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The Surface Transportation Board (STB) has rejected Norfolk Southern Corp.’s and the Watco Cos. Inc.’s plan to launch the Michigan Central Railway L.L.C. (MCR) in early 2008. Last month, the STB denied the parties’ application to jointly form the short line and change ownership of several lines from NS to MCR because the Class I would have “sufficient control” over MCR despite being only a one-third owner, the board said.

In July, NS and Watco agreed to form MCR, which would have operated lines in Michigan and Indiana totaling 384 track miles. The short line also would have acquired NS’ trackage rights for an Amtrak-owned line between Kalamazoo and the Michigan/Indiana state line. Watco would have been MCR’s parent and operator.

However, “NS’s influence over MCR far exceeds what would be expected of a minority investor,” the STB ruled. NS would have been able to designate two of five management committee members and one of three capital project committee members, thus influencing most of MCR’s financial and operational decisions, the board determined.

NS and Watco officials expressed disappointment with the ruling. Amtrak would have benefited from an extended agreement ensuring continued investment in its lines, NS officials said in a statement. In addition, Watco would have spent more than $6 million during MCR’s first year — and more than $20 million within three years — to improve infrastructure and equipment.

“The proposal was a creative, far-sighted response to the long-term trend of shrinking rail volumes in the region,” said NS Chairman, President and Chief Executive Officer Wick Moorman, adding that MCR would have benefited the state, region, and freight-and passenger-rail customers.

The Class I plans to continue seeking options for the lines, but current traffic levels on certain segments don’t justify additional investment and service might be curtailed in some areas, NS said. Watco officials expect to continue working with NS to determine how to expand rail service in Michigan.

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Colorado’s Great Western lands $4 million RRIF loan

Last month, the Federal Railroad Administration (FRA) issued its third Railroad Rehabilitation and Improvement Financing (RRIF) program loan to a freight railroad and fourth overall in 2007.

OmniTRAX Inc.’s The Great Western Railway of Colorado L.L.C. will receive a $4 million RRIF loan to help fund the construction of track connecting to a Windsor, Colo., ethanol plant, a new interchange with Union Pacific Railroad in Greeley, Colo., and other trackwork. The 80-mile Great Western serves 11 shippers at a 700-acre industrial park located between Windsor and Greeley.

The FRA previously issued RRIF loans in ’07 to R.J. Corman Railroad Group, the Dakota Minnesota & Eastern Railroad Corp., and Virginia Railway Express — the first commuter-rail recipient.

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CN to acquire fourth northern Alberta short line

Canadian National Railway Co. reached a deal to acquire the Athabasca Northern Railway Ltd. (ANY) for $25 million from Cando Contracting Ltd. pending long-term traffic guarantees from shippers Suncor Energy Inc., OPTI Canada Inc. and Nexen Inc.

CN plans to spend $135 million during the next three years to upgrade the 202-mile short line to facilitate northbound construction material and machinery moves for oil sands development in the Alberta Industrial Heartland near Edmonton. ANY interchanges with CN in Boyle, Alberta.

In 2006, CN acquired three northern Alberta short lines: the Mackenzie Northern, Lakeland & Waterways, and Savage Alberta railways.