Directs the Secretary of the Treasury to establish a Rail Security Fund account in the Treasury from which the Secretary of Transportation may make grants of up to $100 million annually to freight railroads, hazardous materials shippers, or owners of tank cars used in the transportation of hazardous materials, for full or partial reimbursement of costs incurred on or after September 11, 2001, in the conduct of specified activities to prevent or respond to acts of terrorism, sabotage, or other security threats. Permits grants to railroads of more than $100 million annually if as a result of the security risk assessment the Secretary determines that critical rail transportation security needs require reimbursement to any eligible entity in such amounts. Authorizes appropriations for FY 2003 and 2004.