(The following story by Betty Waters appeared on the Tyler Morning Telegraph website on September 30, 2009.)
HENDERSON, Texas — There’s still eagerness and optimism about prospects of saving the Henderson-Overton rail spur even though the owner, Union Pacific Railroad Co., has spurned three offers by local officials to acquire the line and the U.S. Surface Transportation Board granted the company authority to abandon the track.
Union Pacific stopped rolling trains on the 15.69-mile track about three weeks ago, after the surface transportation board’s decision.
Rusk County Rural Rail Transportation District has not given up on trying to save the industrial branch line. The district continues negotiating, expects to make another offer in writing within a couple of weeks and hopes to have freight trains running along the spur again in 60 to 90 days.
“Our intent is to move as quickly as possible to get the purchase (or) lease/purchase done as soon as we have a good deal,” said John Cloutier, president of the rail district’s board, which is handling the negotiations.
Several governmental entities back the effort — the city councils of Henderson and Overton, the Henderson Economic Development Corporation board and Rusk County Commissioners Court.
The rail district’s new offer to Union Pacific is being developed in consultation with a recently engaged short-line operator, Wayne Defebaugh of Blacklands Railroad, based in Sulphur Springs.
Blacklands is guiding the district to fashion an offer that the district hopes will be acceptable to Union Pacific, approved by the Surface Transportation Board and provide the best opportunity for the district to save the rail while also giving the short-line operator the most opportunity to make money, Cloutier said.
The rail district first asked Union Pacific to donate the spur and the railroad reportedly responded that it was not in a fiscal position to make a donation. The district next offered to buy the spur for $150,000 — an amount based on the average price paid for abandoned track across the state over the past 30 years, which is $10,000 per mile. Union Pacific replied that was not enough.
The district upped its offer to $600,000 in mid-August, based on what local officials thought would be the best deal for the community and what the district could afford to pay while also making improvements to the track, Cloutier said. Union Pacific dismissed that offer as still not enough.
The Surface Transportation Board calculated the net liquidation value of the spur to be approximately $1.3 million. While acknowledging scrap metal dealers could offer Union Pacific more than the rail district, Cloutier said, “We are not going to make our decision (about the amount of the rail district’s next offer) based on that fear. We are still looking for the best possible value.”
The Surface Transportation Board accepted Union Pacific’s forecast that the company would realize a profit from operations of $9,166 next year and incur rehabilitation costs of approximately $1 million for the line, resulting in a subsidy requirement of $1,087,333.
The board’s ruling stated, “Any harm to the shippers and the community from the proposed abandonment is outweighed by the demonstrated harm to Union Pacific and the burden on interstate commerce through continued operation of the Henderson Industrial Lead (rail spur).”
Cloutier countered in an interview that a maintenance program could be started involving replacing some railroad ties and cleaning out a couple of culverts at no astronomical cost. Describing the track as “functional and useable now,” the rail district president pointed out that trains were rolling on it until about three weeks ago.
Long-term total rehabilitation of the line could cost about $1 million, but the rehabilitation does not have to be done all at once, Cloutier maintained.
The Surface Transportation Board further concluded that abandonment of the line would not have a serious, adverse impact on rural and community development nor impede the City of Henderson and Rusk County’s ability to attract industrial shippers to the area.
Contrarily, the Henderson Economic Development Corp.’s general manager, Sue Henderson, told the city council several weeks ago that a manufacturer from Spain considering locating in Henderson passed over the city because no one could guarantee regular rail service.
“It’s vital for economic growth in Henderson,” she said. HEDCO is currently negotiating with another prospect that might come only if the city has the ability to provide service of 100 rail cars for shipping purposes.
Union Pacific lamented in documents filed with the transportation board that traffic on the spur has been declining and dropped, for example, from 168 rail carloads in 2007 to 124 carloads in 2008.
The rail district president charged in an interview that decline in the use of the spur and in Union Pacific’s revenue from the spur was caused by the railroad company’s not providing switching when existing industry needed it.
“If I need a cab now to go to a doctor’s appointment, (the cab company) can’t tell me it will be four hours (before there) is a cab available,” Cloutier said.
The lumber mill in Henderson was priced out of the chipping business because it could not get reliable rail service when it needed to ship chips and it could not sell the chips at a competitive price after trucking them to market, a representative West Fraser Inc. told the rail district board months ago.
Freight rail is important to industrial businesses in communities like Henderson that deal in raw services such as timber, minerals, oil and gas development because it is a much more affordable, efficient way to get product to market in other parts of the nation, Cloutier said.
There is no track record of Henderson/Rusk County complaining to the Surface Transportation board about diminishing rail service through the years. The community’s neglect in not bringing that to the board’s attention was a mistake, Cloutier said. But, he added, there was no mechanism in place for filing the complaint until county commissioners created the rail transportation district two years ago.
“We didn’t start fighting early enough. Now we have to acquire this line to save it,” Cloutier said.
By providing switching service when shippers need it, the district can increase usage of the spur, the district’s president theorized.
Under an agreement with the short-line operator retained by the district, the split of net revenues with the operator will be a negotiating point and determined later if the rail district succeeds in its efforts to acquire the spur. Cloutier projects the spur can be operated at a profit, ranging from $179,650 per year after expenses for 586 cars switched to $2.2 million per year for 6,946 cars.
“We think putting a thousand cars on that line the first year is going to be a cinch … that’s really (getting back) the traffic that Union Pacific has driven away by not providing a timely service,” Cloutier said.
The profits could be used to pay the operator, to pay off a loan the district hopes to acquire to acquire the line and for rehabilitation of the line, according to the rail district president.
But, Cloutier stressed, “The rail district isn’t in this to make a profit; we are in this to insure reliable and safe freight rail service for Rusk County for generations to come.”