NORTH BAY BUSINESS JOURNAL EVENT

2008 Going Green Conference: Building, Technology & Practices

Thursday, October 9, 2008, 7:30-11:45 a.m., Doubletree Hotel, Rohnert Park

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Gas prices call attention to freight rail proposal

BUSINESSES AWAIT LINE REPAIRS, BUT SUIT STALLS PROJECT

NORTH BAY – Most lumber travels all the way from Canada before it gets to Standard Structures, a Sonoma County engineered-wood maker. But it is a tiny segment of that trip – from Vallejo to Windsor – that is capturing the company’s attention.

“One-and-a-half percent of our gross revenues goes just to transfer the material from Vallejo to here,” said Dick Caletti, chairman of Standard Structures.

The segment is expensive because it is the only major part of the company’s shipping route done by truck instead of rail. With the cost of diesel fuel rising, Standard Structures and other North Bay companies that once relied on local freight service are increasingly supporting a stalled effort to revive the region’s defunct rail line, which closed to freight in 1998.

The average cost of diesel fuel rose more than 60 percent in the last year, reaching $4.92 per gallon in California last week, according to federal statistics. Rail is economical because it uses several times less fuel per ton of freight than trucks.

“Everyone in the shipping community is feeling the cost increase of truck fuel, and they’re looking for alternatives,” said John Williams, president of the Northwestern Pacific Railroad Co., which wants to run freight trains in the North Bay.

Northwestern Pacific is the private operator selected by the North Coast Railroad Authority, a public agency, to restore freight service from Lombard – near American Canyon – to Windsor, and possibly as far north as Eureka. The trains would be independent of the proposed Sonoma-Marin Area Rail Transit commuter rail but would share tracks between Cloverdale and Novato before splitting east to southern Napa County.

Companies located along the freight line could receive shipments without using trucks at all, because the service would connect with the national rail network. In the last few months, Mr. Williams said he has received an increasing number of phone calls from potential customers.

“I get a request at the rate of once a week, as opposed to once a month,” Mr. Williams said.

Mr. Williams said he has had “substantive conversations” with more than a dozen local businesses, including concrete and lumber suppliers, feed companies and wineries. Among them is Dairymen’s Feed & Supply Coop in Petaluma, which supplies about 80 local dairy and poultry producers with feed.

Coop General Manager Roger Bane estimates his organization spends up to $800,000 per year to bring feed – most of it from the Central Valley and the Midwest – 35 miles to Petaluma from a Napa County rail facility. “Our transportation will be substantially reduced” by freight service, “and we’re going to pass that along to the dairymen,” Mr. Bane said.

In addition to supplies, the NCRA wants to haul garbage out of Sonoma County, and it eventually hopes to connect with a deep-water shipping port proposed in Humboldt Bay. The agency has received more than $40 million in public transportation money to repair the southern part of the damaged line. But in recent months, its efforts have been stalled by a lawsuit filed by the city of Novato.

The city wants the NCRA to file an environmental report for repairs and operations on the entire rail line before any repair work is done. The NCRA plans to issue a report this summer, but it doesn’t include repairs and covers only the southern half of the line, from Lombard to Willits in Mendocino County. “It needs to cover all of the activities that they propose,” Novato City Manager Dan Keen said.

The NCRA’s Executive Director Mitch Stogner said it doesn’t make sense to study the whole line now because the agency only has funding to fix the southern half, and it is not clear if the northern half will ever get the $100 million in additional repairs it needs.

“Historically that has been an independent division of the railroad,” Mr. Stogner said. “It has been operated independently.”

The NCRA has already filed at least two petitions to kill the lawsuit, but it has been rejected in Marin County Superior Court and a state appellate court in San Francisco. Marin County Judge James Ritchie has temporarily halted much of the track repair work, and a hearing on the lawsuit is scheduled for Aug. 26.

Meanwhile, Northwestern Pacific is paying $20,000 per month to the NCRA as part of its track leasing agreement, but it has not taken any major steps toward attracting customers, Mr. Williams said.

“It doesn’t do me any good to have intensive marketing conversations with a potential customer when I can’t tell him ‘We’ll be operating in the fourth quarter of this year or the middle of next year,’” Mr. Williams said. “I say, ‘As soon as we have some indication of when we will be able to operate, I’ll get back to you.’”