HISTORY

The Southern Tier Extension is a 145-mile long mainline railroad line that connects Corry, Pennsylvania to Hornell, New York. It passes through Jamestown, Falconer, Randolph, Salamanca, Olean, Cuba, Friendship, Wellsville, and Alfred Station. Once a part of the Erie Lackawanna system, the Southern Tier Extension has a rich history as a 75 mile per hour mainline freight and passenger line. The economy of southwestern New York State was in large part developed because of its rail system, of which the Southern Tier Extension was a primary part.

Southern Tier West Regional Planning and Development Board has been working on issues surrounding the Southern Tier Extension since the mid 1980's. Then owned by Conrail, all of the line was dormant, with the exception of the segment from Jamestown to Olean. Conrail had an obligation to provide service on the Southern Tier Extension through an agreement with New York State Department of Transportation known as the Southern Tier Agreement, but Conrail's pricing and maintenance practices effectively shut down completely the segments west of Jamestown and east of Olean.

The Southern Tier Agreement expired in 1998. In the years preceding the expiration, the four counties in New York and the two counties in Pennsylvania in which the Southern Tier Extension is located were concerned that after the agreement expired, Conrail would formally abandon the line and tear up the track. It was felt that if the line were torn up, it never could be replaced, because of the limited traffic volume and the cost of restoring the rail line.

Accordingly, the counties embarked on a strategy to retain the railroad. The strategies of the counties in Pennsylvania and the counties in New York differed, but ultimately became complimentary. In New York, the four counties agreed to designate the Southern Tier West Regional Planning and Development Board as their lead agent in the process. New York State Department of Transportation gave Southern Tier West its rights to negotiate under the Southern Tier Agreement.

Southern Tier West began a multi-year strategy of negotiating the purchase of the line from Conrail, a process that was replete with many unanticipated turns and strategic re-starts. At one time, the counties proposed creating a non-profit corporation to acquire, own, and operate the line. Ultimately, however, this process was brought to a halt when CSX and Norfolk Southern Corporation announced their proposed acquisition and partitioning of Conrail.

Subsequently, Southern Tier West began negotiating with Norfolk Southern Corporation, which was the railroad that would acquire the Southern Tier Extension line from Conrail. During this period, Southern Tier West became a formal party of record in the federal Surface Transportation Board's (STB's) review of the proposed acquisition of Conrail by CSX and Norfolk Southern Corporation. Southern Tier West provided testimony and written commentary to the STB. In May 1998, weeks before the Southern Tier Agreement was to expire, Southern Tier West, Norfolk Southern Corporation, and the New York State Department of Transportation executed an agreement that provided a strategy for insuring that the line would have service after Norfolk Southern Corporation acquired it.

In July 1998, the Surface Transportation Board approved the acquisition and partitioning of Conrail by CSX and Norfolk Southern Corporation. The Southern Tier Extension line was to be transferred from Conrail to Norfolk Southern. The STB decision formally incorporated the May 1998 agreement into its decision as its approved strategy for the Southern Tier Extension line.

In the summer of 2000, at the request of the four New York counties, the New York State Legislature created the Chautauqua, Cattaraugus, Allegany and Steuben Southern Tier Extension Railroad Authority (STERA) as a public authority. The Rail Authority was an essential element of implementing the May 1998 agreement to return the entire Southern Tier Extension railroad line to local and mainline through service.

In late 2000, on behalf of the STERA, Southern Tier West began negotiating a revision of the May 1998 agreement that would make STERA a party to the agreement, provide for the redress of certain other tax abatement issues, and address service commitment obligations by Norfolk Southern Corporation. This agreement was executed in early 2001.

In February 2001, STERA executed an agreement with Norfolk Southern Corporation under which Norfolk Southern Corporation transferred title to the Southern Tier Extension to STERA for a period of years, after which the title is to revert back to Norfolk Southern Corporation. The agreement also provided that Norfolk Southern Corporation leases the Southern Tier Extension line from STERA during the period of years that STERA owns the line. STERA has the express power to abate real estate property taxes that would otherwise be owed on the Southern Tier Extension line in New York State (Pennsylvania does not tax railroad real estate). This structure was designed to provide a low cost operating environment so as to encourage the return of rail service to the entire 145 miles of the line.

In March 2001, STERA approved the long-term sub-lease by Norfolk Southern Corporation of the Southern Tier Extension line to the Western New York and Pennsylvania Railroad Company (WNYP). The WNYP now operates the Southern Tier Extension line. WNYP also has acquired the connecting section of line from Corry, Pennsylvania to Meadville, Pennsylvania. WNYP's Southern Tier Extension trains now connect with Class 1 service (Norfolk Southern) at Meadville and Hornell. For shipping information for the Western New York and Pennsylvania Railroad, contact: Daniel E. Eagan, Vice President -Marketing & Sales, telephone: 585-346-2090, email deagan@lalrr.com.

