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2/18/2003



Rail News: Rail Industry Trends

Kansas & Oklahoma calls on state, communities — and customers — to help upgrade branch line


Watco Cos. Inc. plans to upgrade Kansas & Oklahoma Railroad Co.'s (K&O) Salina-to-Osbourne, Kan., branch line, but the holding company is seeking help from the state, local communities and the 920-mile short line's customers.


When Watco acquired K&O in June 2001, it also obtained the poorly maintained 82-mile branch line, holding company officials said in a project summary.


To fund improvements, Watco plans to transfer line ownership to the city of Pittsburg, Kan., Port Authority in exchange for a 99-year operating lease and forgiveness of K&O's debt to Kansas Department of Transportation (KDOT). With public ownership, the line would be eligible for government grants.


Watco also is trying to secure from several shippers multi-year "take or pay" agreements under which a customer agrees to pay for a minimal amount of service. The agreements would secure business totaling millions of grain bushels, Watco said.


In conjunction with communities and counties, Watco also is requesting $5.7 million as part of the 2003 Federal Transportation Bill, $500,000 from KDOT and $500,000 in state income tax credits.


The $6.7 million would be used to replace 70-pound rail with 90-pound rail, as well as ties and switches between Salina and Lincoln, Kan., enabling K&O to increase train speed from 5 mph to 25 mph ($4.5 million); replace ties, ballast and spikes between Lincoln and Osbourne, enabling the short line to increase train speed from 5 mph to 10 mph ($1.1 million); add track in Salina Yard ($500,000); and obtain 500 grain cars ($500,000).


By March 31, Watco plans to negotiate a line-ownership contract with the port authority and KDOT. If Congress reauthorizes the transportation bill in November, the holding company would begin construction planning.


Construction is expected to start in January 2004 and be completed that May.


Contact Progressive Railroading editorial staff.

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