Nebkota railroad drops objection to rail line sale

Nebkota Railway Inc., the only company currently operating trains in Chadron, Neb., has withdrawn the objection it filed just two weeks ago to the purchase of the rail line from Chadron to Dakota Junction by a newly formed railroad company, the Chadron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 Agreement…to 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.