Union Pacific declined ag company’s $10 million cash offer
Story by Chris Dillmann | cdillmann@vaildaily.com for vaildaily.com
After Union Pacific declined a Kansas and Colorado agriculture company’s $10 million cash offer for the railroad line that runs through the Vail Valley, the company is asking a federal agency to “direct” a sale.
Last Friday, KVCN, LLC and its subsidiary Colorado Pacific Railroad, asked the federal Surface Transportation Board to direct Union Pacific to sell the 229-mile Tennessee Pass line. The line runs from Pueblo, over Tennessee Pass and through the Vail Valley, to Dotsero.
KCVN already bought the 122-mile Towner Line that runs through Colorado’s Eastern Plains, and, so far, spent $3.5 million to make it ready for freight service, expected to begin in April.
Adding the Tennessee Pass line would reopen around 360 miles of railroad from Kansas to Dotsero, and “provide a substantial and significant competitive alternative to BNSF (Burlington Northern Santa Fe) and UP (Union Pacific) to many freight rail shippers in Colorado but also throughout the Western United States,” KCVN says in its Surface Transportation Board filing.
KCVN made its $10 million offer Nov. 14, 2019. Union Pacific declined it on Dec. 30, 2019.
Union Pacific has not used the Tennessee Pass line since the mid-1990s since it merged with Southern Pacific.
UP non-plussed
Kristen South, senior director of Union Pacific’s corporate communications and media relations, said Union Pacific is aware of KCVN’s complaint.
“However, we are in active discussions with another party to potentially restore service to the line, and we plan to continue those discussions,” South said in an email.
In its Friday Surface Transportation Board filing, KCVN demanded that the Surface Transportation Board reveal who Union Pacific’s “other parties” are.
Who are these guys?
The entire Tennessee Pass line is worth $8.8 million. However, it will cost $278 million to rehabilitate it, KCVN’s filing says. The potential buyers appear to have the money.
KCVN is owned and managed by Stefan Soloviev and his father Sheldon Solow.
“Mr. Solow is one of the 400 wealthiest Americans as determined by Forbes Magazine, which lists his net worth at $4.6 billion. Mr. Soloviev is listed as one of the largest American landowners on the Land Report Magazine Top 100 list,” KCVN’s filing says.
KCVN started buying land in Colorado in 2006, and now owns 81,000 acres in Colorado’s Cheyenne, Kiowa and Powers counties. The company also owns 18,214 acres in Kansas and 252,450 acres in New Mexico — and it is under contract to acquire more.
In 2019, KCVN harvested 1.3 million bushels of dryland wheat and experimented with hemp cultivation. In 2020 it will be among Colorado’s largest hemp growers, cultivating the crop for fiber and CBD oil.
KCVN also runs a cow/calf operation with around 2,500 mother cows, and leases 120,000 acres to renewable energy companies, the company said in its Surface Transportation Board filing.
Passenger is possible
Freight shipping over the Tennessee Pass line peaked in the mid-1990s at around 30 trains per day, the Surface Transportation Board filing says. Union Pacific proposed abandoning the part of the line that ran through the mountains. Eventually, the Surface Transportation Board agreed to discontinue service and let the tracks go dormant.
However, a 2017 report from the Colorado Department of Transportation says the Tennessee Pass line has the potential to carry both passengers and freight. That report says that if Union Pacific continues refusing to reactivate the Tennessee Pass line, Colorado should consider purchasing it for freight and/or passenger service.
Passenger service on the Tennessee Pass line is not without precedent, KCVN says. In July 1998 the Royal Gorge Express acquired 12 miles of the discontinued Tennessee Pass line between Parkdale and Canon City for excursion train operations.
While the Tennessee Pass line has been silent for 25 years, Colorado’s population has grown from 3.8 million to 5.8 million people.
“A territory this dynamic and growing should not suffer itself to only one railway across the mountains which divide it,” KCVN said in its filing.
KCVN, a Kansas and Colorado agriculture company is trying to buy the Tennessee Pass railroad line from Union Pacific, which says it’s in discussions with other entities. KCVN is asking the federal Surface Transportation Board to “direct” the sake.
Moving plants and people
For now, though, KCVN says the plan is to move grain to the West Coast.
With improvements in plant genetics and fertilizer, eastern Colorado is producing so much wheat that storage capacity is overwhelmed, the KCVN filing says. The company wants to move the wheat to mills in Salt Lake City and Los Angeles. But to do that, growers have to detour their shipments through a 500-mile loop, without any westward progress. Restoring and reopening Tennessee Pass would expand grain markets for Colorado farmers.
And not just farmers. KCVN claims that other users would include Martin Mariette Materials, the Climax molybdenum mine, and the American Gypsum wallboard plant and mine in Gypsum.
Tale of Tennessee Pass
Construction on the Tennessee Pass line started in 1880, running near Leadville and Red Cliff to capitalize on the mining boom.
The line has been out of service since the mid-1990s when Union Pacific took it over the Rio Grande and Southern Pacific. Union Pacific already had a similar route and the Tennessee Pass route fell dormant.