May 292013

By Nick Worth
The best potash deposit in the world isn’t worth much if you don’t have the infrastructure in place to get it out of the ground and transport it to market. This already existing infrastructure is another factor that makes Passport Potash’s Holbrook Basin project so appealing.
The presence of Interstate 40 running straight through Passport’s land to the east of Holbrook and Highway 180 running through the western edge of the holdings are two major pluses for the project, but the presence of the Burlington Northern and Santa Fe (BNSF) railroad is probably the biggest plus for the proposed mine as far as transportation goes.
The east-west rail line also runs through Passport’s property, providing rail transportation to ports in California in the west and to the Gulf of Mexico via Houston and Mexican ports to the east. The line also runs east into the Midwestern states, where the majority of food is grown in the U.S.
The Apache Railway also figures into Passport’s plans. The railway runs to the west of Passport’s proposed processing site and provides an interchange with the BNSF, making it an option for alternative access to the main line. It can also serve as a short-term storage location for 100-car trains waiting for access to the BNSF main line.
Passport’s business would be a financial boon to the local short line, which lost its main customer when the Catalyst paper mill in Snowflake shut down last September.
“We feel that having the Apache Railway there is a huge advantage for us,” said Ken Bond, head of corporate development for Passport Potash. “The track is already in place to store multiple unit trains off the main lines and that’s something we have to have.”
“We have spoken to them (Passport) about what we can provide, but we haven’t spoken to them about rate structures,” said Apache Railway Superintendent Shirley Cornett. “We can store up to 400 cars on our tracks. I’ve had as many as 350 Preferred Sands cars stored here with room for more.”
Cornett said the railcars can be stored in the railway yard east of the closed Catalyst paper mill, as well as on the line to the mill and the branch line that runs into Snowflake. The Apache Railway has 37 miles of main line, six miles of yard track, six miles of branch line and three miles of spur line available.
“If they do come in, we would probably consider building a small spur line at their location to store unit trains,” said Cornett. She said the spur line would be a dedicated storage line off the main line, but would not run to the Passport facility.
“They would possibly be using some kind of conveyor or trans-loading it to us,” Cornett said. “All of that is just speculation at this point.”
She said another possibility would be for the Apache Railway to build a branch line to Passport’s processing site from the BNSF main line and have Apache Railway crews and locomotives provide the switching for the plant.
“They also have locomotives to move rail cars around,” Bond said. “That’s something else they have that we need. They could do switching for us. They have a bridge over the Little Colorado River and a switching agreement with the BNSF, plus track at the BNSF interchange in Holbrook.”
Bond said those things add up to make the Apache Railway a very desirable partner for Passport.
“All those things we would either have to build ourselves at significant cost of money and of time for permitting and securing rights of way and all the rest,” he said. “Passport provides the anchor Apache Railway needs for long-term sustainability of operations.”
Cornett said the various scenarios have all been discussed with Passport.
“It would be determined by how they build their plant,” said Cornett. “We hope that all comes about, and that we can be part of the procedure and grow our revenue base. We hope to partner with them.”
“I think it would be a very good fit for both companies to work together in the future,” Bond said. “We’re very happy with the efforts that have been made to preserve the Apache Railway, because once a railroad goes away, it never comes back.”
The Passport mine is still a couple of years in the future, so the Apache Railway hasn’t been sitting idle since the closure of the paper mill.
“When the paper mill closed, it took away 90 percent of our business,” said Cornett. “It was like starting a brand new business on Jan. 30, 2013, other than the one on-line customer we have with Pigs For Farmer John (PFFJ).”
The railway brings carloads of pig feed to the pig farm located between Snowflake and Holbrook.
“Usually we haul corn, distillers dried grains (DDG) and soy,” said Cornett. “Right now we’re hauling about 45 cars per month to PFFJ.”
Cornett said PFFJ currently has a contract for corn with a provider in Farmington and it is being brought in by truck.
“When we’re hauling corn, we bring in about 90 cars per month to PFFJ,” Cornett said.
The railway has also picked up some other business by storing cars for Preferred Sands, a fracking sand operation located in Sanders. The short line also stores intermodal cars for BNSF and tank cars for Ergon Emulsions, which used to run an asphalt plant in Snowflake.
Cornett noted that the railway is also pursuing other types of opportunities for growth.
“The Apache Railway is a self-sustaining railroad in that we don’t contract anything out,” Cornett said. “We do our own car repairs, locomotive repairs and track repairs.
“A lot of short line railroads don’t do that anymore. They contract all that out,” she said. “We’re really trying to expand our operations,” she continued. “We’re trying to get a contract with BNSF to do car repairs.
“We’re also exploring bringing a trans-loading facility here on site,” said Cornett. “We met with BNSF last week and will be exploring what opportunities are here in northern Arizona for trans-loading.
“There’s a lot of opportunity we haven’t been able to explore in the past,” Cornett said. She said being a subsidiary of the Catalyst paper mill kept the railway from seeking out new revenue opportunities.
“Short lines diversify all the time,” Cornett remarked. “There is a lot of opportunity out there. A lot of short lines are getting into car storage.
“We’re going to have to be aggressive about all these things so we can grow our revenue base,” Cornett said. “The contract we got with BNSF to store the intermodal cars was one we had to get pretty aggressive to get, but they needed it. They didn’t have enough track to store all their intermodal cars during holidays and slow periods.”
Cornett said the local economy will benefit from any additional opportunities for income the Apache Railway comes up with.
“As we grow our revenue base, we hope to put more people back to work,” she said.