Consultants question Nyssa rail project, urge state to set conditions for money

Greg Smith, Malheur County economic development director, has spearheaded the effort to build a rail reload center north of Nyssa. (The Enterprise/File).

NYSSA – A national consultant has identified “major risks” with Nyssa’s proposed railing ship center and advised that state officials not advance money to build it until land prices are settled, a deal is struck with Union Pacific, and projected business volume is modified.

The Treasure Valley Reload Center is in line for $26 million in state money. The project is being managed by a county-created public company, Malheur County Development Corp.

The Tioga Group, retained by the Oregon Department of Transportation to independently review the case for the Nyssa center, raised several red flags about the project in its Jan. 7 report.

DOCUMENT: Consultant’s report

The rail center has been promoted as a way to boost agriculture in Malheur County by cutting rail costs, particularly for the onion industry. Farmers would truck their produce to Nyssa for it to be loaded on refrigerated rail cars for shipment to several major markets across the U.S.

Tioga flagged as a major issue questions about whether Union Pacific would serve the Nyssa plant – and at what price. The report said the financial and operational success of the Nyssa plant “depend almost entirely on the service, car supply and rates eventually negotiated with Union Pacific.”

The consultants said that “funding for construction should not be approved before an acceptable service and rate agreement is negotiated with Union Pacific.”

Tioga’s recommendations are now headed to the Oregon Transportation Commission, which will consider the Malheur County project at its February meeting.

The commission also will get recommendations approved last Friday by a special review committee. The committee didn’t dispute or disagree with the Tioga findings. The committee separately recommended that the state commission require the Nyssa project to get a stronger letter of commitment from Union Pacific and revise its economic projections to include shipment of other produce from the area.

Union Pacific in a letter last September said the railroad found the concept of the Nyssa plant “acceptable” but “cannot make a commitment to any specific commodity type nor level of service at this early stage.” The railroad said it wanted more talks to consider designs and to “examine potential commercial opportunities.”

Greg Smith, Malheur County economic development director who manages the project, said Sunday that he was “shocked” the consultants would press for a deal with the railroad before the shipping center was ready to operate. He said no business would lock in price on a service that wouldn’t be provided for months.

“We know we need a commitment from UP,” Smith said. “UP will not give a commitment until time of operation.”

The consultants raised cautions about whether the railroad would serve Nyssa and the quality of that service.

Tioga noted that Union Pacific now operates a refrigerated shipping center in Wallula, Wash.

“Potential competition between TVRC and UP’s own Cold Connect at Wallula may emerge as an important factor,” the report said.

The report said the railroad may not want to sacrifice customers in Wallula for what might be less profitable service out of Nyssa. The report also said that “planned service from TVRC will be significantly worse than from Wallula,” noting that a shipment to the northeast U.S. would take four to six days longer if Nyssa is the starting point.

Union Pacific officials didn’t respond to questions about the report’s statements and conclusions.

“We have a good relationship with the Treasure Valley Reload Center project sponsor,” railroad spokeswoman Hannah Bolte said in an email. “We continue to have conversations with the Malheur County Economic Development Corporation regarding the project proposal.”

Paul MacDonald, the Union Pacific executive who wrote the supportive letter last September, has since left the company. Smith said he expects to hire MacDonald as a consultant.

Tioga also suggested state officials require the Nyssa center to have in hand a contract for the entity that would actually run the shipping center. A “comprehensive” agreement is “essential to project viability,” the report said.

Tioga also said the shipping center may be larger than necessary, saying volume estimates are “overly optimistic.”

Still, the consultants said, there was opportunity to consider business not factored into planning for the rail center. The Nyssa center could also ship corn, potatoes, watermelons and seed crops.

“Tioga has no doubt that Treasure Valley shippers would benefit significantly from the additional shipping options, improved rail service, and cost savings,” the report said. “The key question is whether those benefits can be provided as anticipated.”

The report also raised questions about land costs, noting that at one point the development corporation listed land as costing $1.6 million but in another listing a crucial parcel as being valued at $2.8 million.

The Nyssa proposal submitted to the state said the shipping center would best suited on property north of Nyssa on what’s termed Parcel D. The proposal showed that parcel is 285 acres and could be bought for $2.8 million. The property is owned by the family of James Farmer, who serves on the board of the development corporation.

Smith in a Sunday interview couldn’t explain the difference in costs.

“I’d have to go look,” Smith said but he didn’t respond with a clarification by press time.

The consultants said work needed on the agreements with the railroad and operator could mean construction wouldn’t start until this fall and the shipping center wouldn’t open “until late 2020.”

On Sunday, Smith said that he felt that if all the elements fell into place, construction could start this summer and Nyssa could be shipping onions “I would hope this fall.”

The crucial next step is a decision by the state Transportation Commission, which will consider the consultant report, the review committee’s recommendations, and recommendations yet to be offered by the directors of the state Transportation Department and Business Oregon, the state’s economic development agency.

While the commission is scheduled to get those recommendations in February, a decision to proceed with the Nyssa project wouldn’t happen until March or later.

Les Zaitz: [email protected] or 541-473-3377. Twitter: @leszaitz