From _Railroads and American Law_, by James W. Ely, Jr., page 45:
"New trackage was imperative to link carriers and to expedite shipments. Since private capital was obviously scarce, the Confederate Congress authorized a number of loans to encourage speedy construction of additional track. The most vital proposed connection was between Danville, Virginia, and Greensboro, North Carolina, for which Congress in 1862 approved a $1 million loan to a newly organized company.
"This modest rail construction program by the central government sparked a sharp debate in the Confederate Congress. Pointing to a provision in the Constitution against spending "to promote or foster any branch of industry," opponents argued that the measure was unconstitutional. Confederate President Jefferson Davis, however, countered that the project could be justified as a military necessity, and this position carried the day. Much of the opposition to the Virginia-North Carolina link, while couched in constitutional terms, reflected the fear of local economic interests that a new route would divert business."
I should note that there was a whole lot of stupid to go around in the South during the Civil War (laws passed requiring railroads to move military personnel and cargo for free, for example). But this one makes me go, wow. I'll try to remember it the next time I'm listening to some doctrinaire something or other argue for something utterly asinine.
ETA: p 46
"General Robert E. Lee early called for a connection between railroads entering that city. Yet Petersburg officials steadfastly resisted closing this gap, relying on a Virginia statute that banned rail building on city streets without the permission of municipal authorities...Only with the direct supervision and financial backing of the Confederate government was the Petersburg gap closed. Petersburg officials, however, continued to protest. In December 1861 the city council adopted a resolution expressing its opposition to "a permanent connection" between Petersburg and Richmond."
"State-owned lines proved especially troublesome. Because of its commitment to states' rights, the Confederate government found it awkward to override sometimes obstructionist state officials."
Look, I'm _glad_ they were so stupid. Really. It worked out for the best. But wow. Just, wow.