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American Shipper

Oregon governor slams Coos Bay rail operator

Oregon governor slams Coos Bay rail operator

The state of Oregon will not negotiate over the cost of repairing the shuttered Coos Bay rail line until the railroad repairs and reopens the line, Oregon Gov. Ted Kulongoski told railroad officials last week.

   Kulongoski told officials of line operator RailAmerica that the firm must first repair and reopen the 120-mile-long rail line as a demonstration of good faith to the state before any discussion of using state funds to cover the costs could begin.

   RailAmerica, parent firm of the Central Oregon & Pacific Railroad (COPR), which abruptly shuttered the Coos Bay line in September over safety and repair concerns regarding three tunnels along the route, has approached the state and others to cover about $19 million of the estimated $23 million required to reopen the line. Rail America, purchased by a Florida hedge fund earlier this year. also said it wants the state to pay $1.5 million a year that the firm reportedly loses each year operating the line, which mainly handles wood and steel freight between Eugene and the Port of Coos Bay.

   Kulongoski forewarned the firm that if state funds were ultimately used for repairs or to cover losses, the state would expect to obtain some equity in the rail line for its investment.

   Details of the governor's remarks during the closed-door meeting — which included officials of RailAmerica, rail giant Union Pacific, and Oregon elected officials — come from a Monday letter sent by the Coos-Siskiyou Shippers Coalition chair Allyn Ford to Charles Nottingham, chairman of the U.S. Surface Transportation Board. Last month, 18 shippers and manufacturers in southwestern Oregon formed the CSSC in an attempt to gain more voice in decisions regarding their rail transportation needs. Allyn's letter, including details of Thursday's meeting, thanked Nottingham for the federal government's attention to the Coos Bay rail line issues.

   RailAmerica closed the line in September with just 24-hour notice to COPR shippers, despite knowing of safety issues on the line for several months. Federal inspectors have since verified the substandard condition of the three tunnels.

   CSSC claims the closure have seriously affected four major employers in the region that relied on the route to move lumber, wood chips and bulk steel products. The closure also led the Port of Coos Bay, the ultimate destination for much of the cargo shipped on the Coos Bay line, to file a $15 million lawsuit against COPR alleging the rail firm did not provide the legal 180-day public notice for the line closure. The railroad maintains that because the closure was due to immediate safety issues centering on the three tunnels, COPR could circumvent the normal public notice period.

   Shortly after the closure, RailAmerica officials suggested that a five-member partnership of public and private entities, including the Port of Coos Bay, UP, and the state of Oregon, pay for the repairs needed to reopen the line and defray the railroad's losses for operating the Coos Bay route.

   Oregon Democratic Party Rep. Peter DeFazio, who chairs a House Transportation Subcommittee on Highways and Transit, labeled the railroad's demands as 'extortion' by a 'group of super-rich hedge fund managers.'

   DeFazio, who attended the governor's meeting last week, said that instead of turning to the taxpayers, the railroad should be forced to sell the line. Given the firm's assertion that it is losing $1.5 million a year on the line, “we could make them pay us to take it,” he said last month, or use eminent domain to seize the line.

   DeFazio brought a representative of Greenwich, Conn.-based short line rail operator Genesse & Wyoming to the governor's meeting last week in case the state decided to seize the Coos Bay line from RailAmerica and needed an operator.

   Oregon state Senate Transportation Committee Chairman Rick Metzger, D-Welches, said last month that RailAmerica has expressed no interest in selling either the Coos Bay or Siskiyou lines.

   Metzger reported that the firm told his committee that the railroad is also looking to shutter the Siskiyou service, another vital rail link for area shippers that runs from Eugene to Weed, Calif., claiming the line is unprofitable.

   Ironically, the U.S. Economic Development Administration announced Friday that it has awarded a $119,000 grant to the Port of Coos Bay for spurring local economic growth by developing a spur in 2005 to the now-shuttered Coos Bay line. Port officials said that despite the COPR closure of the line, the port plans to use the EDA award to develop long-term projects along their rail spur.

   “It’s part of an ongoing infrastructure development and whether it’s provided by current services or somebody else, there will be rail service,” port communications director Martin Callery told local television station KCBY. “We will move forward with other maritime commerce projects,' and while the rail line 'is not being used today, it will be used again.”

   Paul Lundberg, vice president of operations for RailAmerica, said this firm would consider the governor's proposal and respond by the end of this week.

   RailAmerica estimates that the line could reopen within six months, once repair work begins. ' Keith Higginbotham