safety practices and PSR’s role in the industry.

What is Positive Train Control (PTC)?

Positive Train Control (PTC) is a safety technology mandated by Congress under the Rail Safety Improvement Act of 2008. PTC systems are designed to prevent train-to-train collisions, over-speed derailments, incursions into established work zones, and movements through misaligned switches. As of December 2020, PTC is in operation on all 57,536 required freight and passenger railroad route miles across the United States. In 2024, BNSF completed PTC integration on the former Montana Rail Link lines, extending coverage across its entire national network.

What are Class II railroads?

Class II railroads, also known as regional railroads, are railway carriers designated by the Surface Transportation Board (STB) with annual operating revenues between the Class III and Class I thresholds. As of 2024, that means revenues between US$48,237,637 and US$1,074,600,816. There are approximately 21 Class II carriers operating in the United States.

Examples of Class II railroads

The following are examples of Class II (regional) railroads in the United States. Note that this list changes over time as railroads are acquired, merge, or see their revenues cross the Class II threshold. There are approximately 21 Class II railroads operating in the United States as of 2025.

Florida East Coast Railway (FEC)

The Florida East Coast Railway is one of the most prominent Class II railroads in the country. Originally built in the late 19th century by Standard Oil co-founder Henry Flagler, the FEC operates 351 miles of mainline track running along Florida’s Atlantic coast from Jacksonville to Miami. The FEC is the exclusive rail provider for PortMiami, Port Everglades, and the Port of Palm Beach, making it a critical link in South Florida’s international trade infrastructure. Today the FEC is a wholly owned subsidiary of Grupo México Transportes, one of Mexico’s largest transportation companies. The FEC also hosts Brightline, the privately operated inter-city passenger rail service connecting Miami, Fort Lauderdale, and West Palm Beach to Orlando—the first new private intercity passenger railroad in the United States in decades.

Iowa Interstate Railroad (IAIS)

The Iowa Interstate Railroad, headquartered in Cedar Rapids, Iowa, operates over 580 miles of track from Chicago westward through Peoria, Illinois, and across Iowa to Council Bluffs near Omaha, Nebraska. Founded in 1984 and owned by the Railroad Development Corporation of Pittsburgh, the IAIS is notable for having direct interchange connections with all seven Class I railroads—one of the only regional railroads in the country that can make that claim. Its freight traffic includes grain, ethanol, sand, metals, and intermodal containers. In 2024, the IAIS celebrated its 40th anniversary and broke ground on a Renewable Energy Distribution Center in Newton, Iowa. The railroad is also involved in a multi-agency effort with BNSF, Amtrak, and the Illinois Department of Transportation to bring passenger rail service between Chicago and the Quad Cities.

Alaska Railroad (ARRC)

The Alaska Railroad Corporation is a unique Class II railroad wholly owned by the State of Alaska. Operating 656 miles of track between Seward and Fairbanks, with a branch to Whittier, it is the only full-service railroad in the state and one of the few in North America that provides both freight and scheduled passenger service year-round. The railroad reported net income of $25.3 million in 2024 and employs approximately 660 year-round workers plus seasonal staff. Its freight operations serve military installations, the resource extraction industry, and communities along its route that are otherwise accessible only by air or water. The railroad also operates popular summer excursion trains through Denali National Park, making it both a transportation lifeline and a tourism asset.

Reading Blue Mountain and Northern Railroad (RBMN)

The Reading Blue Mountain and Northern Railroad, based in Port Clinton, Pennsylvania, is the largest privately held Class II railroad in the United States. Founded in 1983 to take over former Conrail trackage on the ex-Pennsylvania Railroad Schuylkill Branch, the RBMN has grown to operate over 400 miles of track in eastern Pennsylvania. In 2024, the railroad posted record freight revenues despite a 10% decline in carloads to just under 32,000, driven by a favorable traffic mix in anthracite coal and forest products. Anthracite coal shipments exceeded one million tons for only the second time in the railroad’s history. The RBMN also operates a thriving passenger excursion business, carrying a record 340,000 riders in 2024, and continues to invest heavily in infrastructure, hiring 70 employees and spending $6 million on equipment and track materials during the year.

