NEGS: Sale To United Rail Falls Through

Sale Agreement for the Venerable Line, Announced in February, Runs Out of Steam at 30 June Deadline. NEGS Operations to Continue as Before.

31 July, Concord NH – The sale agreement between Las Vegas-based United Rail, Inc. (UR) and NEGS owner Peter Dearness was announced on 25 February, without any additional details. The deal was not consummated by the 30 June expiration date, which was revealed by Dearness on 30 July {David Brooks, Concord Monitor, 30.July.2019}.

The deal was hailed by UR in its press release as the kickoff of an aggressive short line acquisition program, including of lines in the northeast, which United Rail CEO Michael Barron asserted to be “an area where we feel there are great growth opportunities” {United Rail press release, 25.Feb.19}. In April, a representative of United Rail told your editor that UR was on the verge of purchasing another small independent line in the region, in addition to NEGS. In follow-up conversations, the UR representative urged that ANRP hold off on the story.

UR: TOO MANY PIES OR TOO MANY THUMBS?

Since the February NEGS acquisition announcement, UR has announced four other nominally substantial railroad acquisitions or operational milestones. On 5 June, the company announced via press release that it had launched its flagship Las Vegas XPress “project,” to provide passenger service between Los Angeles and Las Vegas, beginning in September of this year. On 17 June, UR announced via press release that it had engaged Peakstone Group to raise capital for acquisitions. On 17 July, UR announced via press release that it had acquired Key Holidays and Key Tours International, which it described as a California-based travel agency specializing in train travel vacations. UR’s website lists several other rail-oriented activities and businesses.

Most beguilingly, on 22 July UR parachuted into the battle for the Iowa Pacific (IPR)-owned Saratoga & North Creek Railroad (SNCR), requesting that the STB continue to stay progress on the State’s petition for adverse abandonment of the Tahawus Branch.1

The Tahawus Branch runs north from North Creek NY to the historic Tahawus mining district. Wartime demand for titanium oxide demand in World War II led the federal Defense Plant Corporation to construct the rail connection to the D&H, opened in 1944 {mindate.org}. The corridor was acquired by eminent domain on behalf of the war effort. At its peak, the line moved as many as 100 cars per day were shipped. National Lead Company ones the open-pit mines, and leased the line from the government. The line remained a government-owned asset until 1989 {brass history.net}. Mining operations ceased in 1982 in Tahawus, leaving millions of tons of ore tailings, which have been periodically shipped for use as construction aggregate, including as railbed ballast.

At NYSDEC’s request, the STB on 23.Oct.2018 issued a 90-day stay when OmniTrax entered substantive negotiations to purchase the line from SNCR in September 2018. The stay was extended three times. OmniTrax withdrew from the proceedings on 14 June of this year.

UR’s 22 July letter to the Board asserted that, “[UR] has initiated preliminary discussions with SNCR about the purchase of the Line. United Rail was recently chosen by Warren County through a request-for-proposal process to be the operator of [Warren County-owned the Saratoga Springs-to-North Creek stretch of] rail line that directly connects with the [SNCR-owned Tahawus] Line in North Creek, New York and begins discussions about this rail operation on July 18” {STB Filing# 248182}.

Local media reports on the Warren County operating agreement emphasize that there are significant hurdles to be overcome. After the initial round of negotiation, one official party to the negotiations said that United Rail’s proposal is so far “lacking in critical details,” as to the services that would be offered and details about the finances that would be needed to live up to a potential contract. “We need a lot more information to come to a clear decision as to what is best for Warren County.” Among the sticking points so far is UR’s desire to consummate a lease-to-own purchase of the line, of which the county has not expressed interest in selling {Don Lehman, the Post-Star , 19.July.2019}.


1  In December 2017, the NYS Department of Environmental Conservation (NYSDEC) petitioned the STB for adverse abandonment of the Tahawus Branch, following widespread public outrage over the storage of hundreds of tank cars in the scenic Adirondack valley, as well as other alleged missteps by SNCR/IPR.