A state commission canceled a contract Monday that would allow the Gray family to operate an 18-mile tourist railroad running from Virginia City to Carson City.
The Nevada Commission for the Reconstruction of the V&T Railway, which manages the project, said a 1996 agreement with the Grays' company, the Virginia & Truckee Railroad Co., no longer served any purpose.
The Grays have operated their 2-mile tourist railroad that runs from Virginia City to Gold Hill since 1976 and would have been allowed to run the operation on the state's track for at least two years.
The cancellation was not a "negative action" but an "appropriate action," said Bob Hadfield, commission chairman. Michael Rowe, commission attorney, said the commission has the right to cancel the agreement if it gives the Grays the opportunity to buy the V&T Railway.
But Tom Gray, son of business owner Bob Gray, said the decision was "unilateral," and his family couldn't do anything to fight it.
"It's not the right thing to do," he said, "but we're the little guy."
The commission chose Oakdale, Calif.-based Sierra Railroad Co. as operators of the railroad last year, saying the project had gotten too big for the Grays.
At past meetings, Tom Gray has accused the commission of trying to force his family into selling their railroad. Commission members have said the family was asking too much for it and said they didn't act like they wanted to run the state's railroad.
Gray said his father, who is in his 80s, also thinks the commission's action was unfair.
"He's tired of it," Gray said. "He doesn't like how it's unfolded, but it's been like this for a while."
The commission also voted to have the railroad's rights-of-way and intellectual property - such as names and logos - appraised. Hadfield said the Grays have told him a price and he now wants to have research done to make sure the sale is completely legal.
He said he couldn't say how much the Grays were asking.
Construction on the project started in 2004 and is expected to cost $54 million and be finished by 2011. About $40 million has been raised so far, including $21 million from Carson City. Grants, private donations and revenue from room and sales taxes in Carson City and Storey County fund the 19th-century revival railway.
Construction of the next 4 1/2 miles of track is scheduled to start in December and be finished in June or July. Granite Construction will do the work for $5.2 million and take the track from American Flat in Storey County south to Mound House in Lyon County.
About a mile and a half from Gold Hill to the Overman Pit was finished in 2005. That year, the project was expected to be finished by 2009 and cost $30 million.
• Contact reporter Dave Frank at dfrank@nevadaappeal.com or 881-1212.