Eugene Hretzay (pronounced ret-zay) stands by his truck outside the WP&YR offices. JB

Eugene Hretzay, WP&YR president says lease extension vital to year-round rail operation

Skagway News editor Jeff Brady sat down with new WP&YR President Eugene Hretzay for an interview on October 1, held at the Sweet Tooth Cafe. The full text of the conversation follows, edited minimally for length.

1. Well, you’ve made it through your first summer at the helm of the WP&YR – in general, how did it go? Is this job what you expected it to be?

HRETZAY: I think it went well. It sure went by quickly. The only aspect of the job I didn’t expect was the intense media scrutiny, here and in Whitehorse.

2. With the loss of three cruise ships, you were anticipating lower passenger counts. Were the tour numbers where you thought they would be? Lower? Higher?

HRETZAY: Yes and yes. The numbers just came in and they were slightly above budget but lower than last year.

3. You instituted about a dozen layoffs before the start of the season – would you be in a position next year to bring some of those positions back?

HRETZAY: It’s hard to say. We will be getting one net ship more next year, and it may take more than that to bring back a full crew.

4. The repowering program seems to be going full steam ahead now. With a full summer of a couple of those rebuilt engines on the line, did you see significant savings in fuel costs?

HRETZAY: It’s significant. I think the overall cost savings is 32 percent. The problem is the cost of diesel and its volatility. The major impact is the reduction in pollution: 82 percent. And our fuel consumption is down one-third. Plus you can run one of those engines on a laptop. It’s just the old skin and underneath is a modern engine. We are trying to partner with MOS (Municipality of Skagway) on a Diesel Emissions Reduction Assistance grant. We’ve paid for four locomotives out of pocket and we now find there is (federal) government assistance available. We need a sponsor of government authority to qualify.

WP&YR Engine 94 sits on its carrier awaiting a barge trip south for its winter overhaul under the railroad's repowering program. Jeff Brady

5. Let’s turn to the port, which you have been very active in – reaching an MOU with the borough, an extension of estoppel agreements that could allow a tidelands lease extension, TIGER grant assistance, and in participation at Port Commission meetings. What is your vision of the port for the railroad and how it connects with the community’s interests in making it a viable year-round operation again?

HRETZAY: I just returned from Whitehorse and we had meetings with Selwyn, and we met the premier (pulls out printout of PowerPoint presentation). AIDEA, John Walsh (borough lobbyist), the mayor, and John Tronrud (port commission chair) were there for the signing of the Selwyn project the night before. Harlan Meade (Selwyn president) told me that if we pushed the railroad up to Ross River, he would use us. We’ve also been approached by Casino (Western Copper mine in western Yukon) and Eagle (old Whitehorse Copper mine tailings), and it’s all going through Skagway. It’s also about the back haul, from mining supplies to potentially natural gas. The miners need power and infrastructure. The Yukon government hasn’t provided the power needs and the BC intertie is too far away. The administration has enthusiastically welcomed our proposal. The impetus of this was about the schools and community. There’s a collaborative feeling that if we don’t see something, this community is going to die. Enrollment is down and we need jobs. AIDEA is stepping up to the plate. A new ore handler with a tower that can push back and a radial loading arm that will not interfere with cruise ships. And then they’d have a sorting facility for the lead-zinc that Selwyn would bring in.

6. Are you open to having a public discussion of the tidelands lease extension during the negotiations process, or even a public vote this time around?

HRETZAY: That would be up to the mayor. One of the things I have been trying to do in my first year here is try to establish relationships. I want to make sure that White Pass wants to work with the community and vice versa. We bring in ships and jobs and a lot of tour business, and I’d like to make it a year-round operation if I could. And if we do go ahead, AIDEA is interested in a lease extension, as a sub-tenant. We want the long-term lease if we go year-round. It’s a significant investment. We’re looking at $200 million on the U.S. section and $300 million on the Canadian section. The project could be scaled back to the original terminus (Utah station near Whitehorse) and it could be done quicker, as there are no issues with right-of-way or land claims (as opposed to an extension to Carmacks or Ross River). But through this I want to make it clear that we do not in any fashion want to diminish our tour business, and will continue to grow it. In the summer we’d run freight at night, and then all day in the winter, subject to weather conditions.

7. This railroad ran year-round, through many ups and downs, for 80 years until the mining industry cratered in the early 1980s. It was a shock to this community and the entire north when the railroad shut down in 1982. When the mines came back somewhat later in the decade, the railroad was asked to bid on the Faro ore haul, but lost out to trucking over the highway. And it wasn’t until the tourism numbers looked good that the railroad started up again, and only seasonally. What makes White Pass in a better position now to try and get that mining business back and get this railroad running year-round again?

