News & Reviews News Wire Moffat Tunnel lease could become part of fight over Uinta Basin Railway

Moffat Tunnel lease could become part of fight over Uinta Basin Railway

By Trains Staff | July 30, 2023

| Last updated on February 2, 2024

Opponents of oil-train traffic see opportunity in lease set to expire in January 2025

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Diesel locomotives shed exhaust in misty clouds near a tunnel entrance in a snowy mountain scene.
Union Pacific diesels approach the east portal of Colorado’s Moffat Tunnel. UP’s lease on the tunnel, which expires in 2025, is the subject of scrutiny from opponents of more oil-train traffic on the route. Charlie Conway

DENVER — Colorado opponents of the oil-train traffic expected to be generated by the Uinta Basin Railway may attempt to use Union Pacific’s soon-to-expire lease on the Moffat Tunnel as leverage in their effort to fight the Utah project, the website Colorado Newsline reports.

The 99-year lease UP inherited in its merger with Southern Pacific — under which the railroad pays $12,000 a year for use of the state-owned tunnel — expires on Jan. 6, 2025. Kate McIntire, a regional manager for the Colorado Department of Local Affairs, told Colorado Newsline she has been tasked with “developing our list of concerns, potential opportunities, roles, responsibilities, and ways stakeholders would like to ensure they’re involved in the negotiation.”

McIntire said concerns about the potential rail traffic from the Uinta Basin project, which could send up to 350,000 barrels of oil per day over the Moffat Tunnel line, have already been voiced by several cities and counties, as well as by Denver Water, which uses the original 1922 Moffat Tunnel bore for water movement. Those comments, she said, “were addressed more directly to Union Pacific.”

She also said she expect to hear more from communities and counties along the UP line between Denver and Grand Junction, saying, “… we’re really early in a complex process with legal considerations, roles, responsibilities, and potential opportunities that may or may not be tied to the lease,” McIntire said. “But we’re definitely aware of those concerns, and we’ll continue to do everything we can to ensure stakeholders are engaged.”

Eagle County, Colo., Attorney Bryan Treu told Colorado Newsline in an email that “Anything the state can do to get off the sidelines and participate [in opposition to the project] would be appreciated. We would encourage the state to use all tools at its disposal, including any Moffat Tunnel lease negotiations, to protect every Colorado community along the rail corridor that will be forced to face very real risks of derailment, spills, water contamination and fires.” Eagle County is one of the parties to the legal action challenging the Surface Transportation Board’s approval of the Uinta Basin project [see “Colorado county plans to challenge approval …,” Trains News Wire, Feb. 2, 2022].

Ted Zukowski, an attorney with the Center for Biological Diversity, another party in the suit over the STB decision, told the news site, “It’s crazy that Union Pacific pays Colorado far less rent for the Moffat Tunnel than the median price of a studio apartment in Denver. This is a once-in-a-lifetime opportunity for [Gov. Jared Polis] to protect Colroado communities, our water, our rivers, and our public lands from hazardous materials spills from trains that travel through the Moffat Tunnel.”

Union Pacific spokeswoman Robynn Tysver confirmed in an email to Colorado Newsline that negotiations over the tunnel lease are underway, and noted the railroad’s common-carrier status: “Union Pacific is required by federal law to transport hazardous commodities that Americans use daily, including crude oil, fertilizer and chlorine, and 99.9% of the hazardous material shipped by rail reaches its destination safely.”

35 thoughts on “Moffat Tunnel lease could become part of fight over Uinta Basin Railway

  1. I’m disappointed that this Trains Newswire piece incorrectly states in the first sentence of the second paragraph that Union Pacific merged with the Southern Pacific (sic). Folks at the K: Union Pacific *bought* the Southern Pacific. A correct way to say it is that UP acquired the SP.

    As for the lease: If the stated $12,000. lease payment figure is correct, why would UP have wanted to buy the tunnel in 1998 if it could lease same for a relative pittance? Plus, a lease payment would likely be deemed an operating expense whereas when you own something it’s an asset instead, and like any business, UP is concerned about its return on its assets.

