UP will formally oppose KCVN LLC and Colorado Pacific Railroad LLC’s plan to acquire the 228-mile former Denver & Rio Grande Western line in Colorado, UP wrote in a short letter to the Surface Transportation Board on Monday.
In a feeder line application filed with federal regulators last month, KCVN and Colorado Pacific said they would buy the Tennessee Pass route for its liquidation value of $8.8 million, down from a $10 million offer they made to UP in November.
UP in December declined Colorado Pacific’s offer and said it was in active discussions with another party who wants to restore service on the line.
“The Tennessee Pass Line is simply not an appropriate target for a feeder line application,” UP’s general attorney, Jeremy Berman, wrote to the STB. “The feeder line process was created to preserve rail service to existing shippers. It is meant to prevent railroads from allowing active rail lines to fall into such a state of disrepair that shippers can no longer ship via rail.”
KCVN and Colorado Pacific’s plan does not follow “either the letter or the spirit of the feeder line application procedure,” Berman wrote.
UP says it is unaware of shipper complaints about service on active portions of the route or of demands for service on mileage that has been mothballed since 1997.
Nonetheless, UP has been in “promising discussions” with another interested potential operator of the line, Berman told the STB. The railroad will provide additional details about the negotiations, and the name of the interested party, in a formal filing subject to a protective order.
The Tennessee Pass line is not needed as a through route for Rocky Mountain traffic, UP says. The railroad’s trio of main lines — the Central Corridor through Moffat Tunnel, the Overland Route, and the Sunset Route — are all superior, UP notes, citing the burdensome 3% grade over Tennessee Pass.
KCVN and Colorado Pacific in 2018 successfully used a feeder line application to gain control of the 121.9-mile Towner Line in Eastern Colorado. Last year Colorado Pacific spent $3.5 million to restore the line to 25-mph operation and next month plans to resume regular service on the line.
A sale of the Tennessee Pass line to Colorado Pacific would create a nearly 400-mile route extending from Towner, Colo., to Dotsero, Colo., that would provide grain and mining shippers with a shortcut to Utah and the West Coast, KCVN says in its filing.
Colorado Pacific would spend $278 million to bring the Tennessee Pass route back to Federal Railroad Administration Class 2 track standards that would permit 25 mph operation.
KCVN is controlled by New York real estate developer Sheldon Solow and his son, Stefan Soloviev, who reverted to the traditional spelling of the family’s name.
Soloviev, who controls Colorado Pacific, has extensive land holdings in the West totaling more than 350,000 acres, including cropland in Colorado, Kansas, and New Mexico. His companies, which operate under the name Crossroads Agriculture, own grain elevators in eastern Colorado and western Kansas.
A few years ago I rode my dirt bike along the old D&RG row between Minturn and Leadville Jct wondering if the line would ever see a train again, I still wonder. It would take a major rehabilitation to return it to service, the narrow Eagle River canyon at Gilman where NJ Zinc used to load is a mess, Rock slides, washouts, rails out of alignment, trees growing between. The Tennessee Pass tunnel has 6’ of water in it on east side and there are numerous small slides on the western approach. One thing I’m sure of is the UP will never reopen this line, there is no need. However there is much local interest and speculation in preserving it and Omaha must know there is more value there than scrap.
Follow the money
Actually one of the reasons UP mothballed the line is to sell the expensive plots of land so most of that is already gone. The facilities and yard at Minturn was a very pricey property that UP had that they have spun off. Also unless you live around there you would understand the desire to avoid Denver and the joint line it is just a traffic jamb so yes the Tennessee pass might be a steeper grade but if you keep the rail cars moving rather than sitting in yards staged waiting to move you it might be desirable. Especially if it is your own product moving in your own freight cars you would want control over it as long as you can before you turn it over to a class 1. Who for the most part really never cares about your product or your delivery shipping needs the are only worried about operating ratios and short term stock gains.
