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State to Buy Short-line RR

by Scott Yates
Capital Press, February 16, 2007

Wash. seeks operator for network to replace grain trucks

Net liquidation value for the CW line from Coulee City, Wash., to Cheney: $5.6 million. Purchase of land and leases: $1.6 million. Track material and inventory: $770,000. Track rehabilitation to May 31: up to $550,000. State ownership of the 372-mile Palouse-Coulee City Railroad: Priceless?

On Feb. 8, Gov. Chris Gregoire signed a Memorandum of Understanding that will transfer Watco's short-line rail network to state ownership. Now comes the hard part: Among other things, the state has to find an operator for the line, perform an evaluation of its maintenance needs and ensure shippers will provide the sort of volume necessary to keep the entire operation in the black.

Along with the CW Line, the MOU signed by the governor includes the purchase of the P&L branch line in the Pullman area, the Hooper line between Pullman and Hooper (bluefish notes: Hooper Junction meets the main line 10 miles above the Snake River and Lyons Ferry State Park), a portion of the WIM line between Palouse and the Washington-Idaho border and a portion of the rail line between Thornton and Winona. The Washington State Department of Transportation purchased the rights of way and rail for the P&L branch and the PV Hooper branch in 2004 for $6.5 million.

The governor and several legislators were quick to take credit for the purchase of the line, which, if it works as intended, will keep hundreds of grain trucks off the road and reduce damage to the state's highway infrastructure.

"Washington, for the first time, will become the owner of a critical operating rail system that supports a large portion of our agricultural community," Gregoire said at the MOU signing ceremony.

Rep. David Buri, R-Colfax, said, "It's not an overstatement that we believe keeping the grain-hauling trains running is a legitimate and worthy investment for the citizens of Washington."

Rep. Mark Schoesler, R-Ritzville, said higher fuel costs make it important "to give farmers another alternative than just trucking to move their crops and other goods to markets or processing plants."

Rep. Mike Armstrong, R-Wenatchee, said the state's purchase is a huge victory for farmers in his district, estimating they'll send 4,000 carloads of wheat down from the Waterville plateau every year.

"The other victory is for the county road department. It keeps trucks off those roads that would do a lot of damage. Local governments, such as Douglas County, cannot afford to repair those roads once they are damaged," he said.

The state's MOU does not include any commitment from shippers to use the railroad. At various times since Watco purchased the railroad network in 1992, the scarcity of grain hopper cars has caused shipper's costs to climb well over the tariff price and make the truck-to-barge or truck-to-unit-train loading facility in Ritzville the cheaper alternative.

Mark Blazer, senior vice president for strategic planning at Watco, which is based in Kansas, said his company would like to see the short-line network succeed, but as a private industry, it didn't work for them because of competition with barge traffic on the (Snake) river and the Ritzville Warehouse loading facility, which opened in 2002.

Mike Rowswell, freight rail service manager for the Washington State Department of Transportation, said shippers along the line understand that without adequate volume, the line's new operator can't make a profit.

At the same time, he said, the state is not in the business of fixing rates where different modes of transportation are favored over others.

"We will provide the opportunity for the private system to work, but our goal is not to supplant the private competitive system," he said, adding that if the railroad doesn't prove profitable, "rail banking" - or mothballing the lines for future generations - is possible.

Rowswell said he didn't know how important the car issue would be for the new railroad. The state owns 83 grain cars and operates 16 more owned by the Port of Walla Walla.

Kevin Whitehall, manager of Central Washington Grain Growers and a major shipper along the CW line, said car availability and prices are not an issue today because last season's subpar Midwestern corn harvest made the issue moot. Now, with the emphasis on corn going into the ethanol market, he is hopeful car supply won't become as strained as it has in the past.

He also said that although shippers are not obliged to ship on the rail line, there have been verbal agreements in the past to ship a certain tonnage of grain by rail. And he pointed out that since rail service started again last August after being stopped for several months by Watco, shippers all along the line have moved quite a number of cars.

The next step is for the state to develop a Request for Proposals looking for a company to operate the Palouse-Coulee City Railroad. Rowswell said the RFP should be finished by March 7 at the latest.

Will Watco make a bid? Blazer didn't rule it out.

"We will look at their request," he said.

Supporters divided on subsidies

The "s" word wasn't mentioned as part of the celebratory atmosphere surrounding the state's purchase of the entire Palouse-Coulee City Rail network, but an earlier report indicated subsidies would be needed to keep the short line afloat.

The Washington State Department of Transportation report, which was presented to a work session of the Senate Transportation Committee last September, showed the state's investment would be in the millions of dollars over a 15-year period. In the case of some lines, the study said, the subsidy would dramatically exceed the savings accrued from a decline in road maintenance costs as a result of keeping grain trucks off highways.

Mike Rowswell, freight rail service manager for the state transportation department, said the subsidy issue is not currently on the table. "We need to determine what can be done by private operators," he said.

State Sen. Mark Schoesler, R-Ritzville, said he believes by upgrading the line and diversifying the shippers who use it, subsidies won't be an issue.

But Kevin Whitehall, manager of Central Washington Grain Growers, suggested the Palouse-Coulee City Railroad ought to be considered in the same light as the state's ferry system. Currently, the state subsidizes more than 30 percent of the ferry system's operating cost.

Related Sites: Lower Snake River Transportation Study by American Rivers, Idaho Rivers United, Idaho Wildlife Federation, & National Wildlife Federation

Scott Yates is based in Spokane.
State to Buy Short-line RR
Capital Press, February 16, 2007

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