Lease of the Clinchfield by the ACL and L&N Railroads

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Clinchfield Railroad
CSX Blue RIdge Subdivision

The CSX Blue Ridge Subdivision, the old Clinchfield line south of Erwin is now reopen after the extensive damage from Hurricane Helene. The first revenue freight train ran on September 21st, and two coal trains followed on September 25th. Ribbon cutting photo by Mark Loewe. Use this link to see Designs in Orbit’s exceptional video updates with drone footage. Also, Train Chaser Elliot also provides wonderful coverage.  Click here to read about the monumental CSX rebuilding efforts. In the weeks ahead we will add much more content chronicling the events of the past year.

Clinchfield Lease by the Atlantic Coast Line and Louisville & Nashville

Researched and Chronicled by Scott Jessee and Sandhi Kozsuch

The Carolina Clinchfield & Ohio Railway’s (CC&O) strategic importance lay in its ability to connect two major rail gateways: the Chesapeake & Ohio at Elkhorn City, KY, and the Atlantic Coast Line (C&WC) and Southern Railway in Spartanburg. This created a new “bridge line” to move traffic across the vast Appalachian mountain barrier. Primarily built to haul the high-quality bituminous coal from extensive holdings in southwestern Virginia, the railroad also developed a robust and nearly equal revenue stream from high-speed manifest (general) freight, connecting the Midwest and Southeast. By 1925, manifest freight had already grown to 41% of the CC&O’s revenue. Two solid revenue streams made the CC&O a very attractive investment for over a decade. Rumored suitors included C&O, Seaboard Air Line, and Southern.

The 1924 Lease: A Strategic Partnership

Despite its success, the CC&O was a complex railroad to operate, and in the early 1920s, its principal financial backers sought to exit their investment. This presented a golden opportunity for two of the Southeast’s largest railroads, the Atlantic Coast Line and the Louisville & Nashville. The ACL had acquired a controlling interest in the L&N in 1902, and together, they sought to strengthen their competitive position and secure access to the lucrative Appalachian coalfields. For the ACL, the Clinchfield offered an efficient extension of its network at Spartanburg, SC. For the L&N, it provided a valuable outlet to the Atlantic Coast from its coalfields in Kentucky.

The lease agreement was a significant and complex legal transaction. In 1924, CC&O stockholders approved a 999-year lease to the ACL and L&N. The Interstate Commerce Commission (ICC), the federal regulator of the time, also approved the lease, though not without requiring specific conditions to ensure fair access for competing railroads. To execute the lease, a new, separate operating company was formed: the Clinchfield Railroad Company (CRR), though the CC&O Corporation itself remained in legal existence. The terms of the agreement ensured that the Clinchfield would be operated as a separate entity with competitive traffic policies. The headquarters remained in Erwin, Tennessee.

Lease Details and Terms

  • CC&O signed initial lease May 11, 1923
  • ICC approval: June, 1924
  • Lease executed: October 16, 1924
  • Possession of property: December 1, 1924
  • Term: 999 years
  • Lease payments to CC&O shareholders in addition to fixed charges:
    • $750,000 annually first three years starting in 1925 (3% dividend on outstanding common stock)
    • $1,000,000 annually next ten years (4% dividend on outstanding common stock)
    • $1,250,000 annually thereafter (5% dividend on outstanding common stock)
  • A separate organization having a management directly in charge of operations must be maintained by CC&O.
  • Within one year the L&N must act toward construction of proposed connections between its branches and the CC&O.
  • Existing routes and channels of trade must be continued and in handling traffic, competing carriers must not be discriminated against.
  • Rate divisions must be made without discrimination.
  • Issuance of securities by the lessor may be only for like amounts of expenditures for betterments or of securities refunded.

Additional source for this article

  • 1925 Mundy’s Earning Power of Railroads

Clinchfield.org Sources and Resources

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