SKAGWAY – After two years of promoting the possibility of bringing ore to Skagway via train cars, White Pass and Yukon Route president Eugene Hretzay now says the company will not commit to operating an ore haul on the railroad.

"The business case for the magnetite rail haul has not been met,” wrote Hretzay in a letter addressed to Skagway Mayor Stan Selmer dated Oct. 19.

This news comes exactly one month after a Yukon Chamber of Commerce luncheon at which Hretzay spoke about the benefits of a railroad ore haul. Benefits included the creation of 40 Skagway jobs and savings on shipping costs for mining companies.

During the Sept. 19 luncheon, Chuck Eaton of Whitehorse's Eagle Industrial Metals said he expects about two million metric tons of iron ore to be transported from his mine to Skagway, and he wanted it to travel by rail.

Eagle would be the first mine of several interested in Skagway's port to be ready to ship, and its projected start date is May 2013.

Though Hretzay said he and Eaton were "singing from the same page” in regard to White Pass shipping Eaton's iron ore from Carcross to Skagway, Hretzay mentioned the railroad is owned by ClubLink Enterprises Ltd., and its board of directors would ultimately have the final say about White Pass getting back into the ore haul business.

"I presented the business case, and it was rejected,” Hretzay said in an interview Wednesday, regarding the letter he sent to Selmer last week.

Hretzay said the board has decided it wants to focus its efforts on tourism.

Selmer said the news of White Pass not committing to operating an ore haul is a big shock.

"I felt pretty comfortable at the chamber of commerce meeting that we were being given a really strong message that under the right circumstances, the railroad wanted to haul freight again,” Selmer said.

"There was nothing in either presentation that left me with anything other than the thought of this being the first really good chance since 1982 of hauling freight on the railroad.”

Since the Yukon chamber meeting, municipal officials have been in discussion with consultant Paul Taylor of Pacific Contract Co., LLC, Skagway lobbyist John Walsh and Ted Leonard of Alaska Industrial Development and Export Authority in an effort to generate ideas on how Skagway could participate in getting a rail ore haul again.

In an Oct. 11 special Skagway Borough Assembly meeting, members discussed the potential of borrowing money from AIDEA to purchase flat cars for the railroad to prepare for Eaton's projected haul start date next May.

While attending the special meeting via teleconference, Walsh said chamber luncheon attendees were led to believe both Hretzay and Eaton were interested in pursuing a rail option, but they made it clear they did not expect to raise the capital themselves.

"They were encouraging to the audience that this is an opportunity that perhaps others, including governmental entities, should be interested in,” he said.

In both open and executive sessions, the Skagway Borough Assembly discussed doing whatever it had, capital-wise, to make a railroad ore haul work.

But if the assembly and other government entities in both Alaska and the Yukon were making preparations to contribute, Selmer wanted a commitment from White Pass.

"I sent Eugene an e-mail asking if he and Rai Sahi (CEO of ClubLink) could verify that they were strongly committed to this effort,” he said, adding that Hretzay responded with the letter stating White Pass could not commit.

"This was the best chance Skagway had to get the railroad back into the ore haul,' Selmer said. "I can't overstate the disappointment I feel about this.”

Though Selmer is down, he is not yet out.

"The decision of White Pass to not participate in the ore haul doesn't lessen my desire to make Skagway the port I want it to be,” he said.

It also doesn't lessen Eaton's desire to use Skagway as Eagle Industrial Metals' port.

In an interview Tuesday, Eaton said he is surprised with White Pass's choice but understands that business decisions need to be made at the CEO or board level.

"We're disappointed the railroad has chosen not to pursue the potential resource of a freight service,” he said. "But they've got their own business decisions to make.”

Unless something changes on White Pass's end, Eaton will truck the iron ore to Skagway.

"That was always kind of the back-up plan in case the railroad didn't come through,” he said.

Eagle will be shipping about 1.9 million metric tons of iron through the Port of Skagway.

This operation could take about five to six years, with 30 double trucks coming through Skagway 24 hours a day, seven days a week from May until November next year and April until November in subsequent years.

Though the assembly hasn't had a chance to discuss where it will go from here, Selmer said members have been clear on the fact that they do not want more than 650,000 tons of ore per year going down State Street by truck.

In a Sept. 14 assembly meeting, Selmer mentioned the possibility of a bypass road for ore trucks through the Seven Pastures area, so they would not have to run through the middle of town.

This road could eliminate the need for a trucking cap of 650,000 tons in the potential 2023 AIDEA waterfront lease.

Selmer said he thinks the idea for a bypass road is now in the hands of the State of Alaska, not with the Municipality of Skagway.

The Alaska Department of Transportation has looked into a potential road, Selmer said, but hasn't shared any information with Selmer.

The mayor said the assembly would be discussing White Pass's decision to not commit to the ore haul in upcoming Nov. 1 and 8 meetings.

Rail service between Whitehorse and Skagway was suspended 30 years ago after the former Faro lead-zinc mine – then the railroad's biggest revenue source – began a four-year closure, permanently ending rail shipments of Faro concentrates to Skagway.

By KATIE EMMETS

The Skagway News