From Eldon Advertiser, May 1, 1999...

General Railway still pushing to buy Rock Island General Railway is not going to take Union Pacific's refusal to sell the old Rock Island right-of-way lying down.

The company will take legal action and also try to bring public pressure to bear on UP, General Railway President John Larkin said last week from his office in Omaha. "They (Union Pacific) haven't been dealing in good faith," Larkin said. UP announced Feb. 12 that after a number of sales contract extensions, the deadline had passed and negotiations were over. Larkin said the contract his company had with UP gave him another 45 days to complete the sale. If there's a breach, we've got 45 days to cure it," Larkin said. The purchase funds are in escrow in a bank, Larkin said, and have been for some time. "The real key is at least half (of the extensions) were because UP was dragging their feet or we had government regulations to follow," Larkin said. He said after the contract was signed on Nov. 10, 1997, government regulations caused one long tie-up. "We got delayed four or five months by labor notice filings and everything else," he said. One financial backer also pulled out at the last minute, but other financing has been acquired and is in place, Larkin said. "We're still going to negotiate."

Larkin said the Surface Transportation Board does not have the authority to force a sale of the old Rock Island line to General Railway, or any other group, but with a purchase offer on the table and financed, the STB can prevent UP from abandoning the line and selling the rails and other components for scrap. In fact, UP has already gotten bids for scrapping the line, Larkin said. "They would rather scrap it than sell the line," he said.

Until now, General Railway has not approached members of Congress about the sale, but will now, partly at the invitation of the U.S. Senate. Three bills are pending in the Senate dealing with railroads, and two would re-regulate the industry. Sen. John McCain (R-Arizona) and Sen. Kay Bailey Hutchison (D-Texas) are involved in the legislation, he said. Larkin said one of his business associates is a friend of McCain's, and will brief him on the situation. "They've been contacting me...This could be the poster child for re-regulation," Larkin said. "I don't want to see re-regulation of the industry, if we can avoid it," he said. But he added that UP's actions involved restraint of trade. He said railroads currently are immune from anti-trust legislation, but he believes that immunity should be done away with.

Larkin said residents of much of Missouri have a vested interest in seeing General Railway reactivate the Rock Island Line as Missouri Central Railroad . AmerenUE's power plant at Labadie is dependent on timely coal deliveries. Larkin said there have been times when UP could not deliver coal on time to the plant. Much of Miller County and the lake area are served by AmerenUE. Until the Southern Pacific was merged with UP in 1997, the Labadie plant had two rail lines serving it (UP and SP), Larkin said. Now it only has one, even though UP promised that any rail customer that had two rail lines serving it prior to the merger would have two serving it after the merger. Mike Cleary, spokesman for AmerenUE, confirmed that after the UP-SP merger there were rail problems nationwide and coal deliveries were affected at Labadie, as well as other power plants. "We did truck in coal...It was a problem for a while," Cleary said. However, the problem has not recurred, Cleary said.

After the merger, UP was under STB oversight when shipping problems developed, particularly in regard to hauling fall harvest of grain to buyers and ports for shipping overseas. The problem also affected shipments of other commodities, including coal. Problems with congestion on UP's tracks have lessened since 1998. UP has about 31,000 miles of track and runs about 2,000 trains a day on them. Truck shipping is more expensive, so fuel costs could rise at Labadie, and electric customers eventually would be charged more if rail problems occurred frequently, Larkin said.

When the Save the Rock Island Committee (STRICT) testified before the Surface Transportation Board in 1996, when the UP-SP merger was first being considered, deliveries to the Labadie plant were a concern for the grassroots organization. STRICT wanted both rail lines to remain in service, and in fact SP was using the old Rock Island tracks to move unit coal trains into Labadie, after getting to St. Louis on UP lines and then doubling back. Having a competing rail line should inspire UP to keep its shipping costs low to AmerenUE and other rail customers, Larkin said. Cleary said AmerenUE would not speculate on what might happen if the old Rock Island line was reopened, although he agreed competition could keep shipping rates lower.

A shipper also wants to haul 3,000 railcar loads of fly ash away from the Labadie Plant each year but cannot even get a rate quote from UP, Larkin said. Missouri Central would be interested in providing rail service, he went on to say. Hauling the fly ash, used in concrete products, etc., will take 10,000 trucks per year, according to Larkin. "They (UP) can't handle it, but they don't want anyone else to," Larkin said.

Larkin said one of the things UP wanted in the sales contract involved covenants on the real estate deeds preventing a buyer from serving the Labadie plant, and also giving UP the right to repurchase the real estate. Concentration of the rail business into a few hands is causing problems nationwide, Larkin said, but he believes UP, his former employer, is the worst offender because the management is "arrogant." "We used to have 60, over 60, Class Ones in the country," Larkin said about major railroads 20 years ago. Currently there are only seven, and that number will be reduced to six once the Illinois Central Railroad is bought out by the Canadian National Railroad, Larkin said.

Larkin also believes UP is being short-sighted in refusing to sell the line. Missouri Central would offer local service to shippers, but would have to have connections with other, larger railroads in Kansas City and St. Louis. UP would gain rail business. "They would benefit very quickly," he said. In addition to shippers already on the old line, Larkin said new business would be generated. Feed mills and slaughter facilities for poultry and hogs could end up locating along the rail line, he said. Many Class One operations cooperate with short-line railroads because they get more business, Larkin said. Cooperation in many areas have reduced "paper barriers" to shipping, he said. "Most benefits of merger can be achieved with cooperation," he said. Larkin said UP has developed a "Missouri be damned" attitude in its effort to squelch competition. "Free enterprise is one thing, but abuse of power is another thing," he said.