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State bungles rail deal

Sat., Feb. 18, 2006, midnight

OLYMPIA – Three years ago, faced with imminent closure of “significant sections” of the 372-mile Palouse River and Coulee City Railroad, state lawmakers agreed to spend $33.5 million to buy and renovate it.

“It’s the lifeline of this region,” local business consultant Pam Kelley said at the time. “If we lose it, we’re sunk.”

With the railroad apparently saved, grain growers, mill owners, seed companies and small towns heaved sighs of relief.

Then the state dropped the ball.

Washington’s Department of Transportation failed to buy a critical 108-mile stretch of track between Coulee City and Cheney. In November, the railroad shut down that line. Its Kansas-based owners, citing a rise in steel prices, say the section is worth five times what the state planned to pay in 2003.

“They’re pulling the rug out on this thing and holding the state hostage,” said Sen. Mark Schoesler, R-Ritzville.

Local officials and state lawmakers are struggling to negotiate a deal to reopen the line.

“We know that if it goes away, it will never come back,” said Rep. David Buri, R-Colfax. “We have plenty of rails-to-trails. We need rails.”

For months, growers and the railroad have clashed. The railroad says it wasn’t getting enough business to be profitable; growers say the railroad has added absurdly high surcharges.

But a critical mistake that no one disputes is this: The state Transportation Department, which was supposed to buy the three stretches of track that comprise the PCC Railroad, only bought two.

For $6.5 million, the state in November 2004 bought the “P&L Branch,” a north-south line between Marshall and Pullman, and the “PV Hooper Branch,” a three-legged run linking the Palouse communities of Hooper, Winona, Thornton, Colfax and Pullman.

Included in the Legislature’s plan was $1.2 million for a third line – the “CW Branch,” which runs from Coulee City east to Cheney. The state had a verbal deal to buy that line, according to Barbara Ivanov, director of freight strategy and policy. But no one ever signed an agreement.

“As ridiculous as it seems, they made an agreement based on a handshake,” said Rep. Don Cox, R-Colfax.

By the time the state completed a lengthy title search on the line, the railroad’s owners – a Kansas-based company called Watco – wanted a lot more money for it.

“They believe it’s worth $6 million as scrap,” said Ivanov. The state, she said, thinks it’s now worth $1.4 million.

“There’s a lot of anger about it,” said Lincoln County Commissioner Ted Hopkins. “The average grower and operator on the railroad is really mad at the state of Washington.”

Ivanov, who inherited the mess when she took over the rail office last August, said the Department of Transportation knows it made a mistake.

“I think the agency has a good grip on lessons learned: Sign purchase agreements,” she said. The state’s chief negotiator on the project, she said, died last spring.

Since November, farmers moving wheat or fertilizer have had to truck it. But the trucks put a lot of extra stress on roads, especially during thaws. Grain trucks have so torn up the city roads around two Wilbur grain elevators this year that Mayor Don Reid was on the verge of closing the roads to the trucks.

“It’s just like the Spokane streets,” Reid complained. “Potholes start up, then start joining one another and pretty soon you don’t have any pavement anymore.”

Asked how important it is to restore the rail service to those grain elevators, he said, “If you had more than 100 percent important, it would be that. The rail is totally, totally critical.”

Angering growers, Watco in November started tacking a $250 surcharge onto every rail car shipped on the P&L line. On Jan. 6, the charge became $870.

“That effectively stopped service,” Ivanov said

“They priced themselves out of the market, by their own admission,” said Buri, who’s repeatedly met with Watco officials. The company did not respond to calls seeking comment. There’s little the state can do about the surcharge for now, Ivanov said. Even though state taxpayers bought that rail line, the railroad still has the authority to set its rates.

Now, with fertilizer season fast approaching, lawmakers and local officials are rushing to try to broker a deal to reopen – and eventually buy – the CW line. Buri, Hopkins, Sen. Bob Morton and others are trying to get the grain growers and Watco to agree on minimum rail traffic to keep the CW line operating, with guaranteed service but no surcharges.

“That buys us time to find a price for that CW line,” Buri said. “Our interests are looking out for the taxpayer and seeing that we don’t get rushed into paying too high a price.”

With the thousands of additional grain-truck trips doing an estimated $4.5 million in damage to state roads each year, Buri said, it still makes sense for the state to rehabilitate the track. That would allow trains to operate at 25 mph, instead of 10, and increase profitability.

“But we’re not going to release any of those rehabilitation dollars until we have a plan in place,” he said. The state’s also studying the possibility of adding a rail-loading crane in the West Plains near Spokane, in order to boost rail traffic.

After two meetings with Watco officials and growers in Olympia this week, Buri said he’s optimistic about seeing a deal to reopen the line soon.

“If this thing goes in the toilet, there’s going to be enough smelly stuff to make us all smell bad,” he said. “It behooves us to work this out.”

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