    As some have already pointed out, UP has two existing parallel routes: Its mainline to the north across southern Wyoming and the mothballed Tennessee Pass Line to the south. I agree with some of the commenters that UP probably wouldn’t want to re-open the latter for several reasons including but not limited to rehab costs. But it could certainly take Uinta traffic west to Provo as already described, then north to Ogden and then east. Then if the traffic is ultimately going south to destination it may go through Denver anyway. If such a scenario comes to pass and UP walked away, I wonder what the current owner of the tunnel would do with an asset that isn’t earning any rent? Would farmers pay $12,000 a year to use it for growing mushrooms? Would some shortline operator step forward, knowing its would-be line was surrounded by Union Pacific in all directions?

  2. The Commonwealth of Massachusetts had a similar problem with the Hoosac Tunnel and its Troy & Greenfield RR. Completed in 1875 for $17.25 million and operated as a toll road (a railed Mass. turnpike) with five railroads contributing traffic (Fitchburg, Conn River, New Haven & Northampton, Troy & Boston, and Boston Hoosac Tunnel & Western). In 1887 it was sold to the Fitchburg for only $10 million ($5 mill in FRR 5% bonds due 1937 and $5 mill in new FRR common stock with all existing FRR common becoming a new preferred stock in the same legislation). The legislature knew what it was doing and agreeing to the loss of over $7,000,000; a condition/understanding was the FRR would combine the entire route under one management.
    To make matters worse the new 1887 Federal ICC Act of that year outlawed the rate pooling that the FRR had extorted out of the Boston & Albany so FRR stock ceased paying dividends and when they finally resumed FRR common only got 1%. (Mass. had even agreed to never vote its FRR common shares!) In 1900 when the Boston & Maine leased the FRR (5% on FRR preferred, 1% on common) the B&M bought Mass.’s $5,000,000 FRR common for $5 million in B&M 3% 50-year bonds. 3% is three times 1%! No, that B&M purchase was NOT decisive on the lease election voting; FRR directors voted 7-6 against but put the issue to the stockholders ($17.7 million preferred and $7 million common) where the B&M lease won 62-38%. Comm. of Mass. holdings in B&M bonds continued to be mentioned in the financial manuals as late as 1949. But clearly Mass. took a bating in building and operating the Hoosac Tunnel. (BTW I have read NOTHING of anyone’s ever proposing a system of inclined planes to rival those at Ashley PA.)
    The governor elected in 1887 (annual terms back then!) had campaigned on getting Mass. out of the RR business; his other act was for Mass. to sell the 15% of New York & New England common it owned for cash which turned out to be fateful for that road.

  3. While negotiations are underway, Union Pacific emphasizes its legal obligation to transport hazardous commodities safely. The company has not specifically assessed the risks associated with the increased oil-train traffic from the Uinta Basin Railway project.

    Dr. Güntürk Üstün

  4. Once again a class 1 looks at short term savings and ignores potential future expenses in the long run. Why would one not look at the fact the tunnel lease will soon expire and what are the potential downfalls of a new lease? If memory serves me right, the NS lease on the NCRR was soon to expire not long in the distant pass. NS made demands of North Carolina for a new lease or they would reroute the traffic. I do believe NC called their bluff. So, what is UP thinking?
    And Tennessee Pass would require a lot of money to get back up and running as a through route. If potential grain trains brought out the NIMBY’s, imagine what oil can accomplish.

  5. Would really like to see all those let’s kill the oil , give up their SUV’s before all the complaining.

    1. The railroad tunnel is owned by the state of Colorado, and the parallel water tunnel is owned by the city of Denver.

  6. The crude oil coming off the Uinta Basin Railway will almost be at Soldier Summit, but still with a 1,300-foot climb or so to the top. Worst case, if somehow they are barred from using the Moffat Tunnel, unit oil trains could head north through Provo and Salt Lake City to Ogden and thence east. It will add route mileage but considering Canadian oil bitumen goes from Alberta to refineries in the south and is still profitable, one would think such a move for Uinta Basin crude would still be financially viable.

    1. I have never heard of a railroad called a public utility, could you please further discuss. I am aware they have similar regulations, but they are not supposed to be monopolistic, not governed by states and generally do not serve the public (people as opposed to businesses) directly. I am genuinely curious.

      Also what is an escalation clause?

    2. JACOB — “Escalation clause” means that prices can increase yearly. As one common example, each year’s price increase is tied to COLA.

  7. Back in September 1996, when good luck winked at it, Union Pacific should have bought the Moffat Tunnel from Southern Pacific!

    Dr. Güntürk Üstün

    1. Dr. Ustun: From as far as I can tell from reading the article (above) and from other sources, Southern Pacific didn’t own the tunnel. I can’t understand your post.

