States NETEX claims are ‘not persuasive’
The Blacklands Railroad now has permission from the Surface Transportation Board (STB) to leave their Sulphur Springs location as early as March 15 if they so choose, according to a Feb. 14 ruling.
On Nov. 15, 2019, Blacklands Railroad first filed their petition with the STB to remove themselves from the 65.59 miles the company operates between Greenville and Mount Pleasant, according to the filing. This was in conjunction to a lawsuit Blacklands filed against the Northeast Texas Rural Rail Transportation District (NETEX) in which Blacklands alleged tortious interference by NETEX.
According to Blacklands owner-operator Wayne Defebaugh, in mid-2017 when NETEX began to pursue the Franklin County Container Terminal (FCCT) project near Mount Vernon, he disagreed strongly with the board’s actions, which ultimately led him to bring his lawsuit against them.
“This board was going down a path we didn’t think was going to be any good for us or the railroad,” Defebaugh told NETEX earlier in February, explaining the birth of the lawsuit.
Throughout the past two months, both NETEX and Blacklands have filed additional filings with the STB respective to Blacklands’ November petition to nullify its contract in advance and take leave of the area.
In a Jan. 27 filing, NETEX ascertained that Blacklands “has decided to use half-truths and outright falsehoods” in official documents to the STB and that NETEX “has spotted over 50 issues in the BLR petition that require correction.” NETEX claimed that Blacklands has a “scheme” and is “predatory.”
In the STB’s final Feb. 14 ruling, however, the governmental oversight board found NETEX’s arguments “not persuasive.” The STB stated they would not force Blacklands to operate at a monetary loss, which they believed the company had demonstrated to the STB by handing in financial documents.
Although NETEX stated to the STB that it does not believe Blacklands financial data to be accurate because it has not been audited by a third party, “the [STB] does not generally require verified financial data to be audited by a third party,” the STB stated.
The point the STB stresses the most in their finding, is that “no shipper has opposed the proposed discontinuance or indicated that they would be adversely affected by it.” In fact, the opposite is the case: several shippers spoke out over the course of the ongoing proceedings against what they said they perceived as lack of transparency by NETEX.
On May 8, 2019, Brad Johnson representing the Northeast Texas Farmer’s Co-Op presented a speech before the board, followed on Aug. 3 by Rick Anderson and Matt Jasmer of Feeder’s Supply and David Stevenson of Custom Commodities.
A major sticking point, for NETEX at least, was the desire for Blacklands to quit the 7.9-mile stretch of track it leased from Union Pacific at Mount Pleasant. In filings, NETEX stated it believed Blacklands would “potentially block ... access to the interchange in Mt. Pleasant” which Blacklands would use for “potential market power abuse.” Blacklands replied, “NETEX presents no facts or reasoning to support this fear, and BLR cannot think of a motivation why such interference would be to BLR’s benefit.”
The STB agreed with Blacklands, and instructed NETEX, “If BLR were to engage in such activity, NETEX could seek appropriate relief to enforce its trackage rights at that time.”
About NETEX’s claim that Blacklands has left the tracks in “severely deteriorated conditions,” the STB states, “the Board need not resolve this dispute. … [This] is a contract issue governed by state law and should be determined by an appropriate court.”
As of Feb. 7, Defebaugh had expressed his desire not to leave Sulphur Springs and was instead pursuing $42 million in private equity from a company called Sabine RailWerks, who presented before the NETEX February regular meeting about their plan to revitalize the line.
NETEX has until March 2 to file an exemption request to this petition, according to the STB decision.