Kelly:
Here is an excerpt from the 2018 Colorado Rail Plan at: https://www.codot.gov/about/committees/trac/Agendas-and-Minutes/2018/july-13-2018/03-b1-sfprp-draft-final_-july-tc
“Colorado has relatively few shuttle loading facilities; UP, BNSF, the Nebraska, Kansas & Colorado Railway, and the Great Western Railway of Colorado (GWR) serve sites located in Johnstown, Byers, Windsor, Holyoke, and Cheyenne Wells. These sites are designed to load a 110-car unit train in 15 hours or less. Grain elevators lacking shuttle capabilities can limit the transportation options of producers and feed grain users and increase transport costs. Types of crops grown, global commodity prices, and widely varying crop yields between years due to climatic conditions also affect shuttle locations. High-volume elevator facilities in Kansas and Nebraska near Colorado production areas may attract truck hauls from Colorado to these out-of-state elevators for transfer to rail.”
In addition, there is a shuttle facility on BNSF at Yuma.
It appears there are no shuttle grain train facilities on “Towner Line” (which is logical since it’s not in service). So, are these mystery grain shipments going to be fewer than 110 cars (way fewer) or are new shuttle facilities going to be constructed, and if so by who? Where are the elevators east of Towner that currently ship grain to California and or the Pacific Northwest (AFAIK, there are no shuttle facilities).
As someone who used to work for BNSF, I can tell you that most (if not all – I have never seen one) grain from the Central U.S. on BNSF that goes to California goes not for export, but rather to feed lots or Ethanol facilities. Shuttle trains from this area to the Pacific Northwest on BNSF are rare.
Again, what is the source of all this grain that needs to move, what is the quantity, and why is it so different from the majority of the grain in this area that does go to the Gulf, feed lots, and Ethanol plants? I think if it really existed, the shortline would name names and specifically tout the new facilities to be built to accommodate the traffic.
Just too many mysteries here. And that the Tennessee Pass route – and its steepest grade Soldier Summit – is the high-cost route, makes it harder to accept. I would criticize the UP more when the shortline that wants to buy the Tennessee Pass line at liquidation price is more forthcoming about its traffic origins.
In other news: Union pacific opposes remaining in business.
Right now, all shipments on the ex Mopac line from Towner east move on the K&O all the way to Wichita before they can even turn and go towards the West Coast ports on UP or BNSF. The Towner to NA junction portion of line is ready to go and operation is supposed to begin in the next month or two with K&O to be the operator into Pueblo. Traffic will have to be handed to the big guys at Pueblo for the time being.
With Tennessee pass reopened, other than having a longer haul to hand over trains to I think BNSF rather than UP (unless UP makes a condition that trains be turned over to them for selling the line) at Dotsero, I think KVCN has something else going on thru there. And if they do, then more power to them. Anything that gets the pass reopened and trains running again, I’m all for it. I just wonder who this mysterious group is that Union Pacific says they’re in talks with. Personally I think UP is full of BS!
@Braden Kayganich: “Tennessee Pass is not a viable route to haul freight. No online business either.”
If its not viable, why is UP squatting on it? Who says online business couldn’t be developed post activation? Aggregates, rare earths, potash.
I am tired of Class 1’s treating old ROW’s like an old spouse. They don’t want them, but then they don’t want anyone else to get them either.
CSX is the same way.
I think it is about the land. But nobody can sell it without abandoning the railroad, and how do you do that without offering it for sale?
