Voting Conference, September 15, 2005

Statement of Amy Ziehm

Staff Attorney, STB Office of Proceedings

San Pedro Operating Company, LLC---Abandonment Exemption---in Cochise
County, AZ

STB Docket No. AB-441 (Sub-No. 4X)

Good morning, Chairman Nober, Vice Chairman Buttrey, and Commissioner
Mulvey.

The draft decision submitted for your consideration denies a petition
for exemption filed by San Pedro Railroad Operating Company, LLC to
abandon approximately 76.2 miles of railroad in Cochise County, AZ. The
abandonment is opposed by Chemical Lime Company and Sonora-Arizona
International, LLC.

In its petition, San Pedro states that the level of traffic on the line
has been inadequate to sustain the railroad and that it foresees no
prospects for new traffic in the future. Chemical Lime, the only shipper
on the line, argues that its transportation costs would rise
significantly if San Pedro were to abandon the line. Chemical Lime also
states that it invested significant funds in reliance on San Pedro's
service to reopen its plant on the line and to improve the tracks
leading to the plant. Chemical Lime argues that there is insufficient
evidence upon which to allow the abandonment. Sonora states that it has
pursued, developed, and is in the process of implementing significant
business ventures directly dependent on continued rail service that
could bring traffic to this line.

On rebuttal, San Pedro argues that the increased costs Chemical Lime
might face are not a basis for denying the abandonment, and it maintains
that the business opportunities Sonora describes are too speculative to
be entitled to any weight. Petitioner also submits for the first time on
rebuttal 2004 and 2005 pro forma and consolidated financial statements
and a bridge repair estimate.

The draft decision before you denies San Pedro's petition for an
abandonment exemption. Pursuant to a deadline established by Congress,
the Board must issue a decision on the merits in this proceeding no more
than 110 days from the date the petition was filed. The draft finds that
San Pedro filed its petition knowing that the Board must meet the
applicable time limits and that an applicant (or petitioner) must make
its case-in-chief on opening. The draft states that, while San Pedro
presented some financial information in its petition, it provided no
workpapers or other underlying support for its figures.

In accepting Sonora's late-filed statement, the Board, in a prior
decision, allowed San Pedro to respond to the statements filed by
Chemical Lime and Sonora, but cautioned petitioner to respond directly
to the statements and not to submit evidence and argument that could
have been submitted with its petition. San Pedro provided more detailed
financial information in its rebuttal, but, in doing so, disregarded the
Board's limitation on submitting new evidence. The draft finds that it
would be unfair and improper to consider that new evidence in this
proceeding. If the Board were to consider that evidence, Chemical Lime
and Sonora would be unfairly prejudiced because they have not had an
opportunity to respond to it. The draft concludes that, without the
additional evidence, San Pedro's petition fails. The draft states,
however, that denial of this petition is without prejudice to San
Pedro's filing an appropriate abandonment application or petition for
exemption that contains all relevant evidence and financial data.

We would be happy to answer any questions you might have. Thank you.