Federal board rejects company’s bid to control Northern California rail line for coal-export scheme

A federal board that regulates the nation’s rail rights of way has rejected a mysterious Wyoming company’s bid to seize control of a defunct Northern California rail line to ship coal for export out of Humboldt Bay.

In a decision published Friday afternoon, the U.S. Surface Transportation Board stated it would not consider the North Coast Railroad Company’s petition for control of 176 miles of abandoned rail line north of Willits because the firm had missed an earlier filing deadline in the case.

The decision was a victory for supporters of the Great Redwood Trail, a state-backed initiative to incorporate the abandoned line into a 320-mile recreational trail that could one day stretch from Eureka to San Pablo Bay in Marin County.

If the decision holds — and it was not immediately clear what path, aside from a challenge in federal court, existed for an appeal — then the blown deadline marked the end of a long-shot coal shipping proposal that nevertheless sparked alarm and vociferous political opposition across the region.

“This drives a dagger through the heart of the coal train,” Rep. Jared Huffman said in a brief interview Friday. The company would face a stiff battle if it challenges the ruling in court, Huffman, D-San Rafael, said.

“They made no serious attempt to explain why they blew the deadline, which they’ve known about for months,” he said. “If they want to light a bunch of coal money on fire chasing an appeal, then I hope they do it.”

In its federal filing, the North Coast Railroad Co. indicated it had $15.7 million in the bank to clear an initial test of financial feasibility. That June 1 document, however, came a day late.

The company cited “unforeseen vacation travel delays” and asked the board to accept the late filing. But proponents of the Great Redwood Trail immediately called on the board to reject the proposal, and the board appears to have listened.

The rejection of North Coast Railroad Co.’s petition came the same day that Sen. Alex Padilla, Huffman and Rep. Mike Thompson, D-Napa, sent the transportation board a letter accusing the company of falsifying a financial document in its June 1 filing.

The bank statement submitted by the company, the lawmakers said in their letter, was “at best misleading and at worst fraudulent.”

Representatives of the North Coast Railroad Co. did not respond to requests for comment Friday.

SURFACE TRANSPORTATION BOARD DECISION .pdf

Alicia Hamann, executive director of the nonprofit Friends of the Eel River, said attorneys for the conservation group were looking into the North Coast Railroad Co.’s options for appealing the decision. But she said allegations of fraud in the financial filings, the missed deadline and widespread local resistance to the coal shipping proposal amounted to higher obstacles.

“Really, my quick take is, thank goodness. The coal train attorneys were on vacation just at the right time,” Hamann said.

While the board rejected the rail company’s bid, it is allowing a separate petition from Mendocino Railway, operator of the tourist excursion Skunk Train, to advance. Mendocino Railway seeks to restore 13 miles of railroad line north of Willits to ship gravel, according to Robert Pinoli, the company’s president.

Mendocino Railway’s bid is not connected to the Wyoming company’s proposal, and Pinoli has expressed opposition to any coal shipping scheme.

Pinoli has said Mendocino Railway’s proposal for a limited freight railroading operation can coexist with the Great Redwood Trail. But trail proponents, led by state Sen. Mike McGuire, D-Healdsburg, oppose the company’s bid. Restoring a section of the rail line will considerably increase the cost of building the recreation trail, McGuire said.

In a new letter filed this week, McGuire, the Senate majority leader, argued the company lacked the necessary resources to restore the line and did not have a history of freight shipping.

The board, however, found that Mendocino Railway had met an initial requirement of financial wherewithal and is allowing its bid to proceed.

“There are still a couple more hurdles for the Great Redwood Trail, or at least the entirety of the trail,” Huffman said. However, he anticipated the board would now proceed to “bank” the uncontested stretches of defunct railroad north of Willits, a legal mechanism by which the federal right of way is preserved and trail construction can proceed.

In the meantime, Huffman called for scrutiny of the North Coast Railroad Co.’s financial filings.

In its June 1 filing, North Coast Railroad Co. had indicated it had about $15.7 million in the bank in order to prove it had sufficient finances to advance its bid for a takeover of abandoned rail lines through Mendocino, Trinity and Humboldt counties.

The statement indicates the account’s average balance was about $1,000 — and at one point dipped as low as $69.96 — in the weeks leading up to the filing.

The last visible bank balance on the statement is $2,025.96, on April 21, leaving nine days in which the account could have received a transfer amounting to the cash balance claimed in its filing.

Federal credit union Self Help insures up to $250,000 for the type of money market account North Coast Railroad Co. is using, according to a website for the bank. A bank spokesperson did not respond to a voicemail and email seeking comment Friday.

“With a little bit of digging it should become clear that they were playing a shell game with money,” Huffman said. “It’s just one more aspect of this really dubious, shifty proposal.”

Neither North Coast Railroad Co.’s Chicago-based attorney Robert Wimbish nor Justin Wight, a consultant publicly associated with the company, responded to Press Democrat requests for comment Friday.

In their joint letter, the California lawmakers said questions about the bank statement served as one more indication of an “egregious lack of transparency” from a company that alleges it can upend existing plans to decommission the abandoned line and take on a massive rail reconstruction project, estimated at $2.3 billion.

“This entity has not yet disclosed its identity or its source of financing,” the lawmakers wrote. “It is our understanding that this applicant has no ties to the North Coast of California nor experience with freight rail services but is seeking to haul coal across the functionally abandoned rail line for shipment abroad.”

North Coast Railroad Co. was registered with the Wyoming Secretary of State in August of last year. The state is known for loose business registration laws that allow limited liability companies to form with little to no transparency about who is behind them.

The company’s filings to date have not shed any more light on its backers or its plans, were it to gain control of the line. But early filings with the federal board and onetime connections to a Utah government agency and the coal-rich Crow Tribe in Eastern Montana indicated the company hopes to ship coal from the Powder River Basin in Montana and Wyoming for export out of Humboldt Bay.

Little is known about who is behind the coal-shipping proposal besides Wight, a consultant who pushed it with local officials in the Eureka area.

The bank transactions further tie the company to Wight. A number of the transactions indicate transfers and deposits from two other LLCs, one called Twin Hawkes Development and another called TerraNova Strategies. Wight is listed as a senior partner for TerraNova Strategies on his LinkedIn page, while the website ZoomInfo links him to TwinHawkes.

Staff Writer Mary Callahan contributed reporting.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88