State officials and Union Pacific have reached a tentative agreement on the future use of the Moffat Tunnel — a key step to expanding passenger rail service between Denver and Craig.

The Moffat Tunnel connects Gilpin and Grand counties and is the only functioning rail tunnel through the Continental Divide in Colorado.

The state owns the tunnel, which was completed in 1928, and Union Pacific leases it for its tracks. Train operators, like Amtrak and BNSF, then pay to use the Union Pacific tracks. 

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Under the original 1926 contract, originally negotiated with a predecessor of Union Pacific for a 99-years, the company pays $12,000 per year for use of the tunnel. That agreement was set to expire in January.

Under the new agreement, announced Monday, the lease will be extended for another 25 years, allowing Union Pacific to continue using the tunnel in exchange for the state receiving expanding access to the company’s railroad tracks, according to state officials.

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A statement released by the governor’s office Monday noted some work remained to execute the new agreement but said the news, “marks an important step forward for Colorado’s future.”

“This is a big step forward in making Mountain Rail from Denver to Craig a reality,” said Gov. Jared Polis in a statement.

“Passenger Rail on this corridor will relieve traffic to one of Colorado’s iconic mountain communities and provide safe, reliable, affordable transportation options for tourists and skiers as well as workers traveling along the corridor,” added Polis.

At 9,200 feet, the 6.3 mile-long Moffat Tunnel is the highest railroad tunnel in the United States and the highest point on Amtrak’s national network.

There is also a parallel tunnel through the Moffat Tunnel used by Denver Water that isn’t part of the ongoing negotiations.

The original rail route across the Continental Divide ran from Pueblo to Grand Junction via the Arkansas River valley and Royal Gorge, over Tennessee Pass and following the Eagle River to the Colorado River, running through Glenwood Canyon and into Grand Junction.

The Moffat Tunnel cost nearly $24 million to build at the time, which would amount to approximately $450 million in 2024 dollars. The Floyd Hill improvement project, which began in 2023, is expected to cost $700 million.

Counties including Denver, Grand County, Moffat County and Routt County sold bonds to fund its construction, and the project was paid off by 1983. 

In 2023, Gov. Jared Polis created the Moffat Tunnel working group, a team of representatives from the Department of Transportation, Department of Local Affairs, the Public-Private Partnership Office at the Department of Personnel & Administration, and the Office of Economic Development and International Trade.

CDOT Senior Adviser John Putnam led the negotiations for the state.

“Through this Agreement, we are making sure the Moffat Tunnel moves passengers and goods into the future,” said Putnam in a statement following the announcement of the new lease agreement.

“We need alternatives to I-70 and the high mountain passes, and Moffat Tunnel and Union Pacific’s line provides that whether you’re traveling with kids or freight,” he added.

Union Pacific President Beth Whited also applauded the new lease agreement, noting in a statement of her own that the Moffat Tunnel has been key to the states rail network for almost 100 years.

“We’re excited about the opportunity this renewed lease gives us to continue to serve our customers, while strengthening our partnership with the State of Colorado. It’s a great example of what is possible when we work together,” said Whited.

Regional Reporter Elliot Wenzler contributed to this article.