Western Railroad Discussion > Congressman blasts plan for reopening CORP branch

Nov 15, 3:49 AM EST

DeFazio dislikes plan for reopening short line

EUGENE, Ore. (AP) -- U.S. Rep. Peter DeFazio, D-Ore., reacted angrily to a railroad company's suggestion that taxpayer dollars be used to help reopen a short line railroad that runs from Eugene to the Oregon coast.

The Central Oregon and Pacific Railroad closed the line in September for safety reasons. The action has hampered at least four major employers on the south coast that rely on the line to move lumber, wood chips and hunks of steel.

At a gathering Wednesday of politicians and industry officials in Eugene, the company, whose parent - RailAmerica - was bought earlier this year by a Boca Raton, Fla., hedge fund, estimated that $23 million in repairs are needed to reopen the line, and it wants four other public and private entities share in the cost.

DeFazio said the plan was outrageous, summing it up as "a group of super-rich hedge fund managers who are trying to extort the Port of Coos Bay and the people of Oregon for a few million, which to them (the hedge fund mangers) is chump change."

Railroad company officials want a five-way partnership, with each stakeholder chipping in $4.66 million. It also wants $10 million in state subsidies over five years to defray the $1.5 million annually that the railroad says it loses on the line.

The partners suggested by the company include itself, the Union Pacific railroad, the state Department of Transportation, the Oregon International Port of Coos Bay and the companies who ship their goods on the short line.

DeFazio said a better option is to force the company to sell the line. With the company's assertion that the line loses $1.5 million per year, "we could make them pay us to take it," DeFazio said, or seize the line through eminent domain.

"These people clearly are not interested in providing a critical public service," DeFazio said. "I don't care how rich they are, how powerful they are. We can beat them."

An option discussed earlier was to fight the shutdown itself, by challenging whether conditions are truly unsafe enough to warrant closure. But a Federal Railways Administration report, to be released Thursday, shows that the tunnels really are in bad shape, DeFazio said.

RailAmerica's vice president for its Western region, Bob Jones, apologized Wednesday for the 24 hours notice the company gave shippers and government entities before it applied to shut the line down.

"We didn't do a very good job of bringing people up to speed," Jones said at the meeting. He said the company had been concerned about safety in the tunnels for much of the past year, but decided in September, after the mine collapse in Utah and the bridge collapse in Minnesota, that the situation on the short line was critical.

"Early in my career, I had three industrial fatalities I had to report to families. You don't ever want to have to do that," Jones said.

Asked why the company doesn't just sell a rail line that loses $1.5 million annually, he said: "We don't just want to give up on it."

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That makes sense. After the other disasters, I guess they didn't want to take chances any more. Imagine the drawn out week long coverage if a train was trapped in the collapsed tunnel...

RailAmerica strikes again!! Same kind of thing happened in San Diego. RailAmerica, after publically and privately telling the MTDB,(owners of the SD&AE) and a US Congressman, that they wanted "NOTHING TO DO WITH THE DESERT LINE", would not give up the line without compensation(even though they only operate the line through a lease!). They expected to be justly rewarded for their non use, their not done required maintenance and inspection responsibilities of the Desert line portion of the SD&AE. Now operated by the Carrizo Gorge Railway, which reopened the line after 23 years of dormancy, including 2 tunnels in the Carriso Gorge,(ON THEIR OWN DIME BY THE WAY), CZRY has to shell out 6.9% of gross revenues, plus $200.00 per car rerouted through the desert line away from SDIV, to RailAmerica. The excuse given for this 'HIGHWAY ROBBERY' was "WE ARE A FOR PROFIT CORPORATION".
So beware when statements like "WE DON'T JUST WANT TO GIVE UP ON IT" by Bob Jones of RailAmerica are bandied about, it usually means that the statment is incomplete, on purpose, because "UNLESS WE GET PAID OFF" was not added to the statment!!!!

One footnote: In the thread, the statement by US Rep. Peter DeFazio D-Ore, about using eminent domain to take the line, is not something that can be done easily. Back in the 1980s, the ATSF was talking about leaving San Diego, and turning over the local switching to a short line operator. In 1990 I worked for a company(Natonal Projects Inc. a division of Morrison Knudsen Co.), doing a job for ATSF, and the City of San Diego tried to take the land where the SF yard is located, using eminent domain, and both the Court, and the State PUC came back and said you cannot use eminent domain against public transportation. The City wanted the land, adjacent to the Port of San Diego, for a golf course for the tourists visitng San Diego.

