Another Southwest light rail dispute headed to federal court

Met Council’s escalating argument with a shortline railroad throws another hurdle in front of the $1.9 billion transit project

A freight train makes its way down the Kenilworth Corridor in Minneapolis. File photo

A regional dispute over who will own and control key portions of the future Southwest Light Rail Transit corridor escalated to the federal Surface Transportation Board in April — and then to U.S District Court.

Eager to keep the $1.9 billion SWLRT project on schedule and in the queue for federal funding, the Metropolitan Council petitioned the board for a speedy ruling on its plan to become the owner of both the 6.8-mile Bass Lake Spur and the 2.5-mile Kenilworth Corridor. The two from one contiguous section of an active freight rail route, and Met Council’s plan for a 14.5-mile extension of the Metro Green Line calls for light-rail trains to operate on a parallel set of tracks through much of the corridor.

But Twin Cities & Western Railroad, which moves $1.5 billion in freight through the corridor each year, argues that Met Council and its partner in the deal, the Hennepin County Regional Railroad Authority, haven’t done enough to ensure SWLRT construction and operations won’t hurt its business. The Glencoe-based shortline railroad and many of its customers in southwestern Minnesota and South Dakota are urging the Surface Transportation Board to reject Met Council’s request or at least put off a decision until after a public comment period. Congressman Collin Peterson echoed the shippers’ concerns in his own letter to the board.

TC&W is also seeking a remedy in federal court. On Wednesday, the company filed a complaint in U.S. District Court in Minneapolis alleging Met Council’s actions are preempted by federal law governing interstate commerce and that they would violate a 1990s trackage rights agreement that guarantees TC&W’s ability to operate in the corridor.

In a letter to the Surface Transportation Board, TC&W argued the pending legal action is reason enough to reject Met Council’s request. As an alternative, it suggested the board issue a “housekeeping stay” until a federal judge has time to review the matter.

In a statement issued Wednesday, Met Council Chair Alene Tchourumoff said she was “disappointed” TC&W had chosen to file suit, adding that the offers made to the railroad “were always responsive to their interests, as well as the shippers who rely on those tracks, while balancing our responsibility to the public.”

“Our approach continues to focus on preserving the trackage rights agreements TC&W has today, and we will continue to approach this relationship in good faith,” she said.

TC&W President Mark Wegner returned a phone call Wednesday but said he had to consult with the railroad’s attorneys before answering questions on the record. TC&W is the only freight rail operating in the corridor, and it runs about four trains and 160 loaded cars over the Bass Lake Spur and Kenilworth Corridor each day.

Met Council now finds itself in the position of defending the SWLRT project in two separate federal court cases. Met Council recently prevailed in a federal environmental lawsuit, but the local group that sued the regional planning agency — Lakes and Parks Alliance of Minneapolis — announced earlier this month it would appeal U.S. District Court Judge John Tunheim’s decision to the Eighth Circuit Court of Appeals.

Rising tensions

Tensions between Met Council and TC&W rose sharply this spring, five months after they broke off negotiations on a light rail construction agreement. Before talks froze, Met Council was close to sealing a $16 million deal with TC&W.

The proposed agreement committed the Met Council to spending up to $11.8 million to replace siding tracks in the Bass Lake Spur that would be relocated to accommodate the project. TC&W would get up to $4.2 million, partly for its cooperation on construction and partly to compensate the railroad for any construction-related interruptions in its service.

Met Council members voted to OK the broad terms of the deal in August. But after that vote, agency officials said, TC&W returned with yet more demands — demands that would’ve put Met Council in the position of insuring the railroad against losses unrelated to light rail construction.

Wegner disputed that version of events in an April 13 letter to Tchourumoff, the Met Council chair, writing: “We have never contemplated grabbing additional revenue at SWLRT’s expense. We merely insist that we do not incur losses we would not have occurred but for the presence of SWLRT on the freight corridor.”

In the railroad’s version of the story, presented in letters and the federal complaint, they were close to a final agreement that would have met TC&W’s concerns about the four years of heavy construction planned for SWLRT, tentatively scheduled to begin this year and continue through 2022, with light-rail transit service beginning in 2023. There were several outstanding issues still on the table when Met Council stepped away from negotiations and was silent for months — until it presented TC&W with a take-it-or-leave-it offer this spring.

In a phone conversation earlier this week, before the federal suit was filed, Wegner said the railroad assumed Met Council was simply distracted during the months of silence. During that time, it was dealing with the Lakes and Parks Alliance lawsuit, putting the SWLRT civil construction contracts out for bid and developing a mitigation plan for a 10-foot high, mile-long crash wall only recently added to another section of the future light rail’s path.

The March settlement offer was, he said, “a complete surprise.”

A new plan

Seeking a way around the impasse with TC&W, Met Council announced a new plan with the Hennepin County Regional Railroad Authority in March.

Met Council would purchase the Bass Lake Spur from its current owner, Canadian Pacific Railway, for up to $27.45 million. At the same time, the railroad authority would transfer ownership of the Kenilworth Corridor, valued at $66 million, to Met Council. The deal also placed the railroad authority in the role of common carrier, making it legally responsible for maintaining freight service on both sections of track.

Met Council then presented new settlement terms to TC&W: $11.9 million to cooperate during light-rail construction and quit any claims against the project, plus $230,000 for expenses since talks ended last year. Given until April 18 to respond, TC&W rejected the offer.

In his letter to the Met Council’s chair, Wegner pointed out a key area where, in the railroad’s view, the agency’s offer fell short. The deal would increase TC&W’s tax obligations, opening a $3.2 million gap in the siding replacement project, and add to its ongoing property tax liabilities.

“Forcing TC&W to absorb these taxes is tantamount to asking TC&W to subsidize the light rail project,” he wrote.

The suit filed by TC&W Tuesday names the Met Council, railroad authority and Canadian Pacific Railway. It alleges the Met Council’s current plan “will substantially and unreasonably interfere” with TC&W operations.

Another issue raised by the railroad is the replacement for the siding tracks in the Bass Lake Spur. Asked about current plans for their replacement, Kate Brickman, director of communications for Met Council, said the agency would address the question in a future filing with the Surface Transportation Board. Without access to the roughly 16,000 feet of sidetracks, the railroad alleges in its complaint, it will be unable to sort railcars or park trains temporarily.

The complaint also questions the rail authority’s ability to carry out common carrier duties, alleging that it has “demonstrated a hostile attitude towards rail freight transportation.”

Click here to read the complaint.