Failed railroad CEO seeks a $5 million payday from the State of New York or local governments

April 8, 2018

In March 2016, Ed Ellis stood before the Warren County Board of Supervisors and said that there would be no oil tanker railcars stored in the Adirondacks. He said it again and again as he pushed county leaders to authorize a new 5-year contract to operate the Saratoga and North Creek Railroad (SNCRR). He gave the Supervisors his “word.”

Ellis is the embattled CEO of Iowa Pacific Holdings, who owns the railroad tracks and the right to operate the Sanford Lake Railway, from North Creek to the Tahawus Mine, under certain conditions. Ellis leases the North Creek to Saratoga Railway, which runs from North Creek to Saratoga Springs. The North Creek to Saratoga railroad track and corridor is owned jointly by Warren County and the Town of Corinth, which lease it to Ellis.

Over 40 oil tankers are now stored on siding track south of the Tahawus Mine in Newcomb.
 
It didn’t take long for Ellis to backtrack. By the fall of 2016, he was floating the idea of storing oil tankers, but backed off it when he either could not get any oil tankers or when he encountered state and local opposition. Jump ahead to 2017 and Ellis did exactly what he said he would not do — he started storing oil tankers in the Adirondacks.

Jump ahead to 2018, and we saw Ellis telling a Warren County Board of Supervisors committee that he never said he would not store oil tankers in the Adirondacks. He said that oil tanker storage was always the plan for the Sanford Lake line between North Creek and the Tahawus Mine. Ellis said that there should have been no doubt about his intentions for oil tanker storage in 2016 and because Warren County helped to block him from bringing in thousands of oil tankers last year, the County is morally obligated to buy the Sanford Lake Railway from him for $5 million.

Ed Ellis says he has been in the railroad business for more than 40 years, but probably during that time most of his business was done in a boardroom and was not public and videotaped. What the videotape shows in 2016 and 2018 is that nobody should trust a word Ed Ellis says about anything.

Here’s the link to the meeting with the full Warren County Board of Supervisors in March 2016. The discussion of the railroad starts at 1:57 and then picks up again at 2:11.

At that meeting, Ellis was asked point blank about railcar storage and told the Supervisors “We missed the train on storage (2:12:33),” and went on to say that he can build storage capacity on new track in places like Mississippi and Colorado far cheaper than hauling cars from the west to store in the east in the Adirondacks. He said he may bring in other train car types, such as lumbercars, coalcars, and boxcars, but “the oilcars are done.” Ellis was asked to “put in words” in the new contract that he would not bring in oil tankers. “Let me say that I can’t put anything in contract that would encumber any other line that I own because it would be a violation of my covenants with my lenders. I can’t,” Ellis said.

There were statements from Supervisors that more deliberation was needed on the new contract and that they should also research the viability of conversion to a multi-use trail. Ellis was asked for “assurances that he would not transport oil tankers through Warren County” (2:18). Ellis was pushed by Supervisor Jim Brock of Glens Falls who talked about Warren County’s “obligation to the whole region” and that he wanted “to stop any possibility of oil tankers being stored up there” (on the Sanford Lake Railway). Ellis responded by stating “As I said they’re not coming (2:21:50). I know you’d like to have that in writing, but I can’t put it in writing … but you have my word, they’re not coming. No. I’m not putting any up there. No. You have that on record.” When pressed again Ellis said “I’m not putting any oil tankers up there” (2:22:20)

Not all Supervisors were satisfied with Ellis’s word. Queensbury Supervisor John Strough questioned Ellis’s “verbal promises” not to bring in oil tankers to the Tahawus line. Strough asked the County’s attorneys “Is that oral commitment legally binding?” (2:38) One attorney responded “He has given you his word on the record. His corporate counsel in Chicago has told me the exact same thing.” After further discussion, Strough said “Mr. Ellis I’m going to take you on your word.” Ellis responded “You can do that.” Strough finished by saying “If you do allow oil tankers up there I think there will be outrage.” Ellis responded by saying “If there is ever an oil tanker up there I’ll be here and you can tell me publicly that I did not do what I said I would.”

In the end, Matt Simpson, Supervisor from the Town of Horicon and Dennis Dickinson of Lake George were outspoken in their support of a new contract for Ellis in 2016 and led the effort to approve it. Dickinson called Ellis “a great partner.” The new contract passed narrowly.

More than one half mile of siding track has been filled with use oil out-of-service oil tankers on a stretch of track that runs along the Boreas River. These cars are within the designated Scenic River corridor under the Wild, Scenic and Recreational Rivers Act. This stretch of track also traverses the Forest Preserve.
 
A week ago on March 29, 2018, Ed Ellis attended a meeting the Department of Public Works Committee of the Warren County Board of Supervisors, and recounted a far different version of history than that captured on videotape and described above.

Warren County has posted video of the March 2018 meeting with Ellis, who opened with surly questions about why the Town of Corinth, a partner with Warren County and who has been more supportive of Ellis’s operations, was not invited. He then went straight after the County: “I’m glad you invited me because as a result of your actions on car storage you basically created a devastating financial situation for me, costing us millions of dollars, the cars are all moving out, no customer will do business with us. So congratulations you succeeded on that.”