I have said it before on this forum and I'll say it again. The US Government and various state governments subsidise the Airline and Trucking industries to the point of absurdity, but when it comes to the railroads, they all wring their hands about the cost, and say no. Why?

Bill Pyper
Salem, OR

>City of San Diego tried to take the land where the SF yard is located, using eminent domain, and both the Court, and the State PUC came back and said you cannot use eminent domain against public transportation. The City wanted the land, adjacent to the Port of San Diego, for a golf course for the tourists visitng San Diego<

What ever became of the battle to force BNSF to move completely out of 22nd street?
Something to do with all those high priced condo owners sick of the horns and the rumbling locomotives, and the smoke all night long.
Did the city pay for quad gates? and set up a "Quiet Zone" to stop the horns?

> wanted "NOTHING TO DO WITH THE DESERT LINE"

Well, that's one sleazy crook calling the kettle black!

> What ever became of the battle to force BNSF to
> move completely out of 22nd street?

The first was money. If you eminent domain, you have to replace the value. When the "powers that be" found out what that was, the cars sit right where they are!

The other one was a hair-balled scheme to dig a tunnel through San Diego for rail access. Not only did they not realize that a freight train is not a trolley, and can't climb like one, they forgot to look at the old plans for San Diego. (Hint, the rail yard sits on fill, about a foot above the water line)...

Hmmmm...very interesting! Things sure deteriorated in the 2 years since we took part in a passenger special out to Coos Bay. I don't seem to recall the tunnels having big speed restrictions. I did have second thoughts about going over a couple of swing bridges, though, when looking out the window you could see rust holes big enough to stick my arm through in the trusswork. There were some slow areas, but much of the line we traveled at 25-30 mph.

Another news story:
http://www.registerguard.com/csp/cms/sites/dt.cms.support.viewStory.cls?cid=22634&amp;sid=1&amp;fid=1

Railroad wants public and private help fixing coast line
By Winston Ross The Register-Guard

Published: Thursday, November 15, 2007
The railroad company that shut down the 120-mile short line between Coquille and Eugene in September unveiled a plan on Wednesday to fix the line, including problems that they initially said caused the closure. It isn’t cheap.

The cost of repairs has ballooned from an original figure of $7 million to $23 million. And the Central Oregon and Pacific Railroad wants four other public and private entities to help foot the bill — an unprecedented idea, at least in Oregon.

At a gathering of politicians and industry officials in Eugene, CORP explained why RailAmerica — CORP’s parent company, which was bought earlier this year by a Boca Raton, Fla., hedge fund — decided to shut the critical transportation route down, leaving up to a half-dozen key employers on the south coast in the lurch.

Company officials also said they want to do more than just repair nine tunnels, which they said need nearly $7 million in upgrades and which they originally cited as the reason for closing the rail line. They also want $2.4 million to fix 44,000 railroad ties; $10.4 million for bridge work to address defects that are “unsafe and could cause failure at any time,” according to the company’s engineers; and $3 million to fix drainage problems in the tunnel.

The company does not propose to make those repairs on its own, however. It wants a five-way partnership, with each stakeholder kicking in $4.66 million, plus $10 million in state subsidies over five years to “defray” the $1.5 million annually that the railroad says it loses on the line. The state would then effectively be paying the railroad $500,000 annually to operate the line.

The partners that CORP suggested include itself, the Union Pacific railroad, the state Department of Transportation, the Oregon International Port of Coos Bay and the companies who ship their goods on the short line.

The shippers’ $4.66 million would come by way of a surcharge of $204 per car over four years, a surcharge that Roseburg Forest Products’ traffic manager Andy Jeffers estimated would add 5 percent to 7 percent to the company’s transportation costs.

That’s if the plan passes muster with the four other entities involved. CORP is asking the stakeholders to decide whether they want to pony up in a month, which is “impossible” on the state’s end, said state Rep. Terry Beyer, D-Springfield.

“We do not work that fast, especially in the interim,” Beyer said at the meeting at Valley River Inn.

U.S. Rep. Peter DeFazio, D-Ore., called the plan “outrageous,” summing up the proposal as “a group of super-rich hedge fund managers who are trying to extort the Port of Coos Bay and the people of Oregon for a few million, which to them (the hedge fund mangers) is chump change. Their head of investments is worth $2.5 billion.”

