BILL ANALYSIS
| Senate Research Center | S.B. 2366 |
| 89R9263 MZM-F | By: Hughes; Paxton |
| | Transportation |
| | 4/10/2025 |
| | As Filed |
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
In 1980, Congress passed the Staggers Rail Act, which largely deregulated the railroad industry. Before this act, railroads were heavily regulated, with the federal government dictating routes and pricing. After the passage of the Staggers Act, many railroads shed their low-density and less profitable lines, which led to the abandonment of approximately 10,403 miles of rail lines in Texas alone. However, this also gave rise to the robust short line rail industry we know today.
Nationwide, over 630 small, locally owned and operated short line railroads continue to serve communities, connecting them to the larger rail network and multimodal transportation partners, including ports. The short line operators are grateful for the opportunity to revitalize these otherwise abandoned railroads and provide economic opportunity to these communities. In doing so, it is a win for customers, rural communities, safety, and the entire railroad industry.
It is important to highlight that short line railroads operate with significantly different economics and infrastructure challenges compared to larger Class I railroads. Many short lines are low-density and serve rural areas, often with significant deferred maintenance issues. The goal of modernizing these lines to support higher speeds and accommodate 286,000-pound railcars is often out of reach without public-private partnerships. While other states have established and grown grant programs to support their short line networks, Texas remains one of the few states without such a program.
For example, in 2022, Louisiana launched a short line rail program that has already awarded grants to five railroads, enabling new track construction, improved operational fluidity, and reduced truck traffic on the highways. States like Kansas, Pennsylvania, Virginia, and Ohio have long-standing grant programs that continue to enhance their short line rail infrastructure. Many of these states also leverage their state funding to access federal grants. In contrast, Texas short lines received only $14.8 million in federal awards in the last round of federal grants, out of a total of $1.4 billion. Smaller states such as Alabama, Mississippi, and Kentucky received significantly more funding, indicating that Texas is leaving valuable federal dollars on the table.
S.B. 2366 is an opportunity for Texas to change course, modernize the state's short line rail network, and remain competitive with our neighboring states. By allowing the Texas Department of Transportation to create a grant program for the maintenance, operation, and expansion of short lines, a wide range of projects will be accelerated across the state, thus supporting jobs, reducing roadway congestion, and providing businesses with a safe, reliable, and environmentally sustainable transportation option.
To further note, there is a budget contingency rider that will appropriate $25 million in grant funding to this new program based on the passage of this legislation. The Short Line Grant Program will create a public-private partnership by drawing down federal dollars, along with private sector dollars contributed by the short line industry.
As proposed, S.B. 2366 amends current law relating to a grant program to fund certain short line railroad projects.
RULEMAKING AUTHORITY
Rulemaking authority is expressly granted to the Texas Transportation Commission in SECTION 1 (Section 201.981, Transportation Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter O, Chapter 201, Transportation Code, by adding Section 201.981, as follows:
Sec. 201.981. GRANT PROGRAM FOR CERTAIN SHORT LINE RAILROAD PROJECTS. (a) Defines "district," "railroad company," and "short line railroad."
(b) Requires the Texas Department of Transportation (TxDOT), for the purpose of increasing public safety, enhancing economic development, and reducing traffic, to establish and administer a program to award grants to districts or railroad companies that own or operate short line railroads to fund projects that replace short line railroad tracks or bridges, improve short line rail capacity, or restore short line railways.
(c) Authorizes a district or railroad company that owns or operates a short line railroad to use money awarded by TxDOT under this section as matching funds to secure additional funding for a short line railroad project described by Subsection (b).
(d) Requires that each grant awarded under this section be approved by the Texas Transportation Commission (TTC). Prohibits TTC from approving a grant under this section unless TTC determines that at least 10 percent of the total project costs will be provided by a source other than the state or, if the grant money is being used as matching funds under Subsection (c), at least 10 percent of the amount used as matching funds will be provided by a source other than the state.
(e) Authorizes TxDOT to fund the grant program under this section only from money appropriated by the legislature for that purpose and from gifts and grants, including grants from the federal government. Authorizes TxDOT to solicit and accept gifts and grants from any source for the purposes of this section. Prohibits money deposited to the credit of the state highway fund from being used to fund a grant awarded under this section.
(f) Requires TTC to adopt rules as necessary to implement this section.
SECTION 2. Requires TTC, not later than October 1, 2025, to adopt the rules required by Section 201.981, Transportation Code, as added by this Act.
SECTION 3. Effective date: upon passage or September 1, 2025.