Decades of deferred maintenance by the prior owner Conrail had left the line needing extensive rehabilitation in order to being it up to a safe and economical operating condition. STERA and Southern Tier West have been working to secure low cost funding for the rehabilitation of the Southern Tier Extension line. The first phases of a multi-year rehabilitation work program began in August 2002. STERA and Southern Tier West expect this effort to continue over a number of years.

However, STERA and WNYP had completed enough rehabilitation projects so that viable commercial service has been re-established over the entire 145 miles of the line, with connections to Norfolk Southern at Meadville and Hornell, as of the fall of 2003. Norfolk Southern is now running regular mainline freight traffic over the line, in addition to the WNTP trains. STERA will continue its plans to further rehabilitate and repair the railroad line to make it even more attractive as a freight-shipping route.

In December 2006, STERA was approached by Norfolk Southern and WNYP, who indicated that Norfolk Southern intended to lease the portion of the Buffalo Line that is north of Machias Junction to Buffalo & Pittsburgh. Additionally, they indicated that Norfolk Southern intended to lease the portion of the Buffalo Line between the Pennsylvania State Line and Driftwood, PA to WNYP. Norfolk Southern and WNYP proposed that STERA, Norfolk Southern and WNYP enter into an arrangement on the portion of the Buffalo Line between Machias Junction and the Pennsylvania State Line that would be similar to the arrangement between the parties on the Southern Tier Extension. That is, Norfolk Southern would deed the specified portion of the Buffalo Line to STERA for a period of years, and STERA would lease it back to Norfolk Southern, which would then sub-lease it to WNYP as operator, retaining trackage rights. STERA would provide a real estate property tax abatement on the line during the period of years, with a graduated PILOT in the last three years of operation that escalated to the full tax level at the end of the period. Norfolk Southern would provide a one time negotiated payment in 2007 to ease the first year transition to full tax abatement for the affected New York State taxing jurisdictions.

STERA approved this arrangement in February 2007, and the real estate transaction was filed prior to March 1, 2007. WNYP then went in front of the Surface Transportation Board to obtain regulatory approval for the proposal, which was granted in August 2007. On August 4, 2007, WNYP became operator of the Buffalo Line between Machias Junction and Driftwood, PA. As a consequence of this development, WNYP has created an operations center in the Olean yard, moving operations personnel from the facility in Falconer. WNYP since has announced plans to build a new train barn in the Olean yard.

WNYP's Southern Tier Extension trains now additionally connect with Class 1 service (Norfolk Southern) at Driftwood, PA. Again, for shipping information for the Western New York and Pennsylvania Railroad, contact: Daniel E. Eagan, Vice President -Marketing & Sales, telephone: 585-346-2090, email deagan@lalrr.com.

Simultaneously with the February 2007 approval of the Buffalo Line transaction, the STERA Board approved an extension of the Southern Tier Extension agreement, so that its term matched the Buffalo Line agreement's terms. Now, both agreements expire in March 2016, with graduated PILOT payments in years 2014, 2015, and 2016. All of the other terms of the Southern Tier Extension agreement continue with this extension.

The mission of the Southern Tier Extension Railroad Authority is to fulfill the intent of the New York State Legislature in creating it, which was "to preserve and enhance the system of railroads serving Chautauqua, Cattaraugus, Allegany and Steuben counties in New York state and Warren and Erie counties in the Commonwealth of Pennsylvania, so as to insure a healthy economy for these counties." In other words, STERA's plan is to invigorate the southwestern New York economy by re-invigorating its railroad system. STERA's success in this regard will be a function of the financial viability of railroad operations on the Southern Tier Extension, and hence a function of the financial viability of the operator WNYP. STERA felt that it had to extend the real estate tax abatement on the Southern Tier Extension because of the deferred maintenance and removal of rail assets by CONRAIL, the deterioration of the line with the passage of time and the use of new heavier coal cars, and the inability to obtain public rehabilitation funding on the schedule originally envisioned. Additionally, STERA felt that the long term existence of the Buffalo Line was at jeopardy because of the lack of business on the Buffalo Line and the high costs of operation for the Class I Norfolk Southern Corporation. Further, STERA was convinced that WNYP operations and overall system load would be improved by integrating the Buffalo Line into WNYP operations. Accordingly, STERA took the step of approving the Buffalo Line transaction, and the additional step of synchronizing the agreement terms on the Southern Tier Extension Line and the Buffalo Line.

Moving forward, STERA and Southern Tier West are working in partnership with WNYP to improve access to rail service by potential rail shippers in the region. Initiatives include rail sidings, intermodal access, and other economic development activities along the lines.