DeFazio said the better option is to force CORP to sell the line — an option the port is exploring — via a “feeder line application.” That process involves an outside buyer convincing the federal Surface Transportation Board that a railroad has either abandoned a line or let it deteriorate to an unsatisfactory level. The board can then force the company to sell it, and the buyer can contract with another railroad to provide service.

With CORP’s assertion that it’s losing $1.5 million per year on the short line, “we could make them pay us to take it,” DeFazio said, or seize the line altogether via eminent domain.

“These people clearly are not interested in providing a critical public service,” DeFazio said. “I don’t care how rich they are, how powerful they are. We can beat them.”

An option discussed earlier was to fight the shutdown itself, by challenging whether conditions in the tunnels truly warranted it. But a Federal Railways Administration report, to be released today, shows that the tunnels really are in as bad a shape as the company says, so that’s no longer an option, DeFazio said.

“They’ve let the line deteriorate to the point where there’s an arguable case it was necessary to close the line for safety purposes,” DeFazio said.

RailAmerica’s vice president for its Western region, Bob Jones, apologized to those who attended the meeting Wednesday for the 24 hours’ notice the company gave shippers and government entities before it applied to shut the line down.

“We didn’t do a very good job of bringing people up to speed,” Jones said.

He said the company had been concerned about safety in the tunnels for much of the past year, but decided in September, after the mine collapse in Utah and the bridge collapse in Minnesota, that the situation on the short line was urgent.

“Early in my career, I had three industrial fatalities I had to report to families. You don’t ever want to have to do that,” Jones said.

He blamed the line’s previous owner, Southern Pacific, for letting it deteriorate, but said RailAmerica didn’t know about the line’s poor condition when it purchased the line.

Asked why CORP doesn’t just sell a rail line that it said loses $1.5 million annually, he said, “We don’t just want to give up on it.”

A looming question on Wednesday was what impact a proposed shipping container port for Coos Bay would have on the picture. It would require the entire line to be completely rebuilt to allow for much bigger trains. Jones said he couldn’t count on the port happening.

“We would love to have somebody tell us about their plans there,” Jones said. “We have never been approached by whoever it is talking about developing the port, rather than just guess about whether it’s going to happen or not. Somebody has got to make a deal with us. We own the line.”

State Sen. Joanne Verger, D-Coos Bay, said after the meeting that “if you want someone to bail you out of a problem, create a crisis,” adding that she didn’t know if the entities involved would OK the plan.

“With this particular rail line, there’s not the strongest level of trust,” Verger said. “This crisis was created with 24 hours’ notice.”

> It also wants $10 million in state
> subsidies over five years to defray the $1.5
> million annually that the railroad says it loses
> on the line.


This sounds like it is bordering on extortion. If CORP is providing an essential public service to industry on the line, then I am in no way against them being reimbursed for their losses. But according to the above, they lose $1.5 million/year and want the state to pay $2 million/year on track that is not state-owned? It sounds like they want the state to gaurantee them a profit. If they were a contract operator on a state-owned line that would be reasonable, but the line in question is leased from UP, isn't it? Why should the state give them anything?

Amidst all the posturing, speculation and bashing, it might be helpful to get an physical engineer's evaluation of the tunnel situation on the Coos Bay Line. Rep. DeFazio's web site http://www.defazio.house.gov/index.php?option=content&amp;task=view&amp;id=344 has the "Evaluation of Tunnel Conditions Central Oregon and Pacific Railroad, Coos Bay Subdivision." Interesting and scary reading.

At first, I too thought that CORP's handlers at Rail America and Fortress Investment Group (FIG) were overstating the case of the deteriorated tunnels. Now, I think not.

Given the rule of thumb that a rail line needs 100 revenue movements per year per mile of track, it's clear that 5000 (+-) loads a year on the 130 mile Coos won't support ongoing operations for long. Add in the tunnel rebuilds and the fact that FIG isn't a endless supply of money, other entities are going to have to chip in if the line is going to survive. Stay tuned, this is far from over.

