Fortress Investment Group LLC (FIG)

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Oregonians critical of rail shutdown
Friday April 25, 1:18 pm ET
By Sarah Skidmore, Associated Press Writer
Oregonians tell feds of problems with rail shutdown, urge more oversight

PORTLAND, Ore. (AP) -- Regional shippers and several members of Oregon's Congressional delegation say the owner of a closed railroad line has shirked its duties and urged federal regulators to increase their oversight of carriers.

Sens. Ron Wyden and Gordon Smith and Rep. Peter DeFazio testified Thursday before the federal Surface Transportation Board, along with Allyn Ford, representing the Coos-Siskiyou Shippers Coalition of shippers.

All complained about the problems the state has faced since Central Oregon & Pacific Railroad -- and its parent company, RailAmerica -- abruptly closed the line that runs between the Eugene and Coos Bay areas last fall.

"We depend on railroads," Smith told the board at the hearing in Washington D.C. "We need owners who are serious about railroads because we are serious about them."

RailAmerica officials declined comment, but are expected to speak before the board Friday.

The Oregon delegation has been vocal about the difficulties the shutdown caused businesses that had to scramble to find alternate means of getting their goods to market. They've also lambasted the owners for conflicting messages about the decision and failure to reopen the line.

"Buying a railroad is not like buying a fast-food franchise," Smith said. "There is a responsibility to serve the public that comes with owning a railroad."

The Surface Transportation Board held the two-day hearing to assess the obligation of carriers on railroads. There is some discussion in the U.S. Senate of increasing federal regulation of railroads.

The Oregon delegation did not ask for heavy regulation, but did push for a clarification of the duties carriers have toward the public.

The federal board has given RailAmerica a month to justify its actions in closing the line. If the board determines RailAmerica abandoned the line, someone else could come in and operate it.

Critics say the carrier neglected its public obligation and acted illegally, possibly for the financial benefit of its parent organization -- hedge fund Fortress Investment Group.

"It grows out of something larger," Smith told The Associated Press. "A lot of hedge funds have looked to invest in railroads and their obligation is short term. We need to make it clear that there are profits to be made in owning a railroad but there are public responsibilities that come with that."

RailAmerica closed the line in September, with just one day's notice, citing safety reasons. Initially, the company said there was not enough to traffic to justify reopening the line. It later said it would reopen it if the state would provide much of the money to do so.

The state has repeatedly rejected such requests, saying the line must reopen first.

CORP has also raised rates and reduced service on its Siskiyou line in southern Oregon, and threatened to cease operations altogether.

Critics and regulators have also questioned the company's actions, saying an inspection showed the safety problems had been developing for some time and the company might have failed to invest in proper maintenance.

"Railroads have a duty to provide service upon reasonable request," Wyden said. "By law, a railroad may not refuse to provide service merely because to do so would be inconvenient or unprofitable."

At the same time the company was requesting subsidies from the state, the hedge fund parent organization loaned $24 million to Michael Jackson for his Neverland ranch. Wyden criticized the move and said the company could have upgraded the entire 136 miles of the track to pristine condition with that money.

"Fortress and CORP are in their own Neverland," Wyden said. "A world where others will pay for their business operations. Who wouldn't want to get a deal like that if they could get away with it?"

http://biz.yahoo.com/ap/080425/or_rail_hearing.html?.v=1