Peoria Station

Unused BNSF track in Canton seen June 27, 2011. Will this stretch be turned into a recreational trail…or return to its intended purpose?

This afternoon, both the Canton Daily Ledger and Peoria Journal Star posted an article indicating that BNSF Railway intends to abandon 14.5 miles of track from Dunfermline north through Canton to Farmington. Since Canton is closer to the action, I’m linking to the Ledger’s article here.

Unfortunately, the article’s headline, Rail line may be acquired, become part of local trail, shows that some, including Canton’s mayor, have forgotten about the line’s economic development potential, and their past support for the Keokuk Junction Railway’s effort to acquire it through lease or purchase. I covered this issue extensively on my old blog. Since that one no longer exists, I’ll recount some history here.

On August 4, 2006, the Keokuk Junction Railway (KJRY) filed a Lease and Operating Exemption with the federal Surface Transportation Board to lease BNSF’s branchline between Vermont and Farmington in Fulton County, 42.1 miles. The KJRY would also provide service to AmerenCILCO’s Duck Creek Station via the Dunfermline Industrial Spur. A map is included on page six of KJRY’s STB Filing.

The BNSF-KJRY lease agreement would have been, to borrow a phrase annoyingly repeated by civic boosters, a “win-win situation” for all parties involved, whether they realized it or not. The Union Pacific and KJRY had snatched BNSF’s Duck Creek coal contract, delivering the first train on February 3, 2006. This left the trackage in question without any regular business. So rather than abandon it, BNSF found a way to retain control of the line but also get it off its hands. But as typical in these win-win situations, one party always objects (and wins).

AmerenCILCO filed a Motion for Protective Order with the STB on August 10, 2006. If the Keokuk Junction Railway took over BNSF’s line to their Duck Creek Power Plant, the utility reasoned, competitive rail access, achieved less then a year earlier with the completion of a 4.8-mile spur to the KJRY’s mainline at Rawalts, would be lost. KJRY would control both of Duck Creek’s rail access points. Ameren viewed this as unacceptable, as it went to great expense to end Duck Creek’s captivity to one rail carrier. They would not lose ground already won. Although provided with a letter from the railroads explaining the benefits of the transaction, Ameren believed it lacked sufficient information to understand the impact on their Duck Creek facility.

Ameren’s concerns were unwarranted. As KJRY’s counsel would explain on page three of a filing dated December 7, 2006:

Ameren will not be captive to KJRY. As to BNSF shipments to Ameren, KJRY will act only as a handling line carrier. KJRY will have no control over, or indeed, knowledge of, the rates for BNSF shipments to Ameren. KJRY will only receive a fixed car fee from BNSF.

Nevertheless, the STB ordered a ”housekeeping stay” the same day of Ameren’s filing. After providing Ameren with a redacted version of the confidential BNSF-KJRY lease agreement, KJRY filed a motion September 18, 2o06 to lift the STB’s housekeeping stay. KJRY (then using the aborted “Peoria & Western Railway,” or PWRY, name) also suggested delays in implementing its agreement with BNSF would cause harm as it would prevent it from activating old customers.

By mid-October, KJRY was getting frustrated. Winter was approaching, so track rehabilitation and construction (or repair) of a connecting track with the KJRY mainline at Canton would be delayed if Ameren’s opposition went on much longer. The two parties entered into negotiations, but failed to come to an agreement. On November 17, 2006, Ameren filed a petition to Revoke or Reject Notice of Exemption. In that same filing, Ameren scoffed at any potential new shippers. On Page 12 it asserts:

Captivity for Duck Creek appears to be the only reason to support why KJRY would want to lease this line. There is no other traffic on the line. While KJRY claims, in its Request to Lift Stay at 9, that KJRY “intends to reactivate non-Ameren customers on the Line” no such shipper has been identified.

On page four of its December 7, 2006 filing, KJRY called out Ameren on this issue:

Ameren also pretends to the Board that it is unaware of other potential shippers. KJRY is informed and believes that Ameren well knows the identity of other potential shippers, and, in fact, has been holding one of them (Central Illinois Energy) hostage as a bargaining chip.

