Greg Smith, Malheur County Economic Development director, talks during a meeting regarding a plan for a rail reload center north of Nyssa. Smith will need to answer questions from the state about rail car availability later this month. (The Enterprise/File Photo)
NYSSA – For three years, onion producers and Malheur County officials dreamed of loading local onions onto rail cars for a speedy trip to bustling east coast markets.
They crafted an ambitious plan for the Treasure Valley Reload Center, a shipping depot envisioned north of Nyssa. The county created a public company – Malheur Economic Development Corp. – consisting of local people to oversee the project. It then won a pledge of $26 million in state money to launch the project. But now state officials are asking about where Malheur County will get rail cars needed for the reload center. The state is requiring the county to identify who will supply the rail cars and where they will come from.
“Without rail cars for the facility, containers or goods can not move,” state Transportation Department officials wrote in their directive to the county.
The state is seeking the information because Union Pacific Railroad, which would serve the Nyssa project, has signaled it doesn’t intend to supply the cars.
And a state consultant said the issue – securing rail cars to carry the onions – is vital to whether Treasure Valley Reload Center can pay its way.
Now, Malheur County economic development officials have three weeks to plug this major hole in their plans. Oregon Department of Transportation officials have set an April 23 deadline to get the information as part of the state’s decision whether to release the $26 million.
Grant Kitamura, president of the Malheur Economic Development Corp., said Monday that county officials are “pursuing every avenue we can think of to pull this thing together and somehow get equipment for this facility.”
Kitamura is also managing partner of Baker & Murakami Produce Co., an onion packer in Ontario.
It’s unclear why Malheur County officials are just now settling the issue of rail cars, raised by state consultants five months ago. Greg Smith, the county’s economic development director, didn’t respond to written questions and no longer provides interviews to the Enterprise.
Last August, Smith told the Malheur Enterprise that demand for the rail center was so high that it could “load almost 300 cars a week.”
In September, Malheur County submitted a 134-page proposal to the state in an effort to unlock the promised $26 million. Smith’s firm was given an extra $6,000 a month by the Malheur County Court for help writing the proposal and he also retained Portland consulting firm ECONorthwest, which charged the county $34,279 for “draft and final report preparation.” Smith also retained RailPros Inc., which told state officials that it had deep experience with Union Pacific and “firsthand knowledge of railroad operations.”
Despite that deep bench of publicly funded help, the county in September submitted its proposal without addressing the supply of rail cars.
ECONorthwest discussed the importance of rail car availability for the shippers in a separate report to the county last September.
The consultant projected that the Nyssa center would ship 54 to 89 rail cars per week and there would be “significant seasonal variation” in volume.
“Approximately 79 percent of the shipments will take place between October and March,” said the report.
ECONorthwest told the county that effective rail service hinges on the “relative demand and scarcity for rail cars and trackage. The supply of rail cars is relatively fixed in the short term and price inelastic.”
The state last fall hired The Tioga Group, a Pennsylvania consulting firm, to independently analyze Malheur County’s proposal. The consultants reported several concerns about the Treasure Valley Reload Center plan and flagged the rail car issue.
Without a consistent supply of rail cars and service from Union Pacific, the facility “will not be commercially viable,” Tioga reported.
Tioga reported that Union Pacific has “an old fleet of refrigerated box cars” and that “the number of rail cars in UP’s fleet has declined by over 18% over the past decade.”
The consultant said one of the “crucial” factors to providing economically feasible service was “the willingness of Union Pacific to provide enough rail cars.”
Tioga noted the railroad
in other instances “has been willing to selectively to reinvest in the refrigerated box car business.
Union Pacific cautioned that might not be the case for Nyssa.
“There isn’t a business case for UP to invest in refrigerated rail cars that will only be used six months out of the year,” a Union Pacific executive, Melissa Meier, wrote to Smith in a Jan. 8 email, obtained by the Enterprise through a public records request.
Despite that warning, Smith suggested otherwise in a letter to the Oregon Transportation Commission on Feb. 14. He wrote that “a press release from the rail company…announces the purchase of 1,000 new refrigerated cars.”
Asked in a public records request for that press release, Malheur County Economic Development couldn’t provide it.
Instead, Smith provided an industry newsletter story about a speech in Idaho last fall by a Union Pacific official saying the railroad was buying new cars.
Union Pacific subsequently confirmed it was buying new cars – but to replace obsolete models.
Records show the railroad’s fleet of refrigerated cars is shrinking. Union Pacific reported to federal regulators in 2015 that it had 6,687 refrigerated cars. In 2018, it reported its fleet was down to 5,641.
A rail company representative was direct with the Oregon Transportation Commission in February.
“To be very blunt, we don’t have refrigerated cars and the customer will have to provide them,” said the representative, Cindy Roberts. She appeared before the commission as it considered the Malheur County project.
That would leave Malheur County to turn to other choices – buy its own or lease them.
The state’s $26 million is already spoken for – to be used for buying land, building the shipping center, and installing rail lines.
Buying cars wouldn’t be cheap or happen quickly.
The Greenbrier Companies Inc., a Portland firm that builds rail cars, said that 4,000 to 5,000 refrigerated rail cars are slated to age out of the market in the coming years and, that while demand for new cars is steady, there has been little overall volume growth. The refrigerated cars generally cost from $250,000 to $300,000 and take about eight months to get from order to delivery.
If the Nyssa reload facility needed 90 refrigerated rail cars a week, that single fleet at $250,000 apiece would cost $22 million.
Companies across the country provide leased refrigerated rail cars, but no information was available about what might be available to Malheur County.
Refrigerated rail car supply fluctuates, said Peter Friedman of the Agriculture Transportation Coalition, a transportation advocacy group based in Washington, D.C.
“Supply and demand is all regional. If you are up in Minnesota, you might have a lot more demand than supply. But if you are in Kansas City you might have enough. It is not one-size-fits-all. It is very much a regionally-based calculation,” said Friedman.
The Idaho potato industry is a big user of such cars. An industry representative said that in late 2017 and early 2018 “there was a significant shortage of refrigerated rail cars coming out of the West.”
Another factor is getting cars back and forth across the country to where they are needed, according to Friedman. Once a car loaded with onions is shipped east, it must find its way back to Malheur County. That can be tricky, he said.
“Let’s say it is loaded and it goes to Philadelphia. How are you getting that car back? Who is bringing it back? What is the revenue?” said Friedman.
“Someone is going to have to move that empty refrigerated rail car all the way back to Malheur County. How much cargo is there going from Philadelphia to Malheur County? I think it’s pretty minimal,” said Friedman.
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OUR PREVIOUS REPORTING ON THE RAIL CENTER:
State sets new deadlines for Nyssa reload center
Malheur County faces new obstacles to get money for rail center
Key member of Malheur County board overseeing rail reload center resigns
Malheur County officials make case for rail reload facility
Malheur County to state: Don’t ‘dictate’ terms for Nyssa rail money
Malheur County’s rail project heads to Oregon Transportation Commission
Reviews list risks, concerns with Nyssa rail project
Nyssa shipping project draws more state concern
Top state official recommends no state money for Nyssa rail project until risks addressed
Million-dollar errors dogging Malheur County’s rail center project
County economic development director says Union Pacific is committed to rail reload project
Money to construct Nyssa rail reload center delayed
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