CAPE CHARLES, VA. -- Short-line railroads will play a crucial role in the effort to rejuvenate the nation's freight rail system, according to the head of an Eastern Shore line rescued from the brink of abandonment.

"As the major railroads streamline their business to haul from big centers, they want the short lines to stay in existence, but they don't want to operate them," said Stephen Gedney, chief executive of Eastern Shore Railroad Inc.

Dating from 1884, his 63-mile stretch of railroad -- now called the Eastern Shore Railroad -- runs up the center of Virginia's Eastern Shore into Worcester County, Md.

At its southern terminus in Cape Charles, Va., the line is linked to rail giants CSX Corp. and Norfolk Southern Corp., in Norfolk, by a freight ferry that runs 26 miles across the Chesapeake Bay.

To the north, in Pocomoke City, Md., the rail line hooks up with a Conrail leg that connects to the Northeast corridor.

"Once a railroad is gone, it's gone," Gedney said. "It's very difficult to reinstate a short line once it's shut down and its right-of-way sold. It's like putting a puzzle back together with a blindfold on."

He estimated it would cost at least $225,000 a mile to build a freight railroad.

Gedney led a drive to save the Eastern Shore Railroad in February.

Operated by Penn Central until 1976, Conrail until 1977 and then by the Accomack Northampton (Va.) Transportation District Commission, the line was purchased in 1985 by a subsidiary of Canonie Inc. of Muskegeon, Mich.

Canonie, a marine transport and construction company, eyed the line's ferry operation as a way to "top off" ships with coal. But when coal demand slackened, Gedney said Canonie "decided it no longer wanted to be in the railroad business" and set a Feb. 15 deadline for buyers to come forward or it would file for abandonment.

"You find out that a lot of people want to buy railroads, but they don't have enough money," said Gedney.

The executive, who worked for 15 years as a planner with the Virginia transportation department, orchestrated a last-minute deal in which Maryland, Virginia and Delaware each kicked in $500,000 to help the Accomack district buy back the railroad for $7 million.

The traditional definition of a short line, Gedney said, is a railroad with 50 miles or less of track, serving one or two major shippers and connecting to one major rail carrier.

As the rail giants have cut services, the definition has been expanded to include regional systems "spun off" from big carriers, Gedney said.

The Eastern Shore Railroad's experience should be a warning to other short lines considering purchases by nonrailroad or out-of-state concerns.

"The owners can really do what they want with the railroad. In the case of a short line, that can be really devasting to the local area," said Gedney.

Grain elevators, a candy factory and a propane plant rely on the Eastern Shore Railroad. It also helped lure an alcohol production facility to the peninsula.

"What I would see happening if the railroad did close up would be higher costs borne by the consumer -- for fuel, fertilizer, heavy equipment," Gedney said.

The company expects a profit of "a little bit better than $100,000" this fiscal year, Gedney said. Although its rail bed is in better shape than many of its counterparts, the executive said he expects profits for up to eight years to be used for capital improvements.

After the February purchase, Gedney pared the Eastern Shore Railroad's payroll from 61 to 32 workers, cutting mostly administrators and managers.

"We perform exactly the same service as before," he said. The railroad's schedule is one run north, one south, seven nights a week.