orty and a half years ago, Alaskans packed the Nenana Civic Center to witness the January 5, 1985 ceremonial transfer of ownership of the Alaska Railroad from the federal government to the State of Alaska.
The transfer was rare, in that the railroad did not become a department within state government; the Alaska Legislature instead set it up to operate like a business, but with a quasi-public board of directors guiding it.
“The railroad will be run on a business-like basis. The board and the president of the railroad will make the decisions,” said then-governor Bill Sheffield at the time. Sheffield later served as president and CEO of the railroad.
The roughly 500-mile Seward–to–Fairbanks line was completed in 1923, with the ceremonial golden spike driven by President Warren G. Harding in Nenana. History records the trip as Harding’s last; he died of food poisoning a few weeks later in San Francisco.
The railroad struggled to turn a profit until it began hauling military and civilian supplies and materials during World War II. The military push in 1943 prompted construction of two tunnels through the Chugach Mountains, and in 1944 Whittier opened as a second, military-focused port and fuel depot.
Although President Ronald Reagan in 1983 signed legislation authorizing the transfer of the Alaska Railroad from the federal government to the State of Alaska—sixty years after the Seward–Fairbanks route was completed—the act of carrying out the transfer took a little time. In that time, the Alaska Railroad Corporation invested in telecommunications equipment along the Railbelt, boosting communications along the line. And in 1984, the Alaska Railroad developed passenger services connected to the cruise ship industry; it was then that the superdome, double-decker luxury coaches began service.
Also that year, Governor Sheffield signed legislation creating the Alaska Railroad Corporation and establishing its seven-member, governor-appointed board of directors. The formal transfer of ownership, including the Nenana ceremony and another in Seward, happened the next year.
Alaska Railroad
“It was interesting. It was challenging in some ways. There was always a fair amount of tension between the governor and the legislature—that was not unusual—but what we came up with was pretty unique; there’s nothing else like it in state government,” Shively says. “The one thing we all agreed upon was [that] if we made the Railroad Corporation a political body, it would fail.”
To that end, the Alaska Railroad Corporation’s budget isn’t approved by the legislature, the way the Alaska Marine Highway System budget is, by contrast. Shively says the concern was that the budget-setting focus might be turned from economic to political.
“I think that model has worked well,” he notes. “It has been controversial. From time to time, the legislature has talked about undoing that.”
Shively says when the federal government decided it no longer wanted to be in the railroad business in Alaska, Sheffield agreed with US Senator Ted Stevens and US Congressman Don Young that losing control of the railroad—or having it slip into private hands where its future might be uncertain—could be a major hit for the state.
“They took a big risk, when you think about it, because the place was kind of in shambles. There had been no money put into it for years,” Shively says.
“I’m being admittedly biased about this, but I think this has been a tremendous success for the state of Alaska. The railroad owes a debt of gratitude to not only the congressional delegation at the time—Stevens and Young—and to Bill Sheffield, John Shively in the governor’s office, and to the legislature at the time,” Alaska Railroad President and CEO Bill O’Leary says. “The planning was great, the execution was great, and I think the result was very positive for the state.”
As Sheffield indicated in 1985, the corporation operates as a business driven by both mission and profit. It’s charged with economic development of the state.
“We need to be self-sustaining; we need to make a profit,” O’Leary says. Any profits go back into the corporation for infrastructure to keep the railroad operating in what is essentially an inhospitable environment for many months of the year. These internally generated funds also allow the railroad to leverage additional federal funding, supporting a 2025 capital investment budget of $166 million, substantially driven by a comprehensive bridge repair program and track rehabilitation work.
“Our freight has really enabled a number of Alaska companies—Alaska businesses—to grow and operate. If you were trying to move these products, and move them by road, in some situations it wouldn’t be commercially feasible, in my opinion, and Alaskans would notice. If you were moving gravel trucks along the Parks [Highway] and Glenn [Highway], that could be a huge impact to Alaskans,” O’Leary says.