Larry

I believe you'll find that CORP owns the line, except at the Eugene and Coquille ends, which are leased from the UP.

pennsy3750 Wrote:
-------------------------------------------------------
> > It also wants $10 million in state
> > subsidies over five years to defray the $1.5
> > million annually that the railroad says it
> loses
> > on the line.
>
>
> This sounds like it is bordering on extortion. If
> CORP is providing an essential public service to
> industry on the line, then I am in no way against
> them being reimbursed for their losses. But
> according to the above, they lose $1.5
> million/year and want the state to pay $2
> million/year on track that is not state-owned? It
> sounds like they want the state to gaurantee them
> a profit. If they were a contract operator on a
> state-owned line that would be reasonable, but the
> line in question is leased from UP, isn't it? Why
> should the state give them anything?

calzephyr48 Wrote:
-------------------------------------------------------
> I believe you'll find that CORP owns the line,
> except at the Eugene and Coquille ends, which are
> leased from the UP.

This is new - last I checked, both CORP and W&P (which were formed at the exact same time - February 1993, along with the then Molalla Western and Willamette Valley RR) leased their lines from Southern Pacific.

The Molalla Western (now Oregon Pacific RR) did end up purchasing the line from SP (and then abandoning the last couple of miles from Liberal into Molalla). But everything else is still under a 20 year lease which is expiring in 2013.

I don't see anyone bailing out RailAmerica. What I see is a buyout of the line a la the Port of Tillamook Bay Railroad, or if a suitable arrangement can be found a la the Astoria/United Railways/Forest Grove/Oregon Electric branches, where the State (ODOT) acquires the right-of-way and a railroad company acquires the rails and ties. The only problem is that BNSF had donated the land to ODOT and I don't see UP donating nothing.

An alternate arrangement, the "you scratch my back I scratch your back" is ODOT committing to UP some ConnectOregon II project with additional funding (possibly the UP match) on the condition that UP gives ODOT the Coos Bay Line.

dl-w1955 Wrote:
-------------------------------------------------------
> Asked why the company doesn't just sell a rail
> line that loses $1.5 million annually, he said:
> "We don't just want to give up on it."


He should have said "Nobody will buy a business that loses $1.5 million per year".

The CORP spinoff was somewhat later than the WPRR. Someone (MDO, perhaps) I'm sure has the exact dates, but I believe WPRR was Feb. of '94 and CORP was Jan '95.

From the STB website:

CENTRAL OREGON & PACIFIC RAILROAD, INC.
The Central Oregon & Pacific Railroad, Inc. ("CORP"), 333 S.E. Mosher, Roseburg, OR
97470 (telephone 541-957-5966), a Class II railroad, began operating in January 1995 and is
located in Oregon and California. CORP owns and operates approximately 219.01 miles of rail
line located between: (1) milepost 425.3 at Belleview, OR and milepost 644.3 at Springfield
Junction, OR; and (2) milepost 652.11 at Danebo, OR and milepost 763.13 at Cordes, OR.
CORP leases from UP and operates another 104.7 miles of rail lines located between: (1)
milepost 763.13 at Cordes, OR and milepost 785.5 at Coquille, OR; and (2) milepost 425.3 at
Belleview, OR and milepost 344.0 at Black Butte, CA. CORP has trackage rights over eight
miles of rail line owned by UP located between Danebo and Springfield Junction, OR. See
Exhibit 1-F.
CORP handled 52,480 carloads in 2005. The principal commodities transported are
lumber, paper and chemicals. CORP interchanges with UP at Eugene and Springfield Junction,
OR and Black Butte, CA; with WCTU Railway Company at White City, OR; with Longview,
Portland & Northern Railway Company at Gardiner Junction, OR; and with Yreka Western
Railroad Company at Montague, CA,
In 2005, CORP's gross revenues were $30.9 million.
CORP has an average of 102 crew starts per week and provides seven days per week
service over the rail lines. CORP has 111 employees.

The rest can be found here. Warning: It's a big file.
http://stb.dot.gov/filings/all.nsf/6fb3d3b6a22af03d85257393001a3371/48f4aa50a3b2ffc48525723700732177/$FILE/218187.PDF

Wigwagfan is INCORRECT in his statements about the Molalla Branch OWNED by the Oregon Pacific. The ENTIRE line was PURCHASED in 1993 from the Southern Pacific and operated as the Molalla Western. The ex-Portland Traction line was also PURCHASED from the SP/UP in 1991. There was never a lease connected with either operation, as the Samuels family does not believe in investing in something they do not OWN OUTRIGHT.

Furthermore, none of the Samuels family operations have received ONE CENT of assistance from ODOT or anyone else; we are quite comfortable with dealing with our banker; not the quagmire that exists on the state level.

Just to set the record straight.