McFarland-Plaistow_dh.doc

March 29, 2000

VIA FED EX

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

Joseph J. Plaistow
L.E. Peabody & Associates, Inc.
1501 Duke Street, Suite 200
Alexandria, VA 22314-3449

Re: Follow-up to Last Week’s Conference Call

Dear Tom and Joe,

I have enclosed several documents for your review that we discussed during last week’s conference call. They include comments from the three state agencies (Transportation, Environmental Quality, and Historical Society) addressing the draft Environmental and Historical Report (EHR) prepared by Camas Prairie RailNet. You will note that our friends at the Transportation Department pointed out several deficiencies in the EHR. Although the letter was signed by someone else, our friend Ron Kerr did do the drafting.

Also enclosed is Camas Prairie’s Annual Report submitted to the Idaho Public Utilities Commission for calendar year 1999. You will note on the equipment listing that the Company has seven diesel engines and 324 freight cars. The Company also reported gross operating revenues of approximately $1.24 million. I have also included a newspaper article discussing the dam breaching issue in a little more detail. Again, as we discussed in our telephone conversation, I believe that this subject is best addressed by the shippers and the local governmental officials. Next, I have included a copy of the Idaho Senate Joint Memorial opposing the abandonment of the Grangeville branch. You will note on the second page that the Idaho Legislature urges the STB to “reject any Application for rail abandonments” and urges the STB to “conduct a public hearing in the affected area in Idaho, for the purpose of receiving both oral and written testimony.” Unfortunately, the Memorial also states that the STB “has not shown any sensitivity toward the needs and concerns of this state.” Maybe that was a little harsh.

Next, I have included a letter that I recently sent to Gary Hanes in Winchester, Idaho. Mr. Hanes has been retained by John Bennett (the owner of Shearer Lumber in Grangeville) to organize the area shippers and local officials. Prior to my letter, I had spoken both to Mr. Hanes and Mr. Bennett about the need for organizing local opposition to abandonment of the Grangeville line. I had encouraged both of them (although Gary deferred to Mr. Bennett) to consider retaining Tom for his legal expertise in this matter. In my conversation with both of them I downplayed any rails-to-trails request, to which they both agreed.

In my telephone conversation with Mr. Bennett, I also cautioned him about the alleged NLV for this line being substantially less than the $3 million figure Mr. Nelson mentioned to me the last week. Mr. Bennett mentioned that he has no plans now for purchasing the line and I also advised him that an offer to purchase or subsidize the line did not have to be offered at this time.

Although I have not received Columbia Grain’s traffic data for the forecast year, I talked to Shawn O’Connell of Columbia Grain last week. Mr. O’Connell said he would go ahead and ship me the forecast year car shipments. He did say that he anticipated that his shipments in the forecast year would be more on the lines of his 1998 shipments (1,017 cars) than his 1999 shipments (844). Although most of his grain shipments are “shuttle” shipments from the line down to the Port of Lewiston for shipment by barge, he did estimate that approximately 200 cars of barley would be shipped to other points. I also expect that he may ship one or more unit trains (he did a 75-unit train last year).

I also talked with two other shippers who had not reported their forecast year traffic. Idaho Lime indicated that the Company was for sale and that they did not anticipate any shipments in the forecast year. They shipped three cars in 1998 and seven cars in 1999. Lyman Dust Control indicated that it expected to receive eight cars of magnesium chloride used for dust control. This is the same number of cars that the Company received in 1999.

One other recent development. For reasons not pertinent here, the state of Idaho lost a recent case to the American Trucking Association regarding Idaho’s ton-mile tax for truckers. As a result of the Court case, the state of Idaho is raising the ton-mile tax for intrastate trucks including farm vehicles. As explained during a radio news program, the ton-mile tax to farmers will more than double. The ton-mile increase may indirectly promote rail shipments because farmers and grain producers may truck shorter distances to elevators on the rail line rather than the 60 miles down and back the Winchester Grade.

My attempts to contact the former general manager of the Camas Prairie, Paul Wyatt, have not been successful. I will continue my efforts to contact him.

Finally, as of today, I have not received any Notice of Intent to file the abandonment application. If you have any questions about the enclosed materials, please give me a call at [phone].

Sincerely yours,

Donald L. Howell, II
Deputy Attorney General

Enclosures

vld/L:McFarland_Plaistow_dh
McFarland-Plaistow
March 29, 2000
Page 2

1