Ameren responded in a filing dated December 15, 2006, acknowledging an agreement allowing BNSF to use several thousand feet of the power plant’s privately owned track to serve Central Illinois Energy. But they continued to doubt KJRY’s claims of other potential shippers on the line it wanted to lease. KJRY in turn accused Ameren of trying to use the STB to prevent KJRY’s lease deal with BNSF so it can purchase the Vermont-Dunfermline trackage.

KJRY projected that the Central Illinois Energy ethanol plant could generate up to 2,000 carloads annually. On Page 12 of another December 7, 2006 filing, it named two additional firms that have expressed interest in rail service should the shortline secure its lease deal.

KJRY has also discovered that there are active industries along the Line that do not currently ship by rail but are very interested in resuming rail service if KJRY obtains authority to operate the Line. Interested shippers include Hitchcock Scrap Yard, Inc. (“Hitchcock”), and United Paving & Construction Co. (“United”), both of which are located in the vicinity of Canton. Copies of letters from these two potential shippers are attached hereto as Exhibits D and E, respectively. It is not certain at this time how many carloads each of these two shippers could generate, but, preliminary KJRY estimates indicate that these two shippers could generate 1,100 carloads annually.

These potential shippers provided letters of support. Central Illinois Energy’s is on page 46, Hitchcock Scrap Yard’s is on page 49 and United Paving & Construction’s on page 51. But perhaps just as interesting was on page 10 of KJRY’s December 19, 2006 filing:

Indeed, the City of Canton, through its mayor, Rodney W. Heinze, has urged the proposed KJRY-BNSF lease transaction to be approved as soon as possible, noting the importance of KJRY service to meet CIE’s needs.

Mayor Heinze’s letter of support is on page sixteen. So about six years ago, the City of Canton supported reactivation of the dead BNSF rail line. What changed? For one thing, Canton got a different mayor, Kevin Meade, in 2007. But Meade supported reactivation of the BNSF branchline as recently as 2008 when a modified lease deal, this time supported by Ameren, was in the works.

The reason Canton is “trail-minded” these days may be Cook Medical, which in 2009 opened a 45,000 sq. ft. medical device manufacturing plant in downtown Canton, mere feet from BNSF’s dead rail line. A second plant built by Cook Polymer Technologies  opened in 2012. Medical devices require precision, and the prospect of freight trains again rumbling a few feet away will likely invite a frown.

Nevertheless, if BNSF petitions the federal Surface Transportation Board for permission to abandon Dunfermline-Farmington, a shortline can file an Offer of Financial Assistance (OFA), a technical term for an offer to purchase a line. I fully expect the Keokuk Junction Railway will file an OFA. The aforementioned modified lease deal from 2008 was Ok’d with Ameren, but reportedly suspended by Berkshire Hathaway’s 2009 acquisition of BNSF. It should be noted that BNSF won back the Duck Creek coal business in 2009, so it rehabilitated and restored Vermont-Dunfermline trackage to service.

Potential customers are still out there. Central Illinois Energy Cooperative filed for bankruptcy before finishing its ethanol plant. A new owner, Riverland Biofuels, purchased CEI’s ethanol facilities, finished them and operated it during the fall of 2008 and then for a year from March 2009. During this year of operation, steepwater was transloaded from tank trucks to tank cars at the KJRY siding in Canton. Aventine Renewable Energy purchased the plant in 2010 and was poised to begin operations if not for 2012′s drought and consequential spike in corn prices.

Hitchock Scrap Yard requires rail service for expansion of its business. My understanding is that if rail service is secured and spur tracks are built, Hitckcock will use rail transportation in a big way. United Paving & Construction was acquired by Spoon River Blacktop in 2008, but an asphalt plant located north of Canton continues to operate, and still is a potential customer. Railcar storage contracts are another potential source of business for any prospective buyer of BNSF’s line.

Finally, you may ask if all of this potential business is there, why doesn’t BNSF handle it now? The answer is that potential traffic is small volume and much of it (particularly that from Hitchcock and Spoon River Asphalt) would be mostly shorthaul, something Class I’s like BNSF do not go after. But shortlines like the KJRY would be more than happy to handle such traffic.

This could be a significant story for 2013, and I’ll provide updates as I hear them.

- David P. Jordan