Other notable Class II railroads

Other Class II railroads operating in the United States include the Indiana Rail Road, which operates 500 miles of track between Indianapolis and Effingham, Illinois, primarily hauling coal and grain; the Lake State Railway in Michigan, which inherited high-quality track from CSX and operates in the state’s Lower Peninsula; the Paducah and Louisville Railway in Kentucky, a 280-mile coal-hauling railroad; and the Alabama and Gulf Coast Railway, a Genesee & Wyoming subsidiary serving the Gulf Coast region. The composition of the Class II list shifts periodically as smaller railroads grow into the revenue threshold or larger ones are absorbed into Class I systems through acquisition.

Class I Railroads in Canada

Canadian National (CN) and Canadian Pacific Kansas City (CPKC) are classified as Class I railways by the STB because they also operate extensive networks in the United States and have revenues far exceeding the STB thresholds. At RailState, our network covers all of the Canadian Class I Railways.

What are shortline railroads?

Shortline railroads, also known as Class III railways, are the most numerous category of railroad in the United States. Class III railroads are railway carriers designated by the Surface Transportation Board (STB) that earn less than the Class II revenue threshold. As of 2024, that threshold is $48,237,637 in annual operating revenue. According to the American Short Line and Regional Railroad Association (ASLRRA), there are approximately 603 short line and regional railroads operating in the United States, managing roughly 50,000 miles of track—about 40% of the total U.S. freight rail network by mileage.

Despite their individual size, short lines play an outsized role in the national freight transportation system. They serve as the critical “first mile” and “last mile” connectors, picking up and delivering carloads between shippers’ facilities and the Class I mainline network. Without short lines, thousands of grain elevators, mines, chemical plants, lumber yards, and manufacturing facilities across rural and small-town America would lose their rail access entirely, forcing freight onto the highway system and increasing truck traffic, road wear, emissions, and transportation costs.

Many short lines trace their origins to branch lines that were spun off by larger railroads during the deregulation era of the 1980s. Under the Staggers Rail Act of 1980, Class I carriers gained the ability to shed unprofitable branch lines, and entrepreneurial operators stepped in to acquire and rehabilitate them. In many cases, short line operators were able to run these lines profitably by cutting overhead, negotiating more flexible labor agreements, and providing personalized service to local shippers. The federal Section 45G short line railroad tax credit has been instrumental in supporting this segment, providing tax incentives for track maintenance and infrastructure investment that help short lines maintain safe, efficient operations on lines that might otherwise deteriorate.

Examples of short line railroads

Short line railroads range from tiny switching operations with just a few miles of track to substantial networks spanning hundreds of miles. Some notable examples include:

The Buckingham Branch Railroad in Virginia operates over 280 miles of former Chesapeake & Ohio and Norfolk Southern trackage in the Shenandoah Valley region, hauling lumber, grain, and aggregates. The Wheeling and Lake Erie Railway in Ohio operates approximately 840 miles of track across Ohio and is one of the largest Class III railroads by route miles, handling steel, aggregates, and chemicals. The San Joaquin Valley Railroad in California serves the agricultural heartland of the Central Valley, connecting growers and food processors to the BNSF and Union Pacific mainlines. In the Pacific Northwest, the Portland & Western Railroad (a Genesee & Wyoming subsidiary) operates over 500 miles of track in Oregon’s Willamette Valley.

Short line railroad holding companies

While many short lines remain independently owned by families, local investors, or small partnerships, the industry has seen significant consolidation through holding companies that acquire and operate portfolios of short line railroads across the country. These holding companies bring economies of scale in areas like locomotive purchasing, insurance, regulatory compliance, and management expertise while typically preserving the local identity and community relationships that make short lines effective.

Genesee & Wyoming (G&W)

Genesee & Wyoming Inc. is the largest short line and regional railroad holding company in North America. Originally founded in 1899 as a single short line railroad in upstate New York, G&W grew over more than a century into an empire of approximately 120 freight railroads spanning 42 U.S. states, four Canadian provinces, and operations in the United Kingdom, Continental Europe, and Australia. In 2019, Brookfield Infrastructure Partners and Singapore’s GIC sovereign wealth fund acquired G&W in an $8.4 billion take-private transaction, making it one of the largest infrastructure deals in North American history. G&W’s railroads are organized into locally managed regional operating groups, collectively operating more than 13,000 miles of track, employing approximately 8,000 people, and serving over 3,000 customers. Notable G&W subsidiaries include the Providence & Worcester Railroad in New England, the Alabama & Gulf Coast Railway, the Portland & Western Railroad in Oregon, and the Savannah & Atlanta Railway in Georgia. In December 2024, G&W launched the Red Deer Railway in Alberta, and in 2025 it established the Alberta Heartland Railway to serve the oil sands and energy sector.