    2. David Moffat first conceived of the tunnel in 1902, but before his death in 1911 he was unable to obtain financing to build it. The city of Denver in 1922 finally received legislative authority to create an improvement district that could issue bonds for construction. The bonds were paid off in 1983, but the district continued to exist until 1998, when the legislature abolished it after bitter feuds with the Winter Park resort. There were two tunnels built, one for the railroad and one for water. After the commission was abolished, Denver water bought the water tunnel, but Union Pacific declined to buy and elected to keep its rental agreement in place, at a rate of $12,000 per year. That lease expires in 2025, and given Colorado’s political climate renewal won’t come without a steep cost.

    3. Who knows, maybe UP will put some of its capital monies toward buying it now. So sad Eagle County is that happens! But as was said above, this oil can always be shipped in two different directions and completely bypass Colorado and all its SUV driving tree-huggers. (I know. I used to live there.)

  8. The 6.2 miles (10.0 km) Moffat Tunnel is a railroad and water tunnel that cuts through the Continental Divide in north-central Colorado. Named after Colorado railroad pioneer David Moffat, the tunnel’s first official railroad traffic passed through in February 1928.
    The Moffat Tunnel finally provided Denver with a western link through the Continental Divide, as both Cheyenne, Wyoming, to the north and Pueblo to the south already enjoyed rail access to the West Coast. It follows the right-of-way laid out by Moffat in 1902 while he was seeking a better and shorter route from Denver to Salt Lake City. The Moffat Tunnel averages 15 trains per day. The railroad and water tunnels parallel one another; the water tunnel delivers a portion of Denver’s water supply. In 1979, the tunnel was designated as a National Historic Civil Engineering Landmark by the American Society of Civil Engineers.
    The Moffat Tunnel’s apex elevation of 9,239 feet (2,816 m) is the highest point on the Amtrak network.

    Dr. Güntürk Üstün

    1. The Moffat Tunnel Route needed One More Thing: the Dotsero Cut-off from Dotsero to Orestod; Dotsero is Orestod spelled backwards. When THAT was completed in 1934–the Denver finally had its own transcon route. Anyone know what was the proposed amount for UP’s purchase of the Moffat Tunnel? May have been too expensive for the time and in 1998 could one foresee Colorado’s takeover by Left-Wing Loonies? I could see this oil traffic avoiding the Moffat Tunnel Route and going elsewhere.

  9. It would be nice to have some hard numbers (I.e. data) rather than 99.9% (of what?). Furthermore, the Moffat tunnel was built with Public Finds (bonds) for multiple purposes (water, transportation) and anything that prevents a Public Utility (UP) from utilizing same is unlikely to stand up in Court – although obviously, the Lease should have had an escalation clause).

    1. 99.9% of ALL hazardous material shipped via railroad arrive at destination(s) safely and without incident…is it that hard to parse what was being stated?

    1. The engineering and funding are in place and the actual route-way surveying has already begun.

  10. Railroads are Common Carriers under the law so I don’t know how they could prohibit the UP from hauling any particular commodity.

  11. One way they could reopen Tennessee pass . Run them over that down thru Pueblo. Or just bypass Colorado all together and let trucks do the work.

    1. Why? 3% grade eastbound and terrible snow.. Not happening. They would be better off sending the oil west via SLC to interchange with UP.

    2. Because the biggest customer of the Uintah oil is the petro coast in the gulf of Texas and Louisiana. Otherwise it will have to cross at the southern route to reach it.

  12. The ‘California Zephyr’ will emerge unscathed however this debate is resolved. Maybe the train will be re-equiped with new cars if the debate lasts long enough.

    1. I wouldn’t bet on it, Penelope. Any problem with the tunnel, passenger will be the first to go.

  13. Here’s my solution: Close the railroad and put all the hazmat onto I-70.

    I’m sure I-70 is 100.0000% safe, both on the mountain passes and in downtown Denver.

    1. Actually the People’s Republic of Santa Monica some years ago refused to renew a oil pipeline permit across the city. So the oil company just put the oil into trucks and had them drive across Santa Monica to the refinery. The city changed its mind. Also some years ago a railroad (maybe even the UP) tried to really raise rates on hazmat material because of the risks carrying it and the STB said it couldn’t do it.

    1. For the types that fight projects the enhance human flourishing, there will never be enough 9s.

    2. It is because technically you will never reach 100% no failures…no matter how many times people use that number.

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