McFarland_dh.doc

February 29, 2000

VIA FED EX

Thomas F. McFarland, Jr.
McFarland & Herman
20 North Wacker Drive, Suite 1330
Chicago, IL 60606-2902

Re: Legal Consultant Fees in the Camas Prairie Abandonment

Dear Tom,

Enclosed for your review and signature is a contract for legal consultant services in the above-referenced case. If this contract meets with your approval, please sign both copies, retain one copy for your file, and return the other copy to me.

Enclosed for your information the draft Environmental and Historical Report prepared by Camas Prairie. I have also included a track profile and a profile and track composition for this branch commonly referred to as the “Second Subdivision.” As you will note in the profile and the bridge index, the change in elevation or grade for this line represent approximately a 3,000-foot grade increase from Spalding to Craigmont. At Craigmont there is a large grain shipper (Lewiston Grain Growers) and a timber mill (U.S. Timber) which estimates 470 car loads of logs inbound and 250 cars of finished lumber outbound. U.S. Timber has indicated it ships approximately 60% of its finished lumber by rail and the remainder by truck. I am still waiting to receive the traffic data from other shippers on the line.

The Commission has contracted with Peabody & Associates for the rail and structure inspections as well as the evaluation of the financial data. We are hoping that Peabody can perform its rail and structure inspection during the week of March 13, 2000. Traffic for 1999 was about 2,100 cars.

At this juncture, I am wondering what materials we should ask the railroad to provide now. For example, should we ask for the right-of-way maps and any deeds it has now? In addition, I would like your thoughts on:

1. Should the Commission hold its state hearing before or after the Abandonment Application is filed?

2. Should I ask now for the amount of annual subsidization to keep the line in operation? Because the largest shipper is located in Craigmont, I was wondering whether there might be any benefit to trying to maintain the rail line to Craigmont? Obviously this would cut off shippers located in Grangeville but might retain the two largest shippers with the possibility of a reload facility. Unfortunately, most of the large structures are between Spalding and Reubens.

3. Given the fact that approximately 40-miles of the line are on the NezPerce Indian reservation, we may want to determine whether the railroad has a copy of the treaty regarding the granting of the right-of-way to the railroad.

Once you have had an opportunity to review the materials, please feel free to give me a call at [phone]. If possible, I would like to accompany Peabody on its inspection of the rail line. In addition, I had hoped to hold a meeting with shippers and government officials at that time to prepare them for the PUC and STB proceedings. This meeting will also allow me to gauge the interest that shippers may have in strenuously opposing the abandonment.

Sincerely yours,

Donald L. Howell, II
Deputy Attorney General

Enclosures

Vld/L:McFarland_dh
Thomas McFarland
February 29, 2000
Page 2

1

2