The restoration of eastern rail access for San Diego and northern Baja California to Imperial Valley and the Union Pacific Railroad is moving forward now that trackage rights have been awarded to the new railroad venture, Carrizo Gorge Railway (CZRY). For over twenty years the eastern portion of the line has been inactive due to track damage and lack of regional market support needed to sustain the line.

On the Mexican side, after several unsuccessful bids for the concession of the portion of the line that runs from Tijuana to just east of Tecate before entering back in the United States, several changes have occurred. The award of the line went to the State government of Baja California. It was the subsequent award of the State concession to CZRY and its Mexican affiliate that catalyzed action on the United States side of the line.

The current MTDB contractor, San Diego and Imperial Valley Railroad, has not been willing to invest in the line due to their prior perception of the market potential, as well as the uncertainty in operation of the Mexican portion of the line. For these reasons, progress on the line had been stalled until now. The trackage rights contract between San Diego and Imperial Valley and CZRY is not the best of all worlds, requiring 6.9% of the gross revenues from any freight on the Desert Line to Imperial Valley, as well as $200 for any cars diverted from their control on the coastline by this new arrangement.

Despite this lop-sided contract, which runs until March 8th 2004, CZRY and its sister, Mexican firm, Ferrocarriles Peninsulares del Noroeste, S.A. de C.V. (FPN) are still in business. The incremental restoration of the Desert Line can now begin since MTDB has lowered the onerous $50 million liability insurance for the railway and its subcontractors that was initially imposed.

Opening of Tunnel 8 in Carrizo Gorge is 95% complete, under prior insurance-covered repairs and the materials for the remaining 5% are stored in the tunnel. Tunnel 16 will require, as a guess, $2 million, based upon the experience of re-opening at Tunnel 2 in Tijuana and the extent of damage from the fire. The Goat Canyon Trestle, the world's largest wooden railroad trestle, has vandalism damage, mostly from para-military types dropping rocks onto the support below.

Once local freight movements start into and out of the Imperial Valley through the Gorge, the investment will be made to straighten line segments in the Gorge and drop the tracks in the tunnels about 11 inches. Then anything can get through the Gorge albeit at a considered speed.

The signing of the concession from the federal to the state government for the construction and operation of the new rail line between Tecate (Rancho El Gandoul) and Ensenada (El Sauzal de Rodríquez) will usher in a cash infusion from a major financial backer yet to be chosen. Several offers are apparently pending before CZRY Director, Gary Sweetwood, and FPDN Director, Germán Reyes-Gil.

The new route will pass through Valle Las Palmas, Valle El Testerazo, Valle Guadalupe, and San Antonio de las Minas, transforming these bucolic venues into major sites of development. A possible shunt for Tijuana traffic might use a lower elevation route by way of El Florido and the present Ruta Libre below Presa Carrizo. Restoration of sand deliveries on the railroad from Mexico to San Diego's construction markets is anticipated soon with the completion of environmental analyses (Manifiesto de Impacto Ambiental) and state and federal approvals.

Sand deliveries have been, up to now, the life-blood of CZRY. The construction of the Toyota Tacoma truck factory at El Gandoul requires a railroad presence and eastern access. With the speed and efficiency the Toyota-types have shown, they will be in production before the rail line to Ensenada is built. President Fox broke ground for them earlier in June. With this sort of federal "air cover," a lot can happen quickly.

Opening of the rail line to Ensenada/El Sauzal will allow expansion of the Port of Ensenada under new concession rights. The northern access through San Ysidro/San Diego cannot accommodate the carriers used to import cars due to the low height of the electrical catenary line on the trolley system. A parallel line is required to be constructed for 24-hour access, as well as high clearance. The use of the old Coronado Branch line on the west side of National City and Chula Vista is part of this access, but a major investment is required, in the magnitude of $100 million, to achieve this freight access to San Diego from the south and east. San Diego maritime commerce that is moved by rail is trapped without 24-hour rail service to Mexico, especially with the northern access being squeezed by passenger traffic. It will be interesting to see how this political about-face occurs.

There are still, however, many hurdles for CZRY and FPN. These include installation of the Gamma-ray inspection machines at San Ysidro and Campo that will speed inspection of the cars. The Tijuana - Tecate line is also slated for public transit use and public transit cars are presently in route for this service. Sidings will have to be constructed for passing trains. Gate structures will have to be installed at the many grade crossings in Tijuana and Tecate. A safety program for children and infantile drivers will be needed to allow for proper train operating speeds through the urban areas without fatalities.

The development of the rail system in the region has the total support of the present Mexican state and federal administrations. However, it is still an orphan with most San Diego politicians and leaders. Ignorance of what is now happening in Mexico, as well as an assumption that business is the same as it has been under 70 years of single party rule, needs to be corrected. On the other hand, it is the best-kept secret in the investment world.

Mitch Beauchamp can be reached at (619) 477- 5333 or at mitch@psbs.com