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The Valley Railway Series is a complete canon. Hiro will also appear, giving a fuller explanation of what his homeland was like before he left, prior to the events of "Hero of the Rails". Instead of being a replacement for Stanley, Smudger is now his own individual character.
Smudger is a lonely engine locked away behind a shed, when one day, a tank engine named Freddie appears and warns him that his railway is likely to close, and that he should leave as soon as possible. The following day, a Representative from another Island far away arrives to look for engines. Smudger manages to get his attention, and is shipped away to his new home. Smudger meets another unnamed engine on the ship, and he tells her that if he's going to start a new life, he'll do his best not to make the same old mistakes he once made.
When Smudger arrives on the new Island, he meets two other narrow gauge engines: Edward Mann, the railway's first engine; and Candy, a yellow vertical boiler engine who takes a dislike to Smudger after he derails following his first goods train. Smudger meets some of the Big Railway's engines before pulling his first passenger train on his own, and afterward is taken by the Mainland's special engine, Hiro, to the Works. After he is repaired and fitted with new buffers, Smudger and Edward Mann work with Lewis, the military engine, on cleaning up a hazardous waste site. Lewis's reckless behavior eventually causes a fire at the Harbor.
The little engines work hard to repair the fire damage. One night, the Representative appears with an engine saved from scrap, and Smudger promises to save him, and asks the other engines to help. The four engines use the dual gauge line to take the engine as far as the Big Railway's carriage shed. They try to keep the incident a secret, but later that morning, Lewis mistakenly takes Smudger Edward Mann's train, forgetting to help Candy with snow. The incident is sorted out as quickly as possible, but both Controllers now know about the scrap engine. To the engines' surprise, they are pleased, and praise the little engines as heroes.
Meanwhile, through the winter and into the spring, Smudger works until he wears himself out. Candy admits to him that the reason she distrusted him was because Smudger ran with the number of Candy's brother, Tyler, who was bought by the military and was destroyed during the war. However, she now thinks of Smudger as a dedicated worker and would have made Tyler proud. When Smudger is taken to the Works, he is pulled by Morning Light, the engine he helped save from scrap, and the two are the first engines to run on the new valley line. Smudger is repaired, and is repainted royal blue with red stripes.
Lower Valley Railway
- Edward Mann - Edward Mann is the oldest engine of the Lower Valley Railway. He's a hard-working engine who knows the railway very well, and enjoys instructing the other engines on how to do things proper. This tends to make him an annoyance with other engines who think they know better. In particular, he dislikes Lewis the military engine, the only one of the narrow gauge engines that has ever talked back to him. He is based on "Thomas Bach" of the Llanberis Lake Railway.
- Smudger - Smudger came from the Island of Sodor, and has since become humbled by his experiences. Once a slacker and a showoff, he now does his best to keep busy to be a credit to the Railway. However, he still enjoys showing off on occasion. Despite minor problems for a start, Smudger soon proves to be Really Useful, and is repaired and rebuilt, and is given a new coat of blue paint with red stripes. He is especially close with Candy.
- Candy -Candy is a vertical boiler locomotive originally built for the slate mines, but later became part of the Lower Valley Railway. Even though she's not as strong as the other engines, she does her best to maintain a positive attitude. She hated Smudger at one point, but after he proved himself to be Really Useful, the two have become close friends. She is based on the locomotive "Chanloner", but her name reflects the replica engine "Taffy".
- Kudo - Kudo is a little old tank engine who once ran a tramway north of the valley. when it was closed, he was locked away in a shed and forgotten until one faithful day, when Lewis found him and brought him to the narrow gauge railway. Kudo was since restored and repainted, and has never felt better. He'll do all kinds of work, but enjoys pulling passengers most of all. Kudo is based on Japan's very own "Botchan Train".
- Lewis - Lewis is a tank engine once owned by the Mainland's military, brought to the island by the Representative. With a sharp tongue and years of military service, Lewis is notorious for his attitude, thinking himself superior of the other engines. What he lacks in common sense he makes up for with his hard work and dedication. He is based on the same Baldwin tank engine as Stanley, and his personality is based on Bluenose from TUGS.
- Joel - Joel is a diesel engine who once worked far west on the Island, but was brought to work on the new coal mine. He was worn out beyond repair, so was sent to the Works to be fully rebuilt, and is now a far more reliable engine. He's always out to prove himself to others, even taking on jobs too big for his buffers. Joel is based on Moelwyn, a diesel engine built by Baldwin Locomotive Works of Philadelphia in 1918 and now works on the Ffestiniog Railway.
- Ji Yeon - A quarry shunting engine who worked with Kudo when they were both young. Ji Yeon was meant to go to a Chinese railway, which closed down before she was completed, and was bought by the line's first Representative. During the war of 1936, she was stored away inside the last remaining quarry tunnel, and would not be rescued until nearly 30 years later, thanks to Daichi. She is based on Blanche of the Ffestiniog Railway.
- Yume - Yume is a little tram coach that worked with Kudo on his old line. When the line was closed, she was left with him in a shed until Lewis found them and brought them to the Little Controller's railway. Yume has a special bell on her, which she can ring if the engine can't whistle or in emergency, and the Little Controller enjoys using her for special events. Yume is based on the tram coaches used on the Botchan Train.
Upper Valley Railway
- Katsu - Katsu the mine engine was originally built for the Wild Rock Mine Company, but after his job was taken by the narrow gauge engines, he was sent to work at the Big Station. Katsu is small and squat, but has a rather large ego; he thinks no engine works as hard as he does, and he takes pride in nearly any job he's given. Katsu is based on the Peckett 0-4-0T No. 1900 locomotive, located at the Buckinghamshire Railway. This engine was built extremely short to cooperate with very low tunnel height restrictions.
