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Hearing provides few insights over proposed rail abandonment

A joint hearing of the House and Senate Transportation committees last week provided a few answers from the company that has filed to abandon a stretch of railroad from Grenada to Canton.

But it did nothing to assuage some of the concern from officials of affected communities.

Grenada Railway filed in late September with the federal Surface Transportation Board a request to abandon the 80-mile line it purchased from CN in 2009. Since then, waves of protests have followed, led by the Mississippi Department of Transportation and local economic development offices. Their grievances have carried the same warning: Eliminating rail service will be detrimental both to current businesses and to future economic development prospects.

Grenada Railway said in its initial filing that the short line lost about $100,000 in 2010, and had lost almost that much in the first six months of this year.

“We’ve made our best faith effort to operate these businesses at a profit,” Scott Leavenway, an attorney who represents the company, said at last week’s hearing at the Capitol.

Leavenway said to turn an acceptable profit on the line, its traffic count needs to average 35 cars per mile per year. It hasn’t come close to that, averaging 3.5 cars per mile in 2010, and falling to about 2 cars per mile in the first six months of this year.

“And the prospects are worse for the rest of the year,” he said.

On top of that, two of the bridges on the line are in major disrepair and carry nearly a $1 million price tag to fix.

Things do look better on the northern end of the rail, which runs from Grenada to Southaven and is not slated for abandonment. Leavenway said traffic this year is up 22 percent from last year.

Keeping the northern portion from meeting the same fate has been the goal of folks like Larry Hart, the Water Valley Mayor.

Hart said in a letter to the STB in early October that the closure of the northern line would cut off his town from shipping to the south via rail. Rail freight would have to be shipped north to Memphis, and then south. He said at the hearing last week that three counties have hearings pending that would advance the process of forming a rail authority, which could theoretically purchase the line if Grenada Railway ever decided to abandon it. “We’re well down that road,” he said.

Steve Zea, president of the Kosciusko-Attala Development Corp. said in a STB filing that the line slated for abandonment connects to another short line rail that serves as the only rail service in Kosciusko.

“We currently have a major energy site that has several active prospects that would depend on this rail,” he wrote.

He wrote further the rail’s abandonment “would put this region of Mississippi at a huge disadvantage when competing for economic development projects and overall job creation.”

Pablo Diaz, of the Grenada County Economic Development District, said in his STB filing that nine companies currently use the rail, using nearly 4,000 cars per year. Those companies, he said, have pledged to add 2,000 more cars in the next three years. Some of those companies, he wrote, have been forced because of rate increases to use other rail routes for distribution, or have started shipping their products via truck.

These companies employ 1,895 people. If the rail were abandoned, at least 500 of those jobs would be lost.

One of the companies that uses the rail is Newly Weds Foods in Horn Lake. Plant manager James Rone told the STB in an October notice of opposition that his company is currently being charged rates that are three and four times higher than CN charged when it owned the track. The portion of rail he connects to isn’t slated for abandonment, but he’s worried that it eventually could be.

“My plant has 300 employees and we are in fierce competition from other plants in neighboring states –which have a competitive advantage by having viable rail service,” he wrote.

Leavenway insisted at last week’s hearing that only the southern end of the line is financially weak enough to meet the company’s standards for abandonment. He said that the company had been close a few times to reaching a deal for state assistance via the Mississippi Railroad Improvement Fund, but that had never materialized. The fund currently has $5 million worth of bonds that are not yet issued, said Mississippi Development Authority chief financial officer Kathy Ghelston.

“And we’ve had about $19 million worth of requests,” she said. The MDA will most likely wait until MDOT completes a rail study before deciding how to spend the money, she said, adding that a one-to-one match from whatever rail company receives the funds is the only way it can work.

Grenada, Ghelston said at the hearing, is currently marketing one of the last megasites in the state under the promise that it will have rail access.

Leavenway said Grenada Railway would be willing to construct a lift station, which allows for cargo to be loaded and unloaded from trains to trucks, at Grenada as part of its plans to abandon the Grenada to Canton line.

“This is anything but a staged abandonment,” he said of fears that the northern line would eventually be targeted. “We’d be much smarter to abandon the whole thing at once.”

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