Union Pacific dealt a major blow to a proposal to connect San Antonio and Austin with passenger rail by pulling one of its tracks from a possible plan.

UP ended its agreement with the Lone Star Rail District to study the feasibility of running passenger trains on a freight line that parallels Interstate 35. The idea underpinned the district’s plans to build the passenger rail line, known as LSTAR, between San Antonio and Georgetown.

The agreement, signed in 2010, allowed UP and the district to study the corridor and the possibility of relocating the freight line. But Jeff DeGraff, spokesman for Union Pacific, said the district’s proposals didn’t adequately address concerns about how the passenger rail would affect the company’s freight operations.

“We chose to cancel the (agreement) and move forward with other projects and other things we need to deal with,” he said. “We just don’t think they’ve been able to come up with an arrangement that’s suitable for the needs of freight railroad as well as a passenger railroad.”

The plan for LSTAR involved using UP’s freight line tracks to move passengers between San Antonio and Georgetown, with 19 stops along the way. The district has been studying routes for an alternate freight line east of I-35.

LStar's proposed route, now in jeopardy after the Union Pacific withdrawal and fading city support:

Even if the district built a new freight line, UP would still have to run some freight trains on the LSTAR tracks to serve existing customers, DeGraff said.

“The idea of co-mingling freight and commuter rail on the same line is not a good idea, not something that’s feasible, and we didn’t feel the idea they came up with for realigning the tracks was something we could agree with,” he said.

Bill Bingham, an attorney with the Austin-based law firm McGinnis Lochridge, said UP announced its decision in letter Tuesday. His firm represents the district.

“It was a bit of a surprise,” he said. “We thought really that we had been able to answer any concerns they had as we were proceeding.”

The district is in the midst of an environmental impact study that examines several possible routes for the passenger train, and Bingham said it could revise the plan if the UP tracks stay off-limits. But the UP tracks were the district’s best chance of advancing a proposal more than a decade in the making.

“That is really not a good thing,” said District 9 City Councilman Joe Krier, a longtime proponent of the passenger train. “You have to have an agreement with UP at some point to have access to their right of way.”

The decision could be a major setback in the district’s plans to secure a public-private partnership to establish the service. Several cities, including San Antonio, have put money toward planning the train service, but the district lacks the $2.4 billion needed to build it and relocate the UP route.

Bingham said the district hopes to meet with UP within the next week to better understand the company’s decision and concerns.

“The LSTAR district has had a long and productive good-faith relationship with UP, and we would expect to continue our discussions,” he said.

DeGraff said UP is open to hearing the district’s plans to move forward but has no intention to re-enter any sort of formal agreement at this time.

“These are issues we raised at the onset,” he said. “We went into this with full cooperation, but we want to be able to address the needs of our customers because freight is vitally important across Texas.”

kblunt@express-news.net

Twitter: @katherineblunt