A decision by a federal agency has put a Vicksburg manufacturer back at the table over the deal made between the City of Vicksburg and a potential casino developer over the future of rail service.

The U.S. Surface Transportation Board, an administrative arm of the U.S Department of Transportation, will allow Kansas City Southern Railway to abandon a 4.25-mile stretch of rail parallel to U.S. 61 south of the river bridges, but no money will be forthcoming for a casino or bike trail. The stretch is part of a larger 6.85-mile spur of rail used by Foam Packaging to have raw materials delivered and at the heart of a dispute concerning the company, the city and the railroad.

In April and with special permission from the Legislature, the city approved purchasing 155 acres of rail right-of-way including the part set to be abandoned from Kansas City Southern Railway using money deposited into an escrow account by Minnesota-based Lakes Entertainment.

Lakes has planned since 2005 a $200 million casino resort in the vicinity.

Mayor Laurence Leyens has said the deal was contingent on the casino company paying $70,000 of the $1 million price immediately, then, within two years, coming up with solid development plans for the casino. If the company failed to follow through, the city would get the land, pursue a Rails-To-Trails bicycle path and other recreational development.

However, the Surface Transportation Board, responsible for railroad rate and service questions decided the railroad and the city could not receive exemptions in federal law stipulating lines eyed for abandonment occur in the name of public use.

Citing three prior cases in its conclusion, the agency essentially slammed the concept of using the right-of-way for a casino or a bike path.

While exemptions have been granted “from time to time, they have been granted when the right-of-way is needed for a public purpose and there is no overriding public need for continued rail service,” the decision said.

Earlier this year when it appeared the deal was settled, it appeared Foam Packaging, which makes containers from raw materials delivered in train cars, faced the greater expense of having the materials trucked in. The company apparently appealed the Vicksburg-KCS-Lakes arrangement to federal regulators who found in their favor. An offer of financial assistance, or OFA, to have first rights to buy the acreage from the railroad was filed Oct. 2 by Foam Packaging president Raymond B. English — an offer in line with congressional efforts to preserve freight lines, the decision said.

Also, the agency disputed claims by the casino that continued service on the line would disrupt its construction because it is west of the casino site and the line does not bisect the property.

Though offering no details on how the behind-the-scenes talks have progressed since April, English was pleased with the decision when reached late Thursday.

“The record speaks for itself,” English said. “The board made its decision and it’s favorable to Foam Packaging.”

Leyens said Thursday casino officials were actively “working on a deal” with Foam Packaging to broker an alternate solution, ostensibly one which would work for both parties.

City legal staff could not be reached Thursday, nor could Lakes Entertainment officials, who also have until February 2009 to pre-sent plans to finance development of what could be the city’s seventh casino to the state Gaming Commission.

Leyens also said the involvement of outside influences “with a political agenda with no interest in our community” have tainted the ongoing negotiations.

English said a New Jersey-based firm, CNJ Rail Corp., was enlisted as consultants in the company’s efforts to keep its rail access alive.

Speaking by phone, Eric Strohmeyer, its vice president and chief operating officer, said the city “tried to run roughshod” over Foam Packaging and said the favorable ruling is key to keeping the “rights of first refusal” in rail abandonment matters in the hands of shippers.

“David slew Goliath on this one,” Stroh-meyer said.

Published reports show Strohmeyer’s firm active in similar cases nationwide, most recently with a section of rail lines the company had a stated interest in operating near Baltimore.

Since 1971, the company has converted polystyrene into plastic food containers and foam materials for home construction at its facility just off U.S. 61 South. Campaign finance reports for this year show Foam Packaging contributed funds to District 54 state Rep.-elect Alex Monsour and Commissioner of Insurance-elect Mike Chaney, as well as the state senate campaign of outgoing Rep. Chester Masterson.