HRETZAY: The key metric there is what it costs to load an ore ship for product coming from Carmacks to Skagway, trucking versus rail. For a 30,000 tonne ore ship, it will take 600 trucks versus 20 trains. And the cost of trucking is $1.2 million. The cost on the train is $240,000. That’s about a million dollar difference per shipment. The railroad has to pay our maintenance every year at no cost to the taxpayer, unlike a highway where there are fuel taxes that can’t even pay the maintenance costs. There’s also the costs of accidents on the highway, and the environment. Essentially what makes the railroad in a better position is the cost. It’s dramatically different and more environmentally friendly. Then there’s the traffic on the Klondike. If an ore truck wipes out a string of bicycles, that’s the end of it. The Klondike, I am told, was not originally built for truck traffic. The deal is we are pushing our year-round port vision over Whittier and even Anchorage. Anchorage has to be dredged every other year. Whittier has weather issues that we don’t have on the Inside Passage. If we can partner with the Alaska Railroad (on an extension to meet up with White Pass in Carmacks) then we have a U.S. terminus at both ends. It’s not a big number when considering the overall maintenance. We anticipate five years construction and that would create construction jobs and permanent jobs. I’ve pitched the idea to the premier but we need to take it to the Rust Belt. How do we convince politicians in the Lower 48 and southern Canada for the government to put up $500 million for a railroad. Why? Because of the change going on in the Rust Belt. Manufacturing. Jobs have been shipped to China. Those minerals have got to find their way into the U.S. for manufacturing to create jobs. That was my suggestion on how to approach this. We’ve got to tie those two issues. I think governments are seeing the light and you have to balance this with environmental concerns. Development has to leave a gentle footprint. This is a beautiful country and let’s keep it that way. Yet people have to live and they’ve got to eat.

An ore ship loads copper concentrate from the Minto Mine. Jeff Brady

8. How have Selwyn, Casino and other potential big mines in the Yukon responded to your pitches for an extended rail line? Have you been able to give them an idea of tonnage rates, etc. that could compete with trucking to either here or Stewart, BC?

HRETZAY: Enthusiastically. The $9-10 per tonne (listed in the PowerPoint for rail cost) would cover our variable operating cost. Trucking is $30 per tonne. So our tariff would come somewhere in between. Even though our PowerPoint made a pitch for rail, the premier said he is still focused on the port of Skagway.

9. White Pass used to be proud of not having to rely on government assistance, but has the time come for a need for assistance in getting the rail line to Whitehorse upgraded, and possibly pushed on to Carmacks?

HRETZAY: (Referred to a statement he made in a recent article in the Sept. 2010 Up Here magazine). We are not looking for a hand-out. It’s more of a loan. I hit them with the idea of an earn-out of $500 million. I have the right to pay it back over 20 to 30 years out of essentially the operating profit left when covering our operating costs and management fee, and they get the rest. We are proposing this to the Yukon and federal governments.

10. SN: Is having the lease extension in place a key to this?

HRETZAY: Yes. What would be the worse situation? We have it until 2023 and then turn it over to you guys, the community, to run the port. It goes against what’s going on. The Port of Pennsylvania just went under. An excellent person who knows is the mayor, a former port manager (for White Pass). He has told me that the MOS does not want to be in the business of running a port. We all agree that the time is right to do this, and there seems to be the political will to move this forward. We want to take the PowerPoint to DC, the Alaska Railroad, the governor, and (pausing) the Chinese too…. I’ve met a lot of people in Skagway, decent hard-working people and I’ve enjoyed meeting them and together we’ll move forward. White Pass is open for business. We’ll try to open year-round and get some freight business in here.

11.  You are heading back to Toronto for a while, but it looks like this is going to be a busy winter ahead regarding port issues especially. Are you planning to be back a lot? Are you able to get your immigration situation sorted out?

HRETZAY: My EV (exchange visa) interview is on Oct. 7 in Toronto. They have to do it there. It’s a busy time with budgets, and Ed (Hanousek, superintendent) and I are planning to go to Dollywood to see if we can repatriate the 71 and try to bring her back. I have two jobs with ClubLink (White Pass parent). I’m also the vice president and general counsel. I’ll try to go back and forth. There’s a lot on the plate, (including) getting the city the lease extension (proposal). AIDEA wants it in place. We want it in place. So we will try to make it happen and see where this will go.