Southport Forest Products, a small log sawmill and chipping company with a growing business, will be moving its operations to the North Spit after reaching an agreement to purchase 30 acres at the North Bay Marine Industrial Park.

The Oregon International Port of Coos Bay this week ended months of negotiations with Southport and announced the sale of its property, about a mile past the end of the Transpacific Parkway.

Interim General Manager Mike Gaul presented the port commission an earnest money agreement and a check for $5,000 from Southport to secure the property pending the completion of a sales contract.

"The commission is taking some risk here, but we believe it's risk well worth taking and we're going to have a happy ending to this," Gaul said. "It maintains jobs. It puts private investment on the North Spit, which in turn puts that all back on the tax rolls. It is the catalyst that brings the rail spur to the North Spit property, but it opens about 350 additional publicly and privately held acres for rail service."

Southport, owned by Bay Area residents Jim Lyons and Jason Smith, opened in 1998 with a small chipping facility south of Coos Bay, near Isthmus Slough, and employs between 55 and 65 people. Lyons also is a partner in North Bend's Ocean Terminals. Seeing changes in the timber industry, Southport specialized its sawmill to handle smaller-than-average trees, focusing on a product most other larger timber companies considered usable only for chipping.

Lyons and Smith have been out of the country visiting mill equipment manufacturers to evaluate various production systems for the past week and were not available to comment. Attorney John Whitty, who represented the company during negotiations with the port, could not be reached for comment on Friday.

Negotiations for Southport's relocation began under former port General Manager Allan Rumbaugh and have continued after he resigned in November 2003. Largely, the deal was held up by the uncertainty over the extension of a rail spur four miles down the Transpacific Parkway, to Southport's new site.

The spur was integral for Southport, which currently operates on 25 acres with no direct access to rail. It has, for the past several years, shipped its product by truck and later loaded it on rail cars.

The extension is expected to cost $5.5 million, down from initial estimates as high as $7.2 million. The port has been consulting with the Oregon Department of Transportation Rail Division, the U.S. Economic Development Administration, the Oregon Economic & Community Development Department, the governor's office and the Coos County Urban Renewal Agency to help fund the rail spur.

Gaul said the port still is negotiating for Central Oregon & Pacific Railroad's participation in the rail extension.

Sen. Ken Messerle, R-Coos Bay, and Rep. Joanne Verger, D-Coos Bay, were instrumental in helping the port receive a $40,000 grant in May from OECDD, which helped fund the engineering for the rail spur.

"A new rail line has the potential to bring major benefits to the port and to southern Oregon," Messerle said in a news announcement.

"The good news is that with this grant we will continue to move forward, making needed economic development efforts a reality," Verger added.

The study also evaluated how the rail line could interact with conceptual marine cargo facilities.

"This is a successful community-state partnership which will benefit the region," said port commission President Dave Kronsteiner, announcing the pending sale of the property to Southport. "Mike and the staff have been involved with this project for several months, working with Jim and Jason to bring together the pieces required to keep this company and more than 65 well-paying jobs in the area."

With direct access to rail and a larger facility on the North Spit, Southport believes it can increase its competitiveness and reduce its costs. Future improvements also may include barge shipping facilities, the port indicated.

The final sale price of the property is contingent on how quickly the port can extend rail service to Southport's property. The earnest money agreement indicates the company will pay $17,500 per acre, or $525,000, if rail service connecting to CORP's main line is operational within 12 months.

If the line is connected within the next 12 to 18 months, the final price will be reduced to $15,000 per acre. Should the line take longer than 18 months to complete, the price will be reduced to $12,500 per acre.

"They needed the rail and we needed a company in private investment to help us with funding the rail spur," Gaul said. "One went hand-in-hand with the other."

Gaul said he felt confident the spur could be built within the first 12 months.

"We've done the conceptual engineering. We now need to do the engineering design and place it out for bid," he said.

Gaul said the contract requires Southport to maintain a minimum of 65 jobs for five years and invest a minimum of $15 million in the property over that time. Gaul said Southport expects to invest as much as $20 million in equipment and site development. The deal also requires Southport to put a 25-percent down payment on the property and carry a five-year debt with the port at 6 percent interest.

Gaul said he believes Southport will apply for Enterprise Zone benefits, which would allow the company a partial tax abatement for the first several years.

The port believes it can finalize the details of the land sale contract within the next 45 to 60 days. Following that, Southport is expected to announce a construction start date and could be operating at the new facility within one year.