Shortline answers questions

The Nevada Northern Railway’s lease agreement with S&S Shortline could eventually lead to more commercial businesses moving to Ely. (Battle Born Media Staff photo)

The Nevada Northern Railway’s lease agreement with S&S Shortline could eventually lead to more commercial businesses moving to Ely. (Battle Born Media Staff photo)

Anyone who has attended an Ely City Council meeting in recent months knows that much has been made of the rail car storage agreement between the Nevada Northern Railway and S&S Shortline. The Salt Lake City-based company entered into an a car storage lease agreement with the Nevada Northern Railway in 2009 to make improvements and eventually open up the lines for commerical use. The agreement only focuses on the railroad past the McGill Junction, which is not associated with the historical foundation’s section of track.

Questions about how much the city owes S&S for track repairs, whether they want to own or scrap the rail and more have been asked. Though it was eventually revealed that the city owed $374,000 to S&S after months of inquiries, some of the other questions still remain.

In an exclusive interview with The Ely Times, S&S Shortline’s Manager Mike Williams looks to clear things up and let the Ely community know why his company’s involvement in the railroad is so important.

The Ely Times: A lot of people are just learning the name S&S Shortline for the first time. Can you explain to those people who S&S is?

Williams: S&S is a company out of the Salt Lake City area, owned by Steve Flanders. They’ve been in the railroad business for a while. Steve is probably one of the biggest guys in the country that deals in locomotives, locomotive parts and rebuilding used locomotives. He is just a really nice guy that I’ve known for years, but he is more into the mechanical part of railroading than operating the railroads. That is why he hired me to come in and manage for him and try to get this thing off of the ground. That is something that my company is very successful in doing. We buy our railroads and rebuild them and bring business in. So Steve and I had known each other so he hired me to help him manage it and help him out here.

The Ely Times: Much has been made about the amount of money owed back to S&S Shortline from track repairs. It was revealed in a recent city council meeting that the total amount is $374,000. Is that the true and final total?

Williams: Yes. That is correct.

The Ely Times: The railroad’s executive director Mark Bassett has said that that amount is only expected to be paid back to S&S Shortline through money made by the railroad once it is in operation. Is that correct?

Williams: That is correct. And that is something for me that has been really disappointing. This Marty [Westland], with what he says, there is no wonder people are going to be scared. We go out and fix railroads, that just the way it is. One of the ways we do that is to work with the federal government in obtaining grants which help us rebuild the lines. I’ll tell you a short story here. I took over the same type railroad a few years ago in South Dakota. The track was in three times as bad of shape as the line in Ely. And what we’ve been able to do, and it took everyone working together, is we applied for federal grants, which is like free money that doesn’t have to be paid back, to say here is a way that we can create business. Because of that, between the state and the feds, we’ve just received our second grant which, with the first one that we got and the second one that we were getting ready to do, here was $60 million of money being granted to us to rebuild the railroad. We just turned something that looked like a field of grass into a beautiful railroad, and we did that by having everyone working together.

The Ely Times: Is that your goal then with the NNRY? To get it fully operational?

Williams: Yes it is. But with the way it is right now, you know, I took a trip out there to speak with the city council. The morning before I was scheduled to get into Ely, the city council was supposed to meet with the foundation, but the city council just pulled a boner on them and didn’t even show up to the meeting. That was kind of a slap in the face to me. I traveled 1,000 miles to come and try to get something started and instead what happened was we get the city council who just blows it off and act like they are going to jack these guys around more. It is a sickening situation what is going on there right now.

The Ely Times: In your example with the railroad in South Dakota, you said that everyone worked together. Has the Ely City Council made it difficult to work together like that?

