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Whistle Stopped

A proposed railroad merger threatens jobs throughout Colorado -- and, up in Minturn, a way of life.

Like many others opposed to the merger, Gulliford believes Anschutz used his immense wealth to win Romer's ear. Anschutz is a prominent fundraiser for the national Republican Party, but he personally signed a $5,000 check for Democrat Romer's 1994 re-election campaign. "Roy Romer and Phil Anschutz are close, there's no secret to that," Gulliford says. "If Romer runs for the Senate, who has the deep pockets?"

Even without Anschutz on board, Union Pacific's political influence is powerful. With major operations in twenty states, the railroad is a player in legislatures and congressional delegations in almost every western state. In Colorado the railroad has retained the services of Cole Finegan, an attorney at Brownstein Hyatt Farber & Strickland, known for its links to Romer and most of the state's congressional representatives. Finegan is Romer's former chief legal counsel and is frequently seen at the governor's side, even accompanying Romer on hunting trips. Meg Porfido, Romer's chief of staff, is a former Brownstein Hyatt attorney.

Union Pacific chairman and CEO Drew Lewis carries his own form of political clout. Lewis served as secretary of transportation under President Ronald Reagan and later played a big role in creating the Surface Transportation Board, which will have the final say on the merger. And because Union Pacific is the country's largest railroad contributor to congressional campaigns, Lewis is ensured an open door as he makes the rounds on Capitol Hill.

Under Lewis, Union Pacific has often butted heads with the U.S. Justice Department, which is known for its opposition to anti-competitive mergers. The railroad boss has described the Justice Department as being full of "anti-business, pro-Clinton people." When the former Interstate Commerce Commission was abolished by Congress last year, authority over rail mergers would have passed to Justice, and Lewis lobbied hard behind the scenes to make sure that didn't happen. He convinced Congress that authority over mergers should be given to the Surface Transportation Board instead.

The STB will announce its decision in early July. But an unlikely coalition has formed to oppose the merger, including many railroad customers, the conservative American Farm Bureau and the AFL-CIO. The opponents are demanding that, as a condition for approval of the merger, Union Pacific be required to sell several Southern Pacific lines to competing railroads. Southern Pacific's central corridor--the line from Kansas City to Oakland, California, that passes through Minturn--is among the routes critics want to see auctioned off. Montana Rail Link, a successful regional railroad in the Northwest, has already offered $614 million for the central corridor. Not surprisingly, Union Pacific is fiercely opposed to selling that line to a competitor.

"If I were a betting person, I'd bet the merger gets approved," says Dempsey. "The $64,000 question for Colorado is whether it includes a spinoff of some pieces of the railroad to Montana Rail Link."

Dempsey believes Romer botched an opportunity to influence the federal government on that score when he endorsed the merger. In return for his seal of approval, Union Pacific promised only to turn the Tennessee Pass right-of-way over to the state for use as a recreational trail and to keep open the Southern Pacific's Burnham Shops facility in Denver, where locomotives are serviced and rebuilt. "He walked away with commitments that are fairly meaningless," Dempsey says. "As long as the state subjected to the monopoly doesn't object, why should the federal government care?"

In his March letter to the Surface Transportation Board, Romer hardly painted a rosy picture, acknowledging that "Colorado in many ways would experience more serious impacts from the proposed merger than any other state." Colorado "faces the potential loss of over 2,000 jobs, our communities will experience the abandonment of over 300 miles of rail lines--close to 50 percent of all abandonments identified in the merger application--and our shippers are among those most directly affected by the combination of the two major rail competitors in the central corridor," the governor wrote.

Nonetheless, Romer endorsed the merger. While most states in the region have signed off on it, two of the states that share the central corridor route with Colorado--Utah and Nevada--have not. (Texas also opposes the merger.) Jerry Smith, deputy director of the Colorado Department of Local Affairs, served on a task force Romer set up to consider the UP-SP deal, and he met with Romer repeatedly to discuss the merger. He says the general feeling in Colorado was that the state shouldn't interfere with the private marketplace. "There's a fine line between having a pro-business climate and dictating to business what their policies should be," he says. "Having a strong railroad serving Colorado is in the state's interest."

Smith believes many of the fears of merger opponents are based on speculation. "A lot of the discussion is based on what might happen," he says. "It's conjecture what will happen five or ten years in the future." The task force, he notes, heard divergent views on the impact of the merger on Colorado, with some people suggesting the merger might actually help business in Denver, even if it hurt rural areas of the state. "If Denver shippers can get their goods to the West Coast faster through southern Wyoming, is that a bad thing?" Smith asks. "Market forces will determine what gets used and what doesn't."

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