Watco Companies

Watco Companies, headquartered in Pittsburg, Kansas, is the second-largest short line holding company in North America. Founded in 1983, Watco has grown to own or operate 47 short line railroads across more than 8,000 miles of track in the United States and Australia, employing approximately 4,800 people. Beyond railroads, Watco operates over 70 transload and marine terminal facilities, plus railcar and locomotive maintenance shops, making it a vertically integrated transportation and logistics provider. In June 2025, Watco secured over $600 million in investment from Duration Capital Partners for strategic expansion. In October 2025, Watco began operating the Great Lakes Central Railroad in Michigan, a 420-mile state-owned rail network handling 48,000 carloads annually. The company earned approximately $1.6 billion in revenue in 2022.

OmniTRAX

OmniTRAX, Inc., based in Denver, Colorado, is one of the largest privately held railroad holding companies in North America. A subsidiary of The Broe Group, OmniTRAX owns or operates a network of over 30 short line and regional railroads spanning 18 U.S. states and two Canadian provinces. In addition to railroad operations, the company provides industrial development and real estate services, often leveraging its rail assets to attract warehousing and manufacturing tenants to rail-served industrial parks along its lines.

Other holding companies

Several other holding companies play significant roles in the short line industry. Patriot Rail Company, based in Jacksonville, Florida, operates approximately a dozen short line railroads across the eastern and southern United States. Pioneer Lines owns 15 short line railroads and contract switching operations across 12 states. Anacostia Rail Holdings operates multiple short lines in the Mid-Atlantic and Southeastern states. And Railroad Development Corporation, based in Pittsburgh, owns the Iowa Interstate Railroad and has railroad investments in several countries outside the United States. The proliferation of holding companies reflects the maturation of the short line industry from a collection of scrappy independent operators in the 1980s into a sophisticated segment of the freight transportation market that attracts institutional investment capital.

Who owns the Class I and Class II railways in the United States?

In the United States, freight railroads are typically privately owned and maintained. All Class I railways in the United States—those earning more than US$1,074,600,816 per year in revenue—are private companies. Several are publicly traded corporations:

  • Union Pacific (UNP) – publicly traded on the NYSE
  • CSX Corporation (CSX) – publicly traded on the NASDAQ
  • Norfolk Southern (NSC) – publicly traded on the NYSE
  • Canadian National (CNI/CNR) – publicly traded on the NYSE and TSX
  • CPKC (CP) – publicly traded on the NYSE and TSX
  • BNSF – wholly owned by Berkshire Hathaway (not independently traded)

Who owns the Class I railways in Canada?

Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) are the two dominant freight rail operators in Canada and are both publicly traded companies. Canadian National Railway was a Crown Corporation until 1995 when it was privatized through an initial public offering (IPO). CPKC was formed in 2023 through the merger of Canadian Pacific Railway and Kansas City Southern.

Railroad mergers and consolidation

Mergers have been one of the defining forces shaping the North American railroad industry. The number of Class I railroads has fallen from over 170 in the 1920s to just seven today, a consolidation driven largely by economic pressures, deregulation, and the pursuit of operational efficiency. Understanding this history is essential to grasping why railroad classes matter and how the competitive landscape continues to evolve.

The merger era: 1980s and 1990s

The Staggers Rail Act of 1980 deregulated the railroad industry and unleashed a wave of consolidation that reshaped the Class I map. In the West, Burlington Northern merged with the Atchison, Topeka and Santa Fe Railway in 1995 to form BNSF Railway, while Union Pacific absorbed the Southern Pacific and Chicago and North Western railroads. In the East, CSX was created through the merger of the Chessie System and Seaboard System, and Norfolk Southern grew from the combination of the Norfolk and Western and Southern Railway systems. In 1999, CSX and Norfolk Southern jointly acquired and divided Conrail, the federally created freight carrier that had consolidated several bankrupt northeastern railroads in the 1970s.

These mergers were not without problems. The Union Pacific–Southern Pacific integration in 1996–1997 caused months of severe service disruptions, including massive rail congestion across the Gulf Coast and Midwest that cost shippers billions of dollars. The CSX–Norfolk Southern split of Conrail similarly led to service breakdowns in the early 2000s. These experiences prompted the Surface Transportation Board to impose a 15-month moratorium on major railroad mergers in March 2000 and adopt more stringent merger review rules in June 2001.