Williams: It is very discouraging and it is making the situation impossible. I hired a consulting firm to help me go out and bring in some big business to this railroad. As you know, there is oil out your backdoor window. That oil is going to be drilled and be found. And once that happens, there will be a tremendous need for capabilities of companies to be able to be located on the railroad to transload oil and everything else. We were working with a certain company, a big energy company, right at the first of the year. And they just came back and said that they were not willing to invest any money out there. I know these people. I do business with them. If it were my railroad, they would be doing business with me. They are not going to come in and build these facilities, which cost tens of millions of dollars, because this thing is a mess out there. They are not going to come up and support the railroad. There needs to be companies brought in from all over the United States to make these shortline railroads profitable and able to operate. Very few shortline railroads are able to make their way with just local business. I own 10 shortline railroads across the country. I’ve got a really nice marketing group. What we do is basically market all those railroads out there under one holding company. So we are in touch with people from all over the United States. That is one thing that we bring to the table. I have a big, construction company. I know how to build track, I know how to buy materials. The main part about it is we have this marketing group that knows how to bring in business from out of state, it won’t just be people from Ely.

The Ely Times: What did you take away from your appearance at the city council meeting?

Williams: I’m not into any cloudy issues. I just tell it like it is. And it is like Marty saying that I don’t have the right to run the railroad. Well, hell if I don’t. The Service Transportation Board gave us the right. We are the operator at the railroad. Whether Marty likes that or not, he isn’t going to do anything to change that. You have an agreement. Here is what is so simple. You have a contract and each party is supposed to fulfill that agreement. That is all we are asking to do. We can’t fulfill anything because of what they are doing to us and we’re not going to tolerate it much longer. It is such a shame what is going on out there.

The Ely Times: So are you saying that the Ely City Council’s actions over the past 10 months are putting the deal with S&S Shortline in jeopardy?

Williams: I’ll tell you what. If it wasn’t for Steve Flanders and how I like Steve, if I were doing this someone else, I would’ve already told them that I’m not wasting my time on this. I’m not a guy that gives up easy. I know that there is potential there. We are not going to give up on this. We have all of the fundamental things to have a good railroad out here, but we are just stalemated right now. One of the other things that Marty does is get people riled up about how much money is owed. They don’t owe us anything. That money is going to be come through generating business. There is several hundred thousand dollars tied up in it right now and does that cost us money? We pay interest on that money so yes it does. We need to get it opened up so we can pay ourselves back. That won’t come from the taxpayer, that won’t come from any city budget. That money will come from revenue generated off of the railroad. So it is nothing but a win-win for the city so get this thing opened up. Generate some money and make it a fluid cash flow. It should be a positive thing for this city and right now it is just dormant.

The Ely Times: If the railroad does not become operational, is there any situation where the money owed will have to be paid back by the city?

Williams: Well the contract which was put together was pretty short. That is probably one of those things that a court has to decide instead of one person’s opinion over another. I’ll be honest with you, it never needs to get to that point. We don’t want it to get to that point. We are willing for this thing to get straightened up so we can go on about our business. I will put it this way. There are certain things that can be done. What the city doesn’t understand is that cities don’t control railroads, railroads are controlled by the Service Transportation Board in Washington D. C. If things don’t get straightened out, what will happen is, the Service Transportation Board will be asked to come out and straighten this mess out. They will do that. I know what they can and can’t do. They can come in and tell whoever is messing up the situation “you’re out of here.” That is not how this game works. The city owns the railroad, and that is great, I own a railroad, but they really have no control of what goes on there. They can make a contract, which they are supposed to live up to, and when they don’t, and it is hampering common carrier obligations to companies that need it, that is a serious situation to be in. We haven’t pulled that out yet to use it, but if things don’t get straightened out, the Service Transportation Board will have to get involved pretty shortly. I don’t want to go there. But if we have to, we will. A city council in Ely doesn’t have a damn bit of say so on what that railroad can do, that is government. We are talking federal here.

The Ely Times: Does S&S have any plans to scrap any of the rail?

Williams: When we started business, railroads were being abandoned and several thousand miles of railroad were being torn out. That was part of our business. We did do that type of work and we still do sometimes. But, what we have done in the last 15 years is that we have targeted buying railroads that, if we wouldn’t have bought them, they would’ve been scrapped. It takes people like myself to step in and say “now wait, hold on here.” I can see something and I can make something of this. We have no right to scrap any part of the railroad. What we do from time to time is take the smaller rail out and sell it to buy a bigger rail to put it in. But as far as just tearing any old rail out and scrapping it, we can’t do that. We have never had any plans to do that. We are not out to scrap the railroad, we are out to fix it and generate business.

