State makes offer for rail line

Watco to make decision by May 26

COULEE CITY — The state and area rail users alike are awaiting with bated breath a company's response to an offer to purchase part of a key rail line.

The state Legislature agreed in 2003 to buy and renovate three key sections of the Palouse River and Coulee City (PCC) Railroad from Kansas-based Watco Companies, Inc.

In November 2004, the state paid $6.5 million to buy the P&L Branch, which runs north and south between Marshall and Pullman, and the PV Hooper Branch, a line linking Hooper, Winona, Thornton, Colfax and Pullman.

But the state failed to purchase the 108-mile CW Branch, which runs between Coulee City and Cheney. The Legislature allocated $1.2 million for the line, and Watco and the state Department of Transportation had a verbal agreement on the sale of the branch, but no signed agreement. Watco is now asking for more money for the stretch and closed the line down in November 2005.

Earlier this week, the state made an offer to Watco to purchase the line, and Washington State Department of Transportation director of freight strategy and policy office Barbara Ivanov said a response is expected by the close of business May 26.

"It's very important in particular to the grain co-ops who have made capital investments on that line and seek to gain the most economic output from those investments," Ivanov explained of the CW Branch, adding many cooperative members are also growers.

Kevin Whitehall, general manager of Central Washington Grain Growers, said there are several important reasons to purchase the line and keep it in operation, including maintaining the infrastructure to move commodities to market.

"(It's a) competitive issue as far as growers having the option of going by rail or by truck," Whitehall said. "Once you lose rail, for example, we're at the mercy of one mode of transportation and sometimes that's not the best option to have for our members."

Whitehall added the wear and tear done to county and state highways over the years to come, if the rail line is not operational, will cost "way more" than the cost to purchase the line, according to several studies on the subject.

"Each study has indicated it is in taxpayers' best interest to purchase the lines to save the roads," Whitehall said, adding another issue is the question of safety with hundreds of trucks running up and down those roads. "Sooner or later, there's going to be some serious accidents and fatalities. It will happen."

Ivanov said that the state is still sorting out the importance of the line to the state, and said there are no clear policy directions on why short-line railroads are important to Washington.

"However, the state Legislature has very clearly instructed us to acquire not only the track and the track right-of-way, but the operating rights to run it," Ivanov said. "And they're doing that to serve their constituent base — the grain co-ops and the members that they have."

Ivanov said the best case scenario will be if Watco accepts the offer, a deal is put in place and moves forward. "We have no desire for further litigation or lengthening the process in any way."

Ivanov said the state respects the fact that it needs to make economic sense for Watco to operate the line.

"Other than that, I certainly think that any operator on that line with the current business model might find similar issues," she said. "The fundamental business problem we're trying to sort out is new competition through the Ritzville shuttle loader, there's always the barge system that's very efficient and low cost. So the CW line, over the last three or four years, has been losing business to competition. That's the real issue. The fundamental problem there would exist no matter who the parties were."

The state is working to sort the issue out, Ivanov said, with the Legislature working to resolve the problem for constituents and shippers indicating their willingness to make a level of commitment to ship carloads by rail. The state is also working on how to get an operating plan in place to work long term for grain co-ops and their members.

Whitehall gave kudos to those legislators and lobbyists stepping up and making a stand for the shippers.

"A lot of this hit rather soon," he said, noting the issues essentially came up in December. If the shippers had not taken the charge and started working with area legislators, and if the legislators had not seen the same level of importance as the shippers, "we probably would not have the railroad. Once it's gone, you're never going to get it back."