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Wednesday, February 24, 2010

Nebkota railroad drops objection to rail line sale

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Nebkota Railway Inc., the only company currently operating trains in Chadron, Neb., has withdrawn the objection it filed just two weeks ago to the purchase of the rail line from Chadron to Dakota Junction by a newly formed railroad company, the Chadron Record reports. The move apparently clears the way for Nebraska Northwestern Railroad to purchase the seven miles of track from Chadron to Dakota Junction from the Dakota Minnesota and Eastern Railroad and to lease an additional 20 miles of line from Dakota Junction to Crawford, where the tracks connect with BNSF network.


The railroad line through Chadron, once a part of the Chicago & North Western Railroad's ‘Cowboy Line' across Nebraska, intersects the DM&E line from Rapid City, S.D., at Dakota Junction. From Chadron to the east only four miles of the Cowboy Line remain, with Nebkota as the owner.

West Plains Company, the parent company of Nebkota, announced in late January a plan to create a high-speed grain loading facility along its four mile section of track, with $14.7 million of the project costs supported by federal stimulus funding. Only a few days later NNW, a new company that includes a former Nebkota general manager, George LaPray, as its administrative manager, filed papers with the federal Surface Transportation Board seeking approval of its purchase and lease deal with DM&E. The request for an "Exemption' that allows the transaction to go forward is normally a straight forward process that can be completed quickly, unless an objection is filed, according to an STB representative.

On Feb. 5, Nebkota and West Plains asked the STB to reject or delay approval of the sale, and on Feb. 18 it filed a request for a declaratory order "to terminate controversy and remove uncertainty..regarding the competitive impact and public interest" of the proposal.

In a prepared statement, Bryce Wells, president of West Plains, said that allowing the NNW deal to proceed could restrict its market access to the other railroads. "Any serious impact on Nebkota economics by virtue of this proposed agreement will invariably impact farmers in the area and the future of the railroad," Wells said.

In a phone interview, Jack Nielsen of Alliance, president of NNW, rejected arguments against the deal and said his company intends to work with Nebkota to move trains in and out of Chadron.

In a document filed with the STB on Feb. 12, Nebkota asserted that NNW has "no real prospects of handling any other traffic" than the current loads of wheat owned by West Plains. "The result of the purchase would be to make WPC and NRI hostage to NNW demands for a percentage of freight revenues," the company said. Nebkota also claimed that it would lose its interchange with the DM&E at Dakota Junction if the deal were approved.

In a response to the Nebkota papers, filed on Feb. 18, NNW said that it is making preparations to operate trains, and is not purchasing the track simply to get in the middle of Nebkota's route. "NNW will not be a ‘paper railroad.'" the company said. "NNW fully intends to become a common carrier railroad and provide rail transportation service to patrons."

Nielsen said in late January that his company had been working on the deal with DM&E since 2007, and that its purpose was in part to keep Chadron's railroad line from being closed.

Since it was formed in 1994 and purchased the line from Chadron to Merriman, Nebkota has abandoned all but four miles of the 75 miles of track it once owned, but has continued to move grain from the West Plains elevators in Chadron via the connections to DM&E and BNSF. The company's main markets are in the eastern U.S., but it said the high speed loading facility in Chadron would allow it to reach additional customers to the west and south.

According to NNW, Nebkota will still have access to both the DM&E and BNSF, because of its trackage rights, which aren't affected by the proposed purchase.

In the motion to withdraw the objection it raised with the STB, Nebkota indicates that the concern regarding the interchange issue has been resolved. "This action is taken in light of the Amendment of the Trackage Rights provide for interchange with DME at Dakota Junction," the letter said.

The ultimate impact of the legal squabbling remains uncertain, but apparently both of the parties involved are committed to keeping a viable railroad connection from Chadron to major national markets.

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