The Ely Times: There has been concerns in the community that S&S Shortline would eventually look to own the Nevada Northern Railway. Has there ever been plans to seek out ownership of the railroad of any kind?

Williams: I’ve never had such a conversation. They do not wish to own the railroad. Maybe if the city ever wanted to sell it, then they might. If the city put it up for bid, [S&S] would probably bid on it, but there has never been a conversation about S&S Shortline owning the railroad. We don’t own the railroad, we just want to fix it up. We have no interest in making any types of moves to take over ownership of the railroad. The only thing we have an interest is in operating it.

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Comments

  1. Kudos Ely Times for asking some great and relevant questions of S&S Shortline. Yet, notwithstanding the S&S principal’s high-sounding jurisprudential posturing, Mr. Williams answers are pretty much framed in terms of S&S frustrations of not being able to do business in the manner as it sees fit under its lease agreement with NNR and the related role of the City.

    The S&S principal, Mr. Williams, describes the contractually-related matter as a “sickening situation” and that the “City Council has made the situation impossible.” The City in its part and presumably trying to preserve confidence in this agreement, including fiduciary responsibilities and in the long-term protect taxpayers interests, requested financial data pertaining to the lease and recently initiated an audit of NNR and the lease. Mr. Williams, how are the foregoing actions tantamount to the City not living up to or a failure to fulfill any of the terms of your lease agreement? Specifically, Mr. Williams, what provisions, sections or articles of the lease are you asserting that the City breached?

    As the Ely Times pointed out “Though it was eventually revealed the City owed $374,000 to S&S after months of inquiries.” Why did it take S&S so much time to furnish this information? Since the lease was signed in 2009, Mr. Williams could have used the media of the Ely Times to bring the community up to speed on the milestones achieved and progress to date under the lease. Instead he gives a sidebar account of railroad in South Dakota. Regarding the debt of $374,000, Mr. Williams assures that the City “don’t owe us anything.” However, when the Ely Times asks Mr. Williams if there is any situation when this money owed will have to be paid back to the City, he punts and is not so reassuring. Mr. Williams provides “well the contract was put together and was pretty short, and that is probably one of those things that a court would have to decide.” Surely, you have examined the agreement, Mr Williams. Are there provisions for mediation, indemnification, etc.? Citing a provision of the agreement would not be your personal opinion.

    Mr. Williams, in fact you have not cited any provision of the governing lease agreement to show non-compliance on the part of the City and yet you thrust out that “if things don’t get straightened out what will happen is the Service Transportation Board will be asked to come out and straighten the mess out.” Indeed Mr. Williams you should be trying to foster cooperation and harmonization among the parties, including City officials rather than attempting an end run to advance your own agenda irrespective of the governing agreement.

  2. Shane Bybee says:

    At least Mr. Williams didn’t make his comments as an anonymous coward!!

  3. Yawn! Other than your Aunt Sally Shane, do you have any relative critical thinking?

  4. Wow, you really don’t get it do you Shane!! Go to the back of the class. Your ad hominem attack is neither compelling nor relevant. I suspect the ongoing forensic audit will address issues of accountability and provide some answers. Post your own Bio. LOL

    • Wheeler says:

      Sounds like somebody’s got a specific (albeit anonymous) axe to grind. Speaking as another anonymous commenter, I would simply like to put forward that bios and reputations are ever-present, and Mr. Bybee’s dedication to Ely and WP County as a born and raised resident and business owner/community investor precedes him. Given that resume, where he sits on the specifics of this particular issue probably merits consideration – where he sits on the issue of anonymous windbag trolls is immediately apparent. Where I sit regarding any of these things might still be too subtle for the average intellect stewing in his or her own juices over the latest local issue now ripe for figurative fangs. Unfortunately, shy of recognition, your predictable response to even this will be less fang and more gumming at the edges, but do your worst – I doubt it will leave a mark. Obsequious to your own agenda, I find only yawning amusement in the contradiction that ‘Clarity’ is ironically and ‘apparently’… dense?

