Port of Kennewick out of rail business

By Kristi Pihl, Tri-City HeraldSeptember 5, 2012 

The Port of Kennewick is getting out of the rail business in favor of having a private company own and operate rail in downtown Kennewick and Finley.

Kennewick Transfer, or KET LLC, will be taking over rail spurs the port has owned since the '50s and '60s after commissioners unanimously approved a purchase and sale agreement recently.

Since the rail lines were built, rail cars have grown in weight, causing the old rail to get torn up, said Larry Peterson, the port's director of planning and development.

With such a small amount of rail, it is difficult to be efficient, he said. And a decline in use means fees have not kept up with maintenance needs.

The port owns about one mile of rail in downtown Kennewick near Bruneau Street from Washington Street to the Ash Grove Cement Co. near the cable bridge. Ash Grove Cement is the only company that regularly uses rail cars on the spur, Peterson said.

The glory days when at least one to two cars were moved along the rail per day are gone, he said. The rail spur once was used regularly by Welch Foods, J. Lieb Foods, Twin City Metals, Dan's Garage, Lampson Crane of Kennewick and the Cenex Harvest States grain elevator.

The port is giving KET, a sister company of Frontier Rail Corp., the firm moving rail cars for Railex in Wallula, the easements for the Bruneau Street Rail and a 12.7-acre parcel north of Bowles Road in Finley that includes a quarter-mile of rail.

The property, worth about $41,000, should work for a small rail yard, Peterson said. Access to the property is limited because of the rail spur, and most of the property is in a flood plain.

In exchange, KET will continue to serve customers and take over the maintenance and liability burden, Peterson said. The rail spur has uncontrolled signal crossings.

This is one of the cases like Vista Field Airport where the port has realized that the private sector may be able to do a better job, said Port Commission Chairman Skip Novakovich.

KET knows what it is doing with rail and has plans to turn the rail spurs into a revenue generator, he said.

KET will be able to run the rail spurs more efficiently, Peterson said. And the opportunity of increased maintenance should eliminate derailments and interruptions in service that have happened in the last decade.

And the port will be saving about $40,000 a year. On average, the port has lost $36,000 annually for the last 17 years, Peterson said. And the port will save another $4,000 in insurance.

The port has lost more than $645,000 on the rail spurs since 1995, according to port documents.

The rail spurs have cost the port about $756,000 since 1995, and fees only have brought in about $110,700 during that same time period, according to port documents. Revenue from the rail spurs ranged from $2,804 to $10,500 between 1995 and 2009.

The port stopped collecting revenues in 2010 after Ash Grove Cement agreed to repair a $50,000 derailment in lieu of paying fees for a number of years, Peterson said. But the port still incurred repair costs during those years.

Through June, the port's loss from the rail spurs was more than $26,000.

The port still will own the rail on the property Gunderson Northwest leases from the port, Peterson said. Gunderson Northwest, a company that refurbishes rail cars, uses and maintains that track.

The port is sending a formal notification this week to BNSF Railway Co. and Union Pacific Railroad that the port no longer will be maintaining the rail spurs, Peterson said. KET will take over maintenance once the notice goes out.

Then, there is a six-month cancellation period should the railroad companies oppose the change.

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