The STB’s major merger rules

Under the revised rules adopted in 2001, the STB shifted from requiring that mergers simply maintain existing competition to requiring that applicants demonstrate their proposed transaction would enhance competition. The rules require detailed service reliability plans, analysis of competitive effects, and provisions for competitive access such as reciprocal switching arrangements and trackage rights for competing carriers. These heightened standards effectively froze Class I merger activity for over two decades.

The CP–KCS merger and the creation of CPKC

The freeze ended in 2021 when Canadian Pacific Railway and Kansas City Southern announced a merger agreement. Canadian Pacific completed its US$31 billion acquisition of KCS in December 2021, placing KCS shares into a voting trust while regulators reviewed the deal. The STB approved the merger on March 15, 2023, and the two railroads officially combined on April 14, 2023 to form Canadian Pacific Kansas City (CPKC)—the first single-line railroad connecting Canada, the United States, and Mexico. CPKC’s network stretches from Vancouver and Montreal through the U.S. heartland to the ports of Lázaro Cárdenas and Veracruz on the Mexican coast. As of 2024, CPKC reported annual revenue of approximately $14.2 billion. Full operational integration of the two legacy networks is expected to take up to three years from the merger date.

The proposed Union Pacific–Norfolk Southern merger

On July 29, 2025, Union Pacific and Norfolk Southern announced an agreement to merge in a transaction valued at approximately $85 billion, making it the largest proposed railroad consolidation in history. Under the terms, Norfolk Southern shareholders would receive one Union Pacific common share plus $88.82 in cash for each NS share, valuing NS at roughly $320 per share. The combined railroad would operate over 50,000 route miles across 43 states and serve approximately 100 ports, creating what Union Pacific described as “America’s first transcontinental railroad” since the original 1869 golden spike.

The proposal has drawn both strong support and fierce opposition. The SMART Transportation Division, the nation’s largest rail labor union, endorsed the merger, citing potential benefits for workers and rail service. However, the remaining Class I carriers—BNSF, CN, CPKC, and CSX—have all raised objections, arguing that the merger application filed with the STB on December 19, 2025 was incomplete and failed to adequately address competitive concerns. The STB agreed, rejecting the initial application on January 16, 2026. Union Pacific and Norfolk Southern subsequently notified the STB of their intent to refile a comprehensive application by April 30, 2026, aiming to address all regulatory deficiencies while maintaining their target of closing the deal in 2027.

If approved, a UP–NS combination would likely trigger further consolidation. Industry analysts widely expect that BNSF and CSX would seek to merge in response, potentially reducing the number of U.S. Class I freight railroads from seven to as few as five. The outcome of the STB’s review will be one of the most consequential regulatory decisions in modern transportation history.

The BNSF–CSX intermodal partnership

Even before the UP–NS merger was announced, BNSF and CSX had been quietly developing a coast-to-coast intermodal partnership as an alternative to formal consolidation. On August 22, 2025, the two railroads launched joint intermodal services connecting Southern California with Charlotte, North Carolina and Jacksonville, Florida, as well as a new Phoenix–Atlanta corridor designed to convert truck freight to rail. They expanded the partnership in November 2025, adding nine new schedules from Los Angeles to CSX destinations in the Ohio Valley and Northeast. Unlike a merger, this commercial alliance does not require STB approval and allows both carriers to maintain their independent operations while offering shippers seamless single-shipment service across both networks.

How are railroad classes relevant for shippers and investors?

Understanding railroad classifications helps shippers, traders, and investors evaluate the freight rail landscape. Class I railroads dominate long-haul intermodal and bulk commodity movements, while Class II regionals and Class III short lines fill critical niche roles in first-mile/last-mile service. The revenue thresholds also determine the level of regulatory oversight each railroad faces—Class I carriers are subject to more extensive reporting and compliance requirements than smaller railroads.

For commodity traders and supply chain professionals, tracking railroad performance across all three classes provides valuable signals about economic activity, commodity flows, and potential supply chain disruptions. RailState provides independent, real-time rail data covering the North American Class I network, enabling users to monitor train volumes, commodity movements, and carrier performance with data updated within 25 minutes of train observation.

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