  5. Personally, I think the Ely City Council is being nuts! They have potential of bringing in MILLIONS of dollars into the city and White Pine County’s economy and they’re squabbling over a meager $374K!?! Don’t they know that with an operational connection with the National Rail Network that they can save the average citizen thousands of dollars each year with slashed transportation costs and give businesses like Chevron and Shell an incentive to start drilling for oil. When they come in, think of who’ll follow. More families will move in, bringing more tax revenue for the city and county; businesses will come to serve the needs the needs of the workers, bringing even MORE tax revenue for the city and county; the mine at Ruth will be able to cut its transportation costs, thus allowing it to increase in size and generate more tax money for White Pine County.
    And let’s not forget the tourists! Tourists will flock to the railroad to watch steam-operated freight trains roll by, which’ll give the city and county even more public exposure. Also, those train riders and watchers will need to sleep, eat, and get gas, and maybe try their luck at the local casino. No matter how you look at it, for the benefits the city and the county will get, I think $374K is such a steal that it should be (in a figurative way) criminalized! As the old saying goes, “Where ever the rails go, money will follow”.

    • it will also bring in crime and if you not believe me look at Williston n.d. and surrounding area’s also look into the dangers of transporting oil there has been over 15 deaths attributed to this and they will not be using steam engines they will use other engines

      • I actually talked to a few guys at the museum and they’re wanting to get the 81 restored for the specific purpose of hauling freight up and down the canyon. As for the oil problem, what you’re referring to is Bakken Oil, which is a pretty volatile oil. But, railroads have been hauling oil since the 1870’S and the only reason you think it’s a problem is because of CNN, FOX, ABC, NBC, etc having “wall-to-wall” coverage. In reality, serious accidents involving oil trains is dramatically reducing in the last 30 years thanks to the new FRA tanker standards. Another thing to point out is that, even though we have stronger and safer tankers than even 5 years ago, you get a 10K ton unit train of oil barreling down the tracks at 55-90 MPH, there ain’t a dam thing you can do about minimizing a disaster when one of those cars decides to come off of the tracks
        But, the NNRY freight will only be going 35 MPH, which won’t do much when a car decides to bite the dust. As for crime, it comes with the turf of making money.

    • mel bah;s says:

      here is a reality why would foreland stop hauling oil and use rail so here we go fact production of oil in rail road valley has decreased and there will be no more drilling because of the drop in oil . there also has been lay offs. even then they would have to build a tank battery in or around ely and there would probably have to be a impact study done as the oil in rail road valley has benzene which is dangeious and has been contributed too several deaths in north Dakota and why would the oil company want to haul it to ely then wait for it to be loaded on to oil tankers now if the tank cars are leased the cost of a least last year was $ 2500.00 per car per month and there had to be a 2 to 3 years lease so now the problem is how do you get past cherry creek and or curry beings the crossings are covered . next problem the cars would sit a wait for the union pacific to haul them to slc as the train from here can not go on there rail line . next problem is how do you get passed all the cars that s and s has stored on the tracks at shafner it would not be cost effective people should get the facts before posting I have the rail road hauling any thing is only a fantasy. I also have other facts if any one wants to know

  6. It’s SURFACE Transportation Board, not Service. Successor agency to the old Interstate Commerce Commission, but not quite the same thing.

  7. Nathanael says:

    Correction to the article: it’s the “Surface Transportation Board”, not “Service Transportation Board”. Easy mistake to make in an oral interview. They have jurisdiction over all land transportation in the US.

    Its website is here:
    http://www.stb.dot.gov/stb/index.html

    Regarding the issue of the money, it sounds like the situation is this: S&S lent the Nevada Northern $375K to make improvements on the railroad. When business gets going, S&S will pay Nevada Northern a portion of the profits (as part of the contract), and those profits will be applied to the $375K until it is wiped out, after which it will actually be profits going to the City. This is actually a pretty good deal provided the business is there.

    • Wheeler says:

      Thanks, Nathanael – valiant attempt to bring some actual ‘clarity’ to this thing.
      None-the-less, brace of trolling Luddite impact…

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