Local rail authority files appeal to feds to block abandonment of rail line

Both the bidder for the former Tennessee Railroad line through Anderson County and county Mayor Terry Frank, chairman of the North East Tennessee Railroad Authority, have filed appeals to stop the abandonment of the line over the past few days.

The appeals were filed with the U.S. Surface Transportation Board, which on June 26 denied a petition from Arkansas-Oklahoma Railroad Co. to purchase the line from the R.J. Corman Railroad Co., which would allow an immediate permanent closing of the 41.05-mile line.

In the appeal filed Monday (July 6) by the local railroad authority, and signed by Frank, at least three prospective customers were mentioned as potential shippers or users of the line, with the prospects of moving more than 1,000 rail cars a year on the line.

“NETRA [the railroad authority] asserts that the [STB] Director’s decision [to deny sale of the line] is based on a ‘clear error of judgment’ based on the new evidence of shipper need for rail service set forth herein,’” the mayor’s appeal began.

The appeal noted that at least two logging operations and an Arizona-based railroad car storage and maintenance service have plans to use the line if it is preserved and reopened.

In a separate filing last week, the Phoenix company, IRAIL Car Services, told the STB that it would be a major user of the line, which has not seen any rail traffic since 2013.

The rail authority’s Monday appeal concluded that “the Board should find that NETRA and AOK have met [the] requirement of a ‘continued need for rail service’ and grant this appeal to prevent manifest injustice or correct a clear error of judgment.”

In a Friday (July 3) filing, R.J. Corman asked that the Arkansas-Oklahoma Railroad Co.’s appeal be denied, and that the STB should allow Corman to continue with abandonment of the historic rail line along the New River in Anderson, Campbell and Scott counties.

In its June 26 ruling, the board rejected a June 23 bid from Arkansas-Oklahoma Railroad to buy the line, which runs from Oneida in Scott County to Devonia in remote Anderson County. No trains have run on the line – the former Tennessee Railroad – since a deep coal mine stopped production in the Fork Mountain area near Devonia in early 2013.

If the appeals are denied, the STB’s June 26 ruling would immediately allow Corman to abandon the route and begin pulling up track and other components of the line.

In its decision, the STB said that the proposed buyer (Arkansas-Oklahoma Railroad) had not “sufficiently demonstrated ‘a continued need for rail service’ on the line,” adding that the line had “no active shippers.”

According to the STB, for the proposed buyer to win a bid for a rail line that is about to be abandoned under its rules, “an offeror must demonstrate through evidence that there is a continued need for rail service on the line.”

Statements supporting the bid by the Arkansas-Oklahoma Railroad Co. of Wilburton, Oklahoma, were filed by Anderson, Scott and Campbell county governments, the North East Tennessee Rail Authority, and others, including two proposed shippers on the line – National Coal Co. of Knoxville and Evergreen Packaging Co. of Pioneer. Both said they hoped eventually to ship coal and timber, respectively, on the line at some point.

The STB said that while the purchase offer (Offer of Financial Assistance, or OFA) by Arkansas-Oklahoma Railroad and the statements submitted by the other parties showed that there was “community support for preserving the Line,” but that they provided “no specific detail demonstrating any commercial need for rail service.”

The board also dismissed the use of the line by a planned passenger rail excursion company, saying that provisions allowing a forced sale under an OFA require future use of such a line for freight shipments, and that passenger service does not qualify.

Mayor Frank has been leading efforts to save the scenic stretch of railroad for more than a year. The line dates to 1889.

“I was very disheartened,” she said last week of the June 26 decision by the STB to allow the abandonment. “A lot of state money went into that rail line. I look at this as a great economic opportunity for our region, and I haven’t given up the fight yet.”

In its appeal of the STB order, which Arkansas-Oklahoma Railroad Co. filed on June 29, the company said the federal agency erred in its decision by ruling that “AOK failed to demonstrate thorough evidence that there is a continued need for rail service on the line.”

Instead, the railroad company said, the STB’s own rules allow for using the OFA process to stop an abandonment if there is evidence of “community support for preserving the line.”

The appeal notes, “The Director’s decision acknowledged that ‘AOK has provided evidence of general community support for its OFA,’ and that submissions by Anderson County and Tennessee Mining Association indicate ‘community support for preserving the Line.’”

“That evidence unquestionably complies with the requirement of the applicable regulation, i.e., ‘evidence of community support for continued rail service.’ … On the basis of that evidence, the Director should have found that there is a continued need for rail service on the line,” the appeal said.

Further, Arkansas-Oklahoma Railroad argues: “The Board has an excellent record of preserving lines for continued rail service. The Director’s decision goes in an opposite direction. The Board should grant this Appeal to prevent manifest injustice.”

Arkansas-Oklahoma Railroad bid nearly $425,000 for the rail line, which was only about 10 percent of what the Nicholasville, Kentucky-based R.J. Corman asked in its last offer to sell the line. But the value of the line is diminished immensely by the depressed property values in the area, particularly in Scott County, Frank said.

R.J. Corman officially filed the abandonment petition with the STB in March, and has been fighting to keep Arkansas-Oklahoma Railroad from taking it over since early in the process.

Frank said she still does not know why R.J. Corman seems to be so vehemently opposed to having another railroad take over and reopen the line, which connects to the Cincinnati Southern Railroad line in Oneida, operated by Norfolk Southern Corp.

“That’s a question I’m going to try to find an answer to,” the mayor said last week.

The STB ruling does allow a trail consortium to continue working with R.J. Corman on an agreement to turn the line into a hike-and-bike trail, which would at least preserve the right of way for future use as a rail line, if necessary. But the steel rail and ties would be removed, and any reinstallation of those could be cost-prohibitive, Frank said.

Owned by Norfolk Southern Corp. (formerly The Southern Railway) from 1973 until Knoxville-based National Coal Corp. bought it in 2006 for $2 million, the line was begun in 1889 and extended to its current terminus at a now-abandoned coal preparation plant at Devonia in 1912.

When National Coal was on the verge of bankruptcy in 2010, it sold the line to R.J. Corman for $3 million, and it was used to haul coal out of the Fork Mountain area from a deep mine and a surface mine until those operations shut down in 2013. Since then, the line has not been used, and has fallen into disrepair.

Part of the line from Huntsville in Scott County to Indian Fork in Anderson County did have a short life as a tourist excursion route from 2008 to 2010 when Scotty Phillips, owner of the New River General Store at Devonia, and business partner Jimmy Byrge of Knoxville started the New River Scenic Railway.