WASHINGTON, DC- Congressman Peter DeFazio (D-Springfield) participated in a congressional hearing today to investigate the implications of recent Wall Street interest on the part of hedge funds and private equity firms in the railroad industry. The hearing had particular implications for Oregon where the Central Oregon and Pacific Railroad (CORP) Coos Bay line, which is owned by RailAmerica and parent company Fortress Investment Group, was closed with no warning last September. The Coos Bay line runs between Coquille, Oregon and Vaughn, Oregon.

"I have real concerns with the fact that RailAmerica owned this line for 10 years and invested very little in it. The Coos Bay line is a lifeline for south coast industries and its closure is devastating to the entire south coast economy" DeFazio said.

A major concern for DeFazio with ownership of rail lines by private equity firms, which usually have no rail experience and little interest in running a railroad, is that the investment necessary to maintain the infrastructure will not be addressed. Instead, private equity firms will sell off lines to make a profit or put a line in deep freeze by closing it, thus limiting the ability of shippers to get their goods to market. This has a negative impact on communities like the Port of Coos Bay and the southern coast of Oregon. Railroads are public assets and should not be auctioned off to the highest bidder.

The CORP line is currently owned by RailAmerica, a subsidiary of the private equity firm Fortress, which purchased RailAmerica in February 2007. Last September, the line was closed in an emergency embargo when an inspection of the line found sections of the track and tunnels in a state of gross disrepair. Since the closure of the line, the southern coast economy has suffered and the roadways in the area have been subject to increased congestion. Instead of making the investments to reopen the line, RailAmerica has suggested that the state of Oregon invest the monies to reopen the line and provide operating expenses.

"RailAmerica and Fortress are now demanding that the tax payers of Oregon bail out a private railroad and grant a permanent operating subsidy to keep the line open" DeFazio said. "This is ludicrous! RailAmerica has no credibility in the State of Oregon. Instead of selling the line to the Port of Coos Bay, the State or other interested parties, they have chosen instead to sit on the further disintegrating line, benefiting no one.

Under intense questioning from DeFazio during the hearing, the CEO of RailAmerica claimed they had another proposal for the line but he had no specifics on the proposal and no timeline as to when it might be disclosed.

Congressman DeFazio has been working on the CORP issue since the line was closed last year. Immediately following the embargo, DeFazio requested that the Federal Rail Administration (FRA) investigate the line. The FRA found that the line was in fact in such a state of disrepair that it is was unsafe to operate. Since then, DeFazio has repeatedly urged Fortress to repair and reopen the line. He has also joined with Governor Kulongoski to increase pressure to open the line.

"Locally, it is my hope that a solution can be found and that the CORP line will soon be reopened" DeFazio said. "Nationally, I hope that we can regulate the ownership of freight lines by private equity firms so that what we’re going through in Oregon is not repeated in other parts of the country."

DeFazio is a senior member of the House Transportation and Infrastructure Committee and a member of the Subcommittee on Railroads, Pipelines, and Hazardous Materials.

See the video here.