Mr. McFarlane needs a map. The “Towner Line” (Towner, CO to NA Jct. with trackage rights to Pueblo) doesn’t need to get to Dotsero to interchange to BNSF (not that any interchange tracks exist at Dotsero anyway, – they don’t). Interchange to UP and BNSF can easily be done at Pueblo at which point both railroads can handle the cars to wherever on a lower-cost route than via Tennessee Pass. And why “the only viable outlet for their grain is the Gulf” is truly perplexing. Right now, the Towner Line appears not to be in service, so evidently the grain is moving some other way. The nearest rail access would be BNSF’s route through La Junta, CO or the Kansas and Oklahoma Railroad which operates the line east from Towner which also interchanges with BNSF. BNSF operates shuttle grain trains from Southwestern Kansas to not only the Gulf, but also to the Pacific Northwest, Arizona, and California, so I really don’t see why grain off the KO or the Towner line would have destination restrictions on BNSF.
This is too fishy. Something else is going on and it’s not about moving grain from Eastern Colorado.
If you run the numbers, that is less than $40,000 per mile ($8.8 million for 228 miles) of track. Just the scrap value is ten times or more of that value. I was part of the first Feeder Line Clause case back in the early 1990s, and the conditions then were to pay Net Present Value. For this line, that would either be scrap value or $0 since the line produces no value right now. Scrap value plus land value would certainly be the more reasonable value that Union Pacific would want. Remember that governments have spent millions of dollars per mile to turn rail lines into trails – should that also be considered as part of the line’s value?
Of course UP opposes ownership or operation of the line.. it gives shippers options and competition.
The last thing these oligopolies want is any competition. They want market dominance and predatory pricing.
Re-regulation now.
Makes me wonder if the KCVN group really understands the costs of going over the pass, or has something else up their sleeve. Maybe they are in cahoots with the “other party”, or secretly working with UP to drive up the price for the “other party”…
James Dudzik said:
“Wants to run a rail road through here- NO! Wants to sell plots of expensive property along the line (very scenic and beautiful) to rich investors from the East (and Texas) so they can build their mega-mansion summer homes and spoil a pristine and generally empty valley- empty because U.P. owns the land.”
Exactly.. Tennessee Pass is not a viable route to haul freight. No online business either..
For everyone commenting, the whole reasoning behind this purchase is so the family could ship their grain from their own elevators to the West Cost for export via both the ex-Towner Line and Tennessee Pass, which they could either hand off to UP or BNSF(that’s why UP doesn’t want them to have it). Right now the only viable outlet for their grain is the Gulf and they want to ship it West to more lucrative export markets.
If UP had half a brain, to use the old poker-player analogy, it should “hold em.”
Deregulation saved the industry and reregulation would destroy it. Ask anyone who lived through the 1970s. As much as I would personally like to see the line reopened, other routes are superior. Another route to Dotsero wouldn’t provide serious competition to UP or BNSF.
Other than the aggregates quarry operated out of Parkdale, Colorado (just west of the Royal Gorge?), are there in fact any active shippers on the Tennessee Pass line? I would guess likely not, of course the line has been closed for over 20 years now as a through route (since 1997/1998?).
Also, the 121.9 mile “Towner line” (in eastern Colorado) is ex MoPac trackage?
Wants to run a rail road through here- NO! Wants to sell plots of expensive property along the line (very scenic and beautiful) to rich investors from the East (and Texas) so they can build their mega-mansion summer homes and spoil a pristine and generally empty valley- empty because U.P. owns the land.
They never see trucks as the competition. They will fight tooth and nail against a proposal like this but give up entire regions of rail business to trucking and be happy about it.
If the government were to offer the trucking companies land grants (like they did the railroads in the 19th century) to build and operate their own highways it would be over for the railroads.
All they know is gains through reductions:
Be curious to know when UP engaged their suitor relative to the KVCN offer.
This plan would succeed only if the speculators could somehow convince Union Pacific to shorthaul itself on eastbound traffic and both UP and BNSF to do the same on westbound traffic.
I can’t help but think if this line was worth nearly $100 million scrap value that it would have long ago been gone.
I personally know nothing about the family working on this, but I’m kind of pulling for them. If I were stuck in NYC, I would be willing to try anything to get out to west Kansas myself! Seems like an extremely long shot, but who knows?