(The following story by John Sowell appeared on the News-Review website on April 24.)
ROSEBURG, Ore. — U.S. Rep. Peter DeFazio and Sens. Ron Wyden and Gordon Smith this morning called on federal regulators to take action to reopen the railroad spur line between Coos Bay and Eugene.
Appearing before the federal Surface Transportation Board in Washington, D.C., the members of the Oregon congressional delegation said that the Central Oregon & Pacific Railroad has done little to address the situation since the 136-mile line was shuttered last September because of dangerous conditions inside several tunnels.
Instead, they said the railroad and its corporate owner, Fortress, a Florida-based private equity fund that bought CORP’s parent, RailAmerica, a year ago, have sought a bailout from the state of Oregon and shippers to pay the majority of the $23.3 million needed for the repairs to reopen the line. The company also wanted the state to provide an annual subsidy along with concessions from shippers to counter annual operating losses on the line.
“CORP and its parent company, Fortress, obviously isn’t broke. What we saw is at the same time it was demanding an operating subsidy from the state of Oregon, Fortress loaned $24 million to Michael Jackson for his Neverland Ranch,” Wyden told the three-member group. “With the money that was loaned to Jackson for Neverland, they could have upgraded the entire 136 miles of track to pristine condition and protect the jobs for thousands of workers and their families by making transportation available and attractive for businesses along the line.”
“That would have been in keeping with their public trust and their common carrier obligation,” Wyden continued. “In financing Michael Jackson’s property, it’s made it clear to us that Fortress and CORP are somehow in their own Neverland, a world where others pay for their business’ long-term infrastructure investments and the government directly subsidizes their business operation.”
Wyden also asked the board to investigate CORP’s operation of the Siskiyou line between Southern Oregon and Northern California. The company has quit hauling finished wood products on that line and has asked shippers to agree to an increase in costs of between 300 percent and 400 percent to keep the line running.
Charles “Chip” Nottingham, the Surface Transportation Board’s chairman, said acting on the situation would remain a priority. Two weeks ago, the board ordered RailAmerica to provide justification for keeping the rail line closed.
“This board will stick with this controversy and see it through to its rightful end. We will be availing ourselves of every legal and regulatory tool we have to make sure the right thing is done,” Nottingham said.
Earlier, Nottingham asked RailAmerica CEO John Giles to come to Washington to speak with Allyn Ford, president of Roseburg Forest Products, and others to talk informally about reaching a solution. Nothing came of those talks.
This morning, Ford told the board CORP did not try to address the safety issues with shippers before closing the Coos Bay line with less than 24 hours notice. He said his company and others had to scramble to obtain alternate shipping when CORP officials knew for several months about the dangerous conditions — after having a comprehensive analysis completed between March and July 2007 — before they shut down the line.
Ford noted that American Bridge Co., which has its West Coast office on Bolon Island north of Reedsport, has stopped submitting bids for certain projects because it can no longer ship bridge trusses too large for truck shipment by rail. He said that company has also placed on hold plans for an expansion at the Douglas County site.
Ford, who also represented the 45 members of the Coos-Siskiyou Shippers Coalition before the board, said his company and others would have been willing to assist CORP in making repairs to the tunnels. Since the closure, Roseburg Forest Products has been paying up to $167,000 a month extra to transports its lumber products from the coast by truck.
“Historically, the shippers have been willing to provide both financial assistance as well as equipment to repair tunnels, landslides and to resolve deferred maintenance issues. CORP, however, clearly did not see this as a railroad-shipper partnership and cavalierly shut the line down.”
DeFazio noted that the railroad even refused to haul one last set of shipments when it sent crews on the Coos Bay end of the line to retrieve train engines and cars and send them to Eugene so they could be put to use on the Siskiyou line.
DeFazio said Fortress made a calculated decision to buy RailAmerica despite the poor track conditions.
“One would assume that such a sophisticated group of investors would have done their due diligence and they would have known of the condition of the line,” DeFazio said.
Smith said he isn’t in favor of re-regulating the railroad industry, but said Fortress and other rail operators need to do a better job of maintaining their systems.
“If they’re serious about staying unregulated, I think it’s very important that they get more serious about serving the public. That’s my word of warning,” Smith said.
Operating a successful railroad requires a long-term commitment, he said. It’s not meant for a company seeking quick and easy profits, he said.
“The quick buck artists on Wall Street who want to look at railroads as a turkey to be plucked, I’m sorry, that’s not going to happen,” Smith said.
RailAmerica Vice President Paul Lundberg is scheduled to testify before the Surface Transportation Board Friday morning. The hearing begins at 6 a.m. and can be viewed live online at www.stb.dot.gov. Recorded versions of both days’ hearings will be available online at the same site.