"DOCKET NO. FD 36199
OREGON INTERNATIONAL PORT OF COOS BAY AND
COOS BAY RAIL LINE, INC. -
INTRA-CORPORA TE FAMILY TRANSACTION EXEMPTION
VERIFIED NOTICE OF EXEMPTION
PURSUANT TO 49 C.F.R. § 1180.2(d)(3)

Oregon International Port of Coos Bay (the "Port") and Coos Bay Rail Line, Inc.
("Coos Rail") (collectively, the "Parties") hereby invoke the Surface Transportation Board's (the "Board") class exemption at 49 C.F.R. § l 180.2(d)(3) in connection with a transaction within a corporate family. The subject transaction entails a proposed rail line lease to from the Port to its subsidiary, Coos Rail, permitting Coos Rail to commence operations over Port-owned railroad lines.

In support of this notice of exemption and in compliance with 49 C.F .R. § 1180 .4(g), the Parties provide the following information: 49 C.F.R. § 1180.6(a)(l)(i) - Description of Transaction and Parties Thereto

a. Description of Transaction
The Port is a rail common carrier by virtue of its ownership of certain interconnected railroad lines extending generally from Eugene, Oregon, westward and southward to Coquille,
Oregon, via Coos Bay, Oregon, a total of roughly 133 route miles. Specifically, the lines in
question (hereinafter, collectively, the "Line") extend from milepost 652.114 at Danebo, Oregon, to milepost 763.13 at Cordes, Oregon; and from milepost 761.13 at Cordes to milepost 785.5 at Coquille. The Port acquired portions of the Line at separate times via appropriate Board processes. 1

The Line is currently operated by Coos Bay Railroad Operating Company, LLC d/b/a Coos Bay Rail Link ("CBRL") pursuant to a lease agreement with the Port.2 The parent company of CBRL has advised the Port that it no longer wishes to operate the line, and the Port has sent CBRL a letter inviting them to cure breach of contract issues. Under the circumstances, the
Port has begun to contemplate assuming operation of the Line in place of CBRL. But the Port, as constituted, does not desire to become an operating common carrier itself, due to the potential regulatory, tax and other commercial and legal ramifications that may flow from its assumption of operations. Instead, the Port has created Coos Rail as a public benefit corporation under the control of the Port for purposes of assuming operations over the Line in place of the Port. Under the Port's proposal, the Port would retain ownership of the Line, but common carrier service would be provided by Coos Rail, either jointly with CBRL (if necessary) or in place of CBRL as circumstances may dictate. 3

1 Oregon International Port of Coos Bay - Acquisition Exemption - Rail Line of Union Pacific Railroad Company in Coos County, Or., Docket No. FD 35385 (STB served Jul. 9, 2010); Oregon International Port of Coos Bay- Feeder Line Application- Coos Bay Line of the Central Oregon & Pacific Railroad, Inc., Docket No. FD 35160 (STB served Oct. 31, 2008; modified Mar. 12, 2009).
2 Coos Bay Railroad Operating Company, LLC d/b/a Coos Bay Rail Link - Operation Exemption - Line of Railroad owned by the Oregon International Port of Coos Bay, Docket No. FD 35551 (STB served Sep. 14, 2011).
3 The Port would prefer an orderly and cooperative transition from CBRL to Coos Rail, but
such a transition is not yet assured. The Port may deem it necessary or appropriate, in the event of a continuing contract dispute with CBRL, to permit Coos Rail to assume operations over the Line pending the transfer or termination of CBRL' s common carrier status. The Parties therefore seek exemption authority for the subject transaction to enable Coos Rail to commence operations, potentially jointly with CBRL, on short notice (on after June 1, 2018) in the event that CBRL is no longer contractually entitled to operate over the Port's Line."


https://www.stb.gov/filings/all.nsf/ba7f93537688b8e5852573210004b318/d49d074ef3e4958f8525829f00616168?OpenDocument


It looks like current operator is going to protest any change:

"I am writing on behalf of Coos Bay Railroad Operating Company, LLC ("CBROC"), the incumbent operator of rail service on the subject rail line, in connection with the above-captioned Corporate Family Transaction Exemption. CBROC intends to submit a petition to reject on or before June 20, 2018 and to participate in this proceeding." https://www.stb.gov/filings/all.nsf/ba7f93537688b8e5852573210004b318/16f9ec4dcbfc513c852582a20076885a?OpenDocument


My analysis:

When CORP embargoed the line, the Port of Coos Bay did a pretty amazing job of obtaining commitments from shippers and politicians to save the line, as well as finding the funding for both the purchase (net salvage value as determined by the STB) and additional funding to rehabilitate track, bridges and tunnels. One of the unusual aspects is that the Port did not simply lease the line to an operator, but hired Arizona Rail Group to function more as the day to day contractor while the Port itself seemed to manage the overall management, marketing and rehabilitation projects. This was the tone of the original RFP, the Port basically wanted to be Rail Barons without being directly responsible for the work (or get their hands dirty if you prefer).

I have heard that the current Port Commissioners are not (at least for the most part) the same ones were sitting when the railroad was purchased and began operations. I believe the swing bridge over Coos Bay has failed, and most of the rail traffic is having to be trucked to the other side of the bridge and transloaded to rail. I don't know how much rail equipment got caught on the wrong side of the bridge.

I can't say if the bridge failure is the primary point of contention, though the rumor mill suggests that the relationship between the Port and operator was already strained.

All this does (so far) is create a separate railroad subsidiary owned by the Port. Should the Port actually try to replace ARG as operator then there will either be a STB filing noting the change of operator (with ARG's consent) or an adverse discontinuance filed by the Port to remove ARG as operator by having the STB revoke their common carrier authority. It would appear ARG isn't happy about any of this, and has indicated they intent to protest the Port's transfer of ownership to its own subsidiary. It would appear that the Port might be intending to run their rail line themselves.