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The term ruling grade is usually used as a synonym for "steepest climb" between two points on a railroad. More simply, the steepest grade to be climbed dictates how powerful the motive power (or how light the train) must be in order for the run to be made without assistance. Even if 99% of the line could be run with a low-powered (and inexpensive) locomotive, if at some point on the line there is a steeper gradient than such train would be able to climb, this gradient "rules" that a more powerful locomotive must be used, in spite of it being far too powerful for the rest of the line. This is why special "helper engines" (also dubbed "Bankers") are often stationed near steep grades on otherwise mild tracks. It is cheaper than running a too-powerful locomotive over the entire track mileage just in order to make the grade, especially when multiple trains run over the line each day (to help justify the fixed daily cost of the helper operation).
In the 1953 edition of Railway Engineering William H. Hay says "The ruling grade may be defined as the maximum gradient over which a tonnage train can be hauled with one locomotive....The ruling grade does not necessarily have the maximum gradient on the division. Momentum grades, pusher grades, or those that must regularly be doubled by tonnage trains may be heavier." This means the "ruling grade" may change if the management chooses to operate the railroad differently.