Ellis failed to mention the opposition of from Governor Andrew Cuomo, State Comptroller Thomas DiNapoli, Attorney General Eric Schneiderman, Senators Chuck Schumer and Kirsten Gillibrand, as well as state agencies. He did not mention opposition from other local governments, such as specific towns in Essex County and the Essex County Board of Supervisors, from any of the Adirondack environmental groups, or from elected representatives like Dan Stec or Betty Little.

Ellis then put a demand on the table to Warren County saying they need to “buy the Tahawus railroad (the Sanford Lake Railway) for $5 million.” He said if they did that he would pay all his bills. If not, he said he has no money to sustain the operation of the Saratoga & North Creek Railway. Ellis owes Warren County over $28,000.

County leaders at the meeting rejected Ellis’s demand. Ellis then tried a new tactic, saying he only renewed his contract with the County in 2016 “based on car storage.” He said he informed the county of his plans to store cars on the Tahawus Line during contract negotiations, and now in 2018 “The County has taken that away from us.” The 2016 meeting notes quoted above shows Ellis spinning pure fiction.

What is real is Ellis’s desperation. At one point in the meeting, when asked about plans for operating the rail line this summer, Ellis said. “Let me be clear. You either buy the Tahawus Line for $5 million or we are done. D-O-N-E.”

Glens Falls Supervisor Claudia Braymer rejected Ellis’s contention that the County has undercut him. She argued his freight service and tourist train businesses had failed and now he was looking for Warren County to bail him out. Ellis said that he is still confident that the freight business will develop some day, but he needs to store railcars until that point. Ellis says he is “now out of time” for the original agreement. Ellis claimed that he has made investments, fixed line, ran snow trains, tourist trains, Christmas Trains, and was the only bidder who tried to make the line work, but none of his activities “resulted in financial viability.” Ellis said he never would have signed a new contract if the County had opposed his plans for railcar storage.

Other supervisors chimed in “We’re not buying the line. That’s not happening.” Ellis said the Saratoga and North Creek Railway is broke and cannot operate and cannot pay the County. “We don’t have the ability to pay.” When asked about his contractual obligations, Ellis said “We have a contract but we have no manageable wherewithal to fulfill it.” Finally, Ellis said “If you want a railroad, you’re gonna have to pay for it” and encouraged the County to send some one to Albany “to get the $5 million.”

At another point, Ellis name-dropped new Department of Transportation Commissioner Paul Karas, who he referred to as his friend and neighbor from Chicago. Ellis said he was looking for a deal with Karas, through a “third party” intermediary.

One of those who attended the 2016 meeting and questioned Ellis was Jim Brock, retired 4th Ward Supervisor from Glens Falls. In a letter to editor in the Post Star last week about how Ellis was rewriting history, he wrote:

Mr. Ed Ellis, owner of the Saratoga and North Creek Railway, has a memory as leaky as his oil cars. His complaint is that the uproar over his company storing tanker cars on the line north of North River has chased away potential customers. He now wants the county or some other entity to buy the rail line there for $5 million to make up for his losses. What he seems to forget is what he told me and the board on March 16, 2016. The following is from the county board minutes:

“Supervisor Brock informed he was very concerned about the possibility of storing oil cars, as he felt they had an obligation not only to the county but also to the region. He said he was not versed in the law so he was unaware of the legal aspects of it, but he would like to stop any possibility of oil tank cars or any other types of cars from being stored in Tahawus. Mr. Ellis interjected that, as he stated earlier, due to the cost of transporting them, no oil cars would be stored in Tahawus; however, he noted, it was not an option for him to put that in writing, but he was giving his word that this would not occur.”

“Supervisor Brock inquired whether Mr. Ellis would store cars in Tahawus if the need did arose, and Mr. Ellis restated that he gave his word that oil cars were not coming here. Supervisor Brock remarked that had not been his question, and Mr. Ellis replied that the answer to the question was no, they would not be stored there. He pointed out they now had it on record that he had given his word that no cars would be stored in Tahawus.”

Ellis is clearly feeling the heat. His plans to haul stone from the Tahawus Mine failed. His plans to haul materials for Barton Mines failed. His commuter trains, snow trains, Christmas trains, tourist trains, dinner trains and Thomas the Tank Engine trains all failed. He has stiffed contractors from one side of the country to the other. His only option now is to try and extort money from the State of New York. Last fall he was telling people he would leave for $12 million, and now he is down to $5 million.

The State of New York has a new petition at the federal Surface Transportation Board (STB) in an attempt to de-certify Ellis’s operation of the Sanford Lake railway. The state is arguing that Ellis has failed to haul freight from the mine or to allow use of the line for snowmobiling in the winter, two key conditions of STB certification in 2010 (when Protect the Adirondacks was the lone voice in opposition). If the state wins, Ellis will be left with only the salvage value of the steel rails. Once the Sanford Lake Line is out of service, the corridor reverts back to private landowners, including returning most of the line to the Forest Preserve and other parts to a few dozen other landowners. Ellis has failed in other railroad operations in other parts of the U.S., but found that storage of railcars can be a lucrative business. A component of the storage business that Ellis apparently invented is extorting local governments to pay him to remove these railcars due to their unattractiveness and degradation to the communities where they are stored.

It appears that Ellis has failed with every trick he has tried in the Adirondacks. It’s time to do what Warren County Supervisors said should have started back in 2016 – to investigate options to convert the rail line into a multi-use public recreation trail.

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