The Virginia and Maryland Railroad Co. began business last night at midnight, taking over all rail operations on the Virginia portion of the Delmarva Peninsula previously served by Consolidated Rail Corp.

Under a contract with the Accomack - Northampton Transportation District Commission, the new rail firm is operating over the 63.5 mile Delmarva main line from Pokomoke City, Md., to Cape Charles, Va., a 26-mile freight car ferry across the Chesapeake Bay, and a 7-mile stretch from Little Creek, Va. into Norfolk.

Virginia and Maryland Railroad was formed to operate in Delmarva after local authorities refused to sign a new contract with ConRail, which sought an increased subsidy. The new railroad also is conducting talks with officials in Maryland about possible operation of four branch lines in that state.

William L. Withuhn, vice president of the new company, said yesterday that a symbolic first train will be operated today after keys to the former ConRail station at Cape Charles are turned over to Virginia and Maryland Railroad.

Normal freight operations are expected to begin next Monday, he said. In recent weeks, freight traffic on the North-South rail route has slowed to virtually nothing because of a Conrail decision to prohibit movement of rail cars onto the line.

Conrail lifted this embargo a week after it could have done so, adding to the problem, Withuhn said. Although relations with ConRail operating personnel were termed by Withuhn as "great," he reserved his comments about ConRail management.

Virginia and Maryland plans to hire experienced rail workers as traffic starts to build and expects to have 40 employees in two months. The new company also is prepared to begin rail rehabilitation by adding 100,000 new ties this year, if a separate track work contract is approved.

Maryland officials are considering contracts with the new railroad and with a competing group on the Eastern Shore, which has enlisted the Washington firm of Railvest to draw up a separate proposal for replacing ConRail.

A decision in favor of one firm or the other is expected from Maryland authorities within a month, sources [TEXT OMITTED FROM SOURCE]