FRA Capital Grants for Rail Line Relocation
The Federal Railroad Administration's Capital Grants for Rail Line Relocation and Improvement Program — authorized by 49 U.S.C. § 20154 and implemented at 49 CFR Part 262 — provides federal grants to states for projects that physically relocate or improve freight rail lines to reduce their impact on highway safety, traffic flow, or community development. When a railroad track bisects a town, blocks at-grade highway crossings dozens of times a day, or runs through a neighborhood that wants to redevelop, the relocation grant program can fund the construction needed to move it.
Current Rule (2026)
| Parameter | Value |
|---|---|
| Citation | 49 CFR Part 262 |
| Issuing agency | Federal Railroad Administration (FRA) |
| Statutory authority | 49 U.S.C. § 20154 |
| Applicant eligibility | States (not political subdivisions directly) |
| Federal share | Up to 90% of construction costs |
| Minimum state match | At least 10% of construction costs |
| Last major amendment | No major amendments since original promulgation |
What This Rule Does
Rail line relocation grants address a problem that plays out in communities across the country: a freight railroad line, often built generations ago through the center of a town, has become a barrier to safety and economic growth. At-grade crossings stop traffic dozens of times a day; through-trains generate noise and vibration in residential neighborhoods; a rail corridor running through the heart of a downtown blocks redevelopment. Moving the line — elevating it, depressing it, or rerouting it around the affected area — can transform a community, but the cost is typically tens or hundreds of millions of dollars.
Under Part 262, the federal government can fund up to 90% of the construction cost. The state applies to FRA, identifies the project, and commits at least 10% from non-federal sources (which can include in-kind contributions like donated right-of-way). FRA evaluates applications on cost-effectiveness and awards grants from appropriated funds. Because Congress must appropriate funds to the program before FRA can issue grants, the program is intermittently active depending on whether annual transportation appropriations include a line item for rail line relocation.
The Infrastructure Investment and Jobs Act (2021, the "Bipartisan Infrastructure Law") provided significant new funding for freight and rail programs, and FRA has used this funding period to advance grade separation and relocation projects across the country. Relocation projects overlap with the broader grade crossing improvement agenda of the Railway-Highway Crossings Program (23 U.S.C. § 130), but Part 262 grants cover larger-scale relocations and structural improvements beyond what crossing improvement grants typically fund.
Key Provisions
- § 262.3 — Definitions: "allowable costs" means only construction and construction-related costs — planning, design, environmental review, and land acquisition are not fundable under this program (they must come from other federal programs or state/local funds); "construction" means supervising, inspecting, and building the physical project, including structures, earthwork, and related items
- § 262.5 — Allocation requirements: at least 50% of all grant funds awarded in any fiscal year must go to projects receiving grants of $20 million or less each; designated high-priority projects are excluded from this formula; the provision ensures that large states and large projects do not monopolize available funding
- § 262.7 — Eligibility: a State may apply for any construction project that (1) improves a rail line route or structure; and (2) is carried out to mitigate adverse effects of rail traffic on safety, motor vehicle traffic flow, or economic development in the affected community; both through-relocation (moving the line to a new corridor) and in-place improvement (elevating or depressing an existing line) are eligible
- § 262.9 — Selection criteria: FRA evaluates applications on cost-effectiveness — the benefits of the project relative to the federal funds expended; anticipated benefits include: reduced accident rates at grade crossings, reduction in vehicle delay at crossings, improvement in emergency vehicle access, reduction in rail-related noise and vibration, and facilitation of community economic development; multi-modal connectivity improvements are also considered
- § 262.11 — Application process: applications are submitted via grants.gov only when FRA posts a notice that funds are appropriated and available; each application must include a description of anticipated public and private benefits and a state assessment of how those benefits outweigh the costs; private entities expected to benefit from the relocation (railroads, developers) must be consulted in developing the benefit assessment, and any financial commitments from private beneficiaries must be identified
- § 262.13 — Matching requirements: the non-federal share is at least 10% of construction costs; the match may be paid in cash or in-kind; allowable in-kind contributions include: donated real property or tangible personal property needed for the project; services of state employees directly supporting construction management (at pay-and-benefits cost, excluding overhead); and costs incurred or in-kind contributions made before the application was filed (pre-application costs are creditable if they were incurred in compliance with applicable federal requirements); private contributions (railroad right-of-way donations, developer contributions) may count toward the match
- § 262.15 — Environmental assessment: all projects must comply with NEPA (environmental review), Section 4(f) of the Transportation Act (protection of parks, wildlife refuges, and historic sites), the National Historic Preservation Act, and the Endangered Species Act; FRA must complete environmental review and approve the project before construction can begin; states have two options: (1) allow FRA to complete the environmental review, or (2) prepare the environmental documentation themselves and submit it to FRA for review and approval (the latter option is faster for states with experienced environmental staff)
- § 262.17 — Combining grant awards: two or more states may combine grant amounts for a project that benefits each of them — enabling multi-state rail corridor projects to pool relocation grant funding without each state filing separate applications
- § 262.19 — Close-out procedures: within 90 days after the grant period expires or the project terminates, the state must submit final performance reports, financial status reports, and a full inspection report of all completed construction; FRA reviews close-out materials and adjusts final payments accordingly
How It Affects You
If you are a state department of transportation dealing with freight railroad grade crossing problems, blocked emergency vehicle corridors, or a downtown rail line that prevents economic redevelopment, the Part 262 program is your pathway to federal capital funding for the solution. The key constraints are: (1) funds must be appropriated before FRA can accept applications; (2) only construction costs are fundable — planning and environmental review must be financed separately; (3) the state must contribute at least 10% from non-federal sources; and (4) you must demonstrate that project benefits outweigh costs.
If you are a local government or community near a freight railroad corridor, rail line relocation grants work through states — your city or county cannot apply directly, but can work with your state DOT to include a relocation project in a state application. Private interests — railroads, developers — can contribute to the required state match and have their contributions counted, giving them a role in moving a project forward.
If you are a railroad, relocating a line typically requires your cooperation even when the state is the applicant. The railroad must agree to the relocation, provide access to the right-of-way, and often contribute right-of-way or other assets that count toward the non-federal match.
Statutory Authority
This rule implements:
- 49 U.S.C. § 20154 — authorizes the Secretary of Transportation to establish a capital grants program for local rail line relocation and improvement projects; directs promulgation of regulations; specifies that grants are available to states; allows combinations of state grants for multi-state projects; requires at least 50% of awards to go to grants of $20M or less
Recent Rulemakings
No major amendments since original promulgation. The program has operated under appropriated funding from SAFETEA-LU (2005), MAP-21 (2012), and the Infrastructure Investment and Jobs Act (2021), which expanded available funding for freight rail infrastructure and grade crossing improvement. FRA administers the program in coordination with annual NOFA (Notice of Funding Availability) postings on grants.gov when funds are available.