Trains that carry gravel from Palmer to Anchorage throughout the summer make up the bulk of tonnage hauled by the railroad. In 2024, gravel trains accounted for nearly 1.5 million tons, or nearly half the freight hauled by rail that year. Coal, traveling from Healy north to Fairbanks, was the second-largest category, comprising 647,000 tons of freight. Interline freight—items shipped from some point in the Lower 48 (frequently beginning the journey in Canada or Mexico), barged to Alaska, and placed on trains to a destination somewhere along the Alaska Railroad—accounted for another 644,000 tons. Bulk petroleum—460,000 tons of it—made up the fourth-largest sector of hauled freight in 2024. “Other” freight, which the railroad describes as specialty movements of “very large or oddly shaped equipment and materials, as well as in-state shipments of cement, scrap metal, military equipment, and pipe” made up 446,000 tons last year, the fifth and final category of freight hauled.
Shively says the economics of moving freight by rail brings a benefit to Alaskans, both in terms of reduced shipping costs on everyday items, such as lumber and gravel, and by reducing freight traffic on Alaska roads.
A 2024 “Railroad at a Glance” fact sheet notes that one freight train can carry the load of more than 280 trucks. In 2023, the 25,466 hopper and tanker railcars that carried gravel, coal, and petroleum from one place to another on the railroad offset an estimated 174,000 trucks traveling 18.1 million highway miles.
“Rail by its nature—especially freight rail—is the most efficient form of transportation,” O’Leary says.
“I doubt that Denali [National Park and Preserve] would have developed the way it has without the railroad. I’m not saying there would have been no development out there—there has always been some development,” Shively says. But the volume of cruise industry travel to Denali would be significantly lower, he explains.
Fewer travelers would mean less development around the park entrance and fewer jobs supporting those travelers and the businesses they support. The implications would ripple outward; many cruise travelers stop in Talkeetna on their way north or extend their vacation with a visit to the Golden Heart City after a visit to Denali.
The National Park Service reports that Denali welcomed 499,000 visitors in 2023. Those visitors spent an estimated $599 million on everything from camping, hotels, gas, transportation, and groceries to recreation, restaurants, and retail purchases. The economy around the park accounted for 7,790 jobs and $306 million in labor income, according to the Park Service.
The partnership between Alaska Railroad and the cruise ship industry has only grown stronger since 1984. It got a boost last year when the Alaska Railroad Corporation board approved the purchase of a $137 million cruise ship terminal to be built in Seward, financed by the railroad’s bonding authority and paid back through a thirty-year pier usage agreement with Royal Caribbean Group. The facility is scheduled to open in time for the 2026 cruise season.
Not all who board Alaska Railroad passenger cars are cruise ship passengers; the railroad operates daily summer runs between Anchorage and Seward, Anchorage and Whittier, and Anchorage and Denali/Fairbanks for non-cruise passengers as well. It also operates the last flagstop service in the nation, carrying riders to roadless areas where thousands of people live and recreate. Passenger service slows in the winter, but weekend trains still travel between Anchorage and Fairbanks.
“Our passenger service is what we are best known for. It is also a significant contributor to our bottom line and a tremendous asset to the state,” O’Leary says.
The passenger service is valuable to the railroad in another way, he notes. The railroad relies on federal grant funding for track improvements. “Without passenger services, we would not be eligible for the vast majority of those grants,” he says.
The railroad offers long-term leases at fair market value, providing a solid revenue stream that has helped offset other fluctuations, such as when coal exports, which had spiked from 2009 to 2013, stopped in 2016. Or when Flint Hills Resources shuttered its North Pole oil refinery in 2014. At the time, freight trains were operating five days a week, carrying thirty tank cars filled with Flint Hills fuel from North Pole to Anchorage.
“At one point, moving petroleum was over 50 percent of our freight revenue. That was a huge part of our entire structure, and that went, maybe not to zero overnight, but it was decimated. That took a significant amount of restructuring,” O’Leary says.
The 2010s were lean times, he says, and then came the hit of the COVID-19 pandemic, which dropped passenger service from a robust average of 500,000 passengers a year to only 32,059 passengers in 2020.
“We don’t call those the good old days,” O’Leary notes.
Alaska Railroad
Retooling to meet market changes is what any CEO is expected to do, and O’Leary, with nearly twenty-four years at the railroad and nearly twelve years at its helm—the longest tenure of any of the six CEOs since it became a state-owned corporation—has learned flexibility.
The model that the Alaska Legislature created allows that flexibility in ways a state-run railroad might not have. Hopefully, it will prove flexible enough to continue for another forty years.
“This is a tremendous asset for the state. It really is,” O’Leary says. “It needs to be there for future generations.”