Category: Top News

By Tim Blackwell/Cowcatcher Magazine

Freight trains will soon run on the Texas State Railroad.

 Iowa Pacific Holdings, operator of several freight and tourist railroads, inked a deal in early August with American Heritage Railways to assume ownership of the Texas State Railroad. Terms were not disclosed.

 According to Iowa Pacific President Ed Ellis, the Chicago-based short line will supplement tourist runs with freight service between Palestine and Rusk, TX.

The Texas State Railroad sold for the second time in three years. – Cowcatcher Magazine

“We are very excited about this opportunity to build on the substantial achievements that American Heritage has made, in cooperation with the Texas State Railroad Authority, in improving the Texas State Railroad’s infrastructure and in developing the tourist ridership,” he said in a prepared statement. “We are already taking steps to continue this progress by further developing passenger services, reconnecting the railroad with the national rail network at Palestine, and implementing freight service.”

TSRA President Steve Presley said Iowa Pacific’s freight ability brings an added dimension to TSR, which struggled financially in recent years but was on the road to profitability with AHR. Iowa Pacific operates six short line railroads in the United States and, through an affiliated company, operates three railways and related businesses in the United Kingdom.  

As part of the deal, Iowa Pacific acquired a dormant three-mile connection from the Palestine Depot to an interchange with the Union Pacific. Work already is under way on readying the track for service.

“They’re working on getting that stretch up and running and should get that open soon,” Presley said. “They’re also going to bring in more cars for Polar Express. I think the advantage here is that they have the background and knowledge to bring this freight business to the table that will help support the tourist business.”

AHR took over TSR in 2009 after the state had declared it would shutter the financially strapped line. The railroad was losing more than $1 million per year before AHR took over, but got within $150,000 of breaking even last year and was positioned to make a profit in 2012.

However, a nearly 1,000-gallon diesel spill in February was costly and forced AHR President Al Harper to seek additional funding and debt forgiveness. After being denied, Harper put TSR up for sale and Iowa Pacific expressed interest.

Negotiations moved swiftly but remediation of the spill became a sticking point. In July, TSRA adopted a resolution assuming responsibility of the $350,000 cleanup. AHR paid for some of the expense prior to transferring ownership to Iowa Pacific.

The Texas Commission on Environmental Quality (TCEQ) gave its approval of the remediation but groundwater must be tested for chemicals.

“There’s no more spill but it’s going to require monitoring over the long haul,” Presley said. “Now, we’re trying to work out how we’ll reimburse American Heritage Railways for the money that was spent on it.”

While excited about TSR’s future under new ownership, Presley said TSRA can’t forget the contribution that AHR and Harper made.

“We would never be where we are today if not for Al Harper and American Heritage Railways,” Presley said. “Nobody else was in the picture to do it as well as they did it. It just worked out better for them that they not have this right now and for Iowa Pacific to have it. Without Al and American Heritage, it would have been closed. I’m extremely thankful to them for all they did for us.”

As part of the transaction, American Heritage Railways of Texas LLC will be renamed Rusk, Palestine and Pacific Railroad LLC, although it will continue doing business as the Texas State Railroad.

Ownership and operations of the Texas State Railroad could change hands within 90 days if a deal is reached between American Heritage Railways and Iowa Pacific Holdings.

Texas State Railroad Authority agreed Thursday to pursue the proposed acquisition of the railroad from current operator AHR to IPH. TSRA President Steve Presley said that the companies have discussed terms for the Chicago-based short line freight and tourist railroad group to take over the cash-strapped TSR. “I would say we’re within 60-90 days of having a closing,” Presley said.

IPH, according to published reports, wants to bring commercial freight operations to the line while maintaining tourist operations. The company is talking to Union Pacific about accessing a 3-mile stretch of line from the Palestine Depot to an interchange point. President Ed Ellis told a local radio station that IPH is interested in creating a transload facility for rail/truck transfer to move oil and timber industry products. IPH owns six railroads in the U.S. – including the Texas-New Mexico Railroad and West Texas & Lubbock Railway – and two lines in Great Britain.

AHR has struggled to make a profit since taking over TSR in 2009, Presley said. AHR President Al Harper made unsuccessful pitches earlier this year for additional funding and forgiveness of $2 million in loans. When AHR took over operations, TSR was losing more than $1 million per year and on the verge of shutdown by the state. Last year, TSR managed to get within $150,000 of break-even by managing costs, like shutting down steam runs from Palestine. But this year, remediation from a 1,000-gallon diesel fuel spill has taken a financial toll.

“AHR had almost gotten it to profitability,” Presley said. “They’ve gotten the railroad back from losing $1.5 million to break even. At this point, they didn’t have the cash flow because of unrelated issues to continue to keep the operation going.”

The Oklahoma Department of Transportation formally signed an agreement to receive $6.75 million from the Transportation Investments Generating Economic Recovery (TIGER) III program to rehabilitate 49 miles of state-owned rail line between Elk City and Sayre, OK, in the Anadarko Basin, according to U.S. Transportation Secretary Ray LaHood.

The Federal Railroad Administration announced in December that ODOT was awarded the funding.

Farmrail, a short line that serves the region, will benefit from track improvements that are expected to reduce transportation costs in bringing crude oil and gas to market quicker. The railroad has made recent investments in equipment to keep up with more outbound crude and inbound frack sand trains coming from the Basin.

The track rehabilitation will allow for speeds up to 25 miles per hour with fewer restrictions on the number of cars per train.

U.S. Transportation Secretary Ray LaHood today awarded more than $186 million to the Illinois Department of Transportation (IDOT) for a high-speed rail project.

The project will extend construction of the corridor north to Joliet, allowing for 110-mph service along nearly 70 percent of the route. Construction is already under way on the Chicago – St. Louis corridor, and work on the extension to Joliet will begin this spring. Once construction is complete, travelers can expect reductions of more than an hour in trip time, with improved on-time performance as well. Ridership has grown 137 percent over the last five years. The state has plans to add more frequent trips, and further reduce trip times on this popular route in the future.

The corridor will also benefit from next-generation American-made trains, funded as part of a previously announced $782 million grant that will pump new life into domestic manufacturing. States will purchase 33 quick-acceleration locomotives and 120 bi-level passenger cars to operate in Illinois, Indiana, Michigan, Iowa, Missouri, California, Washington and Oregon.

Illinois is among 32 states throughout the U.S. and the District of Columbia that are laying the foundation for high-speed rail corridors that will link Americans with faster and more energy-efficient travel options. To date, the U.S. Department of Transportation has invested $10.1 billion to put American communities on track towards new and expanded rail access and improved reliability, speed and frequency of existing service.