- Naomi - Naomi is a beautiful steam motor coach, and was the first engine brought to the Island by the Representative. She has her very own branch line of which she is enormously proud. She thinks herself as a very classy engine, and refuses to do goods work. She is based on the Ivatt GNR rail motor coaches, specifically the type used for No. 5 and 6.
- Misaki - Misaki is a brand new tank engine that Smudger made friends with during his trip to the Island. She's chipper and bright, and enjoys pulling passenger trains most of all. She is always looking out for the narrow gauge engines, as she has something of a "big sister" attitude towards them. She is based on the LMS Fairburn 2-6-4T.
- Morning Light - Morning Light is an unusual locomotive rescued by the Representative, with the help of the narrow gauge engines. He hauls the biggest passenger and goods trains, but is prone to breaking down. He's a gentle giant by nature, and the other engines simply refer to him as "Akio". He is based on the experimental SR Leader class locomotive.
- Ryu - The second engine built for the Mainland's line, Ryu is a medium-sized tender engine with a terrible attitude, boasting without focusing on his work. Ryu enjoys complaining as well, and easily makes molehills into mountains. Ryu is based on the JNR C50 class locomotive, and carries the number 50 on his tender.
- Hideaki - The newest engine on the main line, Hideaki is a big and powerful engine, almost as strong as Hiro. When he first arrived, he was nervous about not being a Really Useful Engine, but eventually Shane helped to set him straight. After pulling the Express while moving the broken down Raiden and his train, Hideaki has gotten his confidence back...though he may be more proud and boastful than the other engines would like. He is based on the JNR Class 57 locomotive.
- No. 12 - The third engine built for the Mainland's line, 12 is a tank engine. His whistle wouldn't work properly when he was first completed; although it's since been repaired, 12 is now "mute" and has not been given a name. No. 12 is based on the JNR C12 class locomotive.
- Shane - The logging engine who lives at the Jobi Lumber Yards at the end of Naomi's branch line. Shane treks up and down the line each day, carrying heavy timber where other engines can't go. He has an old, wheezing voice, and likes to give the other engines advice. He is a Shay locomotive and based directly on the class C-80.
- Oni - Oni is a little tank engine who once worked on a brewery tramway, and now is the Works's personal locomotive that delivers parts and supplies wherever they are needed. Oni is fun-loving and mischievous, and he almost always has a goofy smile on his face. He's especially infamous for his annoying laugh. Oni is based on the locomotives that worked on the Guiness Bewery Tramways. They were 1f 10in in gauge and could also be loaded onto a special flatcar that allowed them to work on the nearby broad gauge track as well.
- Raiden - The biggest and strongest of all of Keikan Island's engines, Raiden pulls heavy goods and passenger trains between the two islands. He's cruel and insulting toward the steam engines, and infamously tried to make Ryu crash into Morning Light. Because of this, he's only allowed to run on Tanishima under strict conditions. He is based on the JNR Class DD51.
- The Scrap Shunters (Mari, Kenji, and Toki) - The three shunting engines on Keikan. Mari is the leader of the group, a dark and manipulative engine who hides her cruel and dangerous thoughts under a deceitful smile. Kenji is an angry and violent engine with a gold fang, who sometimes argues with Mari and Raiden. Toki is a simple but strong engine with a frightening laugh, who blindly follows what the other diesels tell him to do. The three diesels hate steam engines, and work at the nearby scrapyards. All three are based on DB201, built in 1953 and now preserved at the Kaya Steam Locomotive Square.
- Hiro - Hiro was built specially on Tanishima, while he is owned by the Mainland's railway. A big, powerful engine who hauls heavy goods and passenger trains between the two islands, Hiro is wise and dignified. The engineers affectionately refer to him as the "Master of the Railway". When the Mainland's special line was closed, Hiro was purchased by Sir Topham Hatt, who was visiting the Island with his wife.
- Takao - Takao was once the oldest running engine on the Upper Valley Railway, but his age has finally caught up with him, and now he works at the Tanishima Railway and Art Museum. He is wise beyond his years, and loves nothing more than to tell the younger engines about his experiences. He is based on the same box tank engine as Neil.
- Tyler - a vertical boiler tank engine and Candy's twin. Tyler was reckless and daring, but was very protective of his sister. He was sent away during World War II and was destroyed during the Hiroshima bombing. Barely a locomotive when he was found, he was melted down and his parts were put to other uses.
- The Spider Tram - Edward Mann once told a story about a tram engine who had long legs that rolled on underwater rails. This engine hated his job and made things difficult for everybody. One faithful night, a storm knocked him away from his station and made him fall over into the sea. He was rescued and repaired, but the costs were so high that the railway eventually went bankrupt, and the tram was scrapped. Nowadays, they say a ghost of the engine can be seen on the full moon, slowly creeping over the water. The Spider Tram is based on the Brighton and Rottingdean Seashore Electric Railway, which used a long-legged tram to travel through water. The unusual locomotive was nicknamed "Daddy Longlegs".
- The Representative - Ryo Gunji is a representative for both the Upper and Lower Valley Railways. He travels the world looking for engines willing to work, and brings them back to the Island to be restored and put to use. Some engines he's brought to the Island include Smudger, Naomi, Misaki, and Morning Light.
- The Little Controller - the Controller of the Lower Valley Railway. His father founded the narrow gauge railway nearly 50 years prior to Smudger's arrival.
- The Big Controller - the Controller of the Upper Valley Railway. He is the third Controller of the railway, and a master engineer, having overseen the designing and construction of Hiro and the restoration of Morning Light. His Works also service the Lower Valley Railway's engines.