Railroads play an important role in the U.S. transportation system. Annually, railroads haul more than 1.5 billion tons of freight for an average distance of more than 750 miles, with a value of more than $319 billion. For some products, the role of railroads in the U.S, is even more pronounced. Railroads serve as an important transporter of many of the low-valued, bulky natural resource commodities produced in the U.S., such as coal, grain, fertilizer and basic chemicals. Short-line railroads (non-Class I railroads) account for 29% of all U.S. rail miles operated, 12% of all U.S. railroad employees, and 9% of all U.S. railroad freight revenue. Although short-line railroads comprise a small portion of U.S. freight revenues, they serve as an important feeder into the nation's large Class I railroads. It is estimated that nearly 14,000 shippers rely on short-lines for access to the nation's rail system. However, a recent change in the industry standard for the size of rail cars interchanged between railroads could threaten viability of the nation's short-line network. The old industry standard of 263,000-pound cars is being replaced with an industry standard of 286,000-pound cars. Many short-line railroads can not handle these larger cars, as they have light rail in place, shallow or poor ballast, and/or deferred tie maintenance. In many cases, the traffic levels available to short-line railroads may not justify a major upgrade to handle these larger rail cars. In other cases financing at terms agreeable to the short-line operator may not be available. This study examines: (1) capital investment needs facing the short-line industry, (2) terms available for meeting these needs, (3) public interest benefits of short-line railroads, and (4) the relationship of short-line railroad services to the statutory responsibilities of the Secretary of Transportation.