New life has been breathed into the campaign to reopen the Napier-Gisborne rail link with KiwiRail offering to lease the damaged line to Hawke's Bay Regional Council.
The council is tomorrow expected to approve spending $250,000 to develop a business case to re-establish a freight service on the line.
A private sector investment of about $10 million to $12 million would then need to be found on top of a $5.46 million provision the council has earmarked for the project in order for it to get off the ground.
Earlier this year, the council asked the Government to repair the damaged line - at an estimated cost of between $3.7 million and $4.5 million.
The council was approached by the Napier-Gisborne Railway Shorthall Establishment Group (NGR) who wanted it to become a shareholder in a rail freight operating business using the line.
But the Transport Minister at the time, Gerry Brownlee, refused the request for funding, saying the council's plans to see the line put back into service did not make economic sense.
However, in a letter to the council last week, KiwiRail chief executive Peter Reidy said the company was willing to lease the line to the council, but would not commit any funding to the work required to reopen it, or for ongoing maintenance.
KiwiRail has given the council until March 1, to finalise its business case for the line, after which, Mr Reidy said in his letter, the company "will need to resume its process to lease the line for alternative uses, or fully close [it]".
The line has been mothballed since late 2012.
Under a "revised proposal" from NGR, to be considered at tomorrow's council meeting, the rail group suggests paying the council up to $300,000 a year to sub-lease the line, depending on the cost of repairs.
Councillor Alan Dick, chair of the regional transport committee and an advocate for the re-opening of the rail line, said the revised NGR proposal reduced the risk for the council because it no longer involved the council taking a stake in the freight business.
The group was confident it could raise the capital required to acquire locomotives, rolling stock and other assets to get the business up and running, but was looking to the council to be an "infrastructure provider" through the KiwiRail lease, Mr Dick said.
"There's a lot of work to be done and there are some challenges but we're confident that we can get there.
Napier Labour MP Stuart Nash, an advocate for re-opening the line, welcomed KiwiRail's move to offer to lease it to the council.
He said the company's decision "recognises the tenacity and persistence" shown by Mr Dick, NGR and other rail supporters.
"I'm delighted by this decision and I am confident the HBRC will end up being the saviour of this important piece of regional infrastructure, " Mr Nash said.
Earlier this month the mayors of Napier, Hastings, Wairoa and Gisborne agreed to fully support the regional council's efforts to secure a lease of the rail corridor.
At the same time, Parliament's Transport and Industrial Relations Committee is considering a request to fund a feasibility study into the possibility of converting the rail corridor into a tourist cycling trail.