Palmetto Railways intermodal facility at Navy Base (copy)

A rendering shows the train and cargo-transfer hub that Palmetto Railways plans to build on the old Navy base in North Charleston to serve a new port terminal being built nearby. It would be used by Norfolk Southern and CSX Corp. Provided/Palmetto Railways

A rail yard where cargo boxes moving through the Port of Charleston would be transferred on and off freight trains has received a key federal permit, but the project has a few more steps before it gets the green light.

The $291 million rail hub is proposed for 118 acres near Hobson Avenue and Viaduct Road on the former Navy base in North Charleston. It would be owned and operated by Palmetto Railways, a division of the S.C.  Commerce Department.

In a statement, Commerce called the permit from the Army Corps of Engineers a "monumental milestone," giving the rail hub all of the environmental approvals necessary for construction.

But the project — officially known as the Navy Base Intermodal Container Transfer Facility — doesn't have all of its funding and to get that it will need approval from the Federal Railroad Administration. A spokeswoman for that agency said approval could come later this year.

Palmetto Railways is seeking a loan through the federal Build America Bureau to cover most of the construction costs, with other funding expected to come from public and private sources.

Palmetto Railways might have to revise its permit application with the Army Corps to let CSX Corp. and Norfolk Southern rail cars use an all-southern access to the site. The original application had railroads accessing the site from rail lines heading north and south of the yard.

Sean McBride, a spokesman for the Army Corps, said the agency would not speculate on whether such a modification would be necessary or what additional information, if any, might be needed.

"We really can't say what would happen if Palmetto Railways looked to modify their project going forward because we don't know what the modification would look like at the time," he said.

Patrick McCrory, vice president and chief commercial operator for Palmetto Railways, said the current permit allows access from both locations.

"The actual traffic through the north or south access points will be dictated by network demands and operational agreements," McCrory said.

The city of Charleston supports the project but opposes the southern-only access plan because mile-long trains would regularly tie up traffic along upper Meeting Street, creating congestion and safety concerns. Mayor John Tecklenburg has said road improvements to solve those problems, such as a Meeting Street overpass, would cost between $40 million and $55 million. Palmetto Railways has set aside just $4.3 million for such work.

The project "continues to prompt significant concerns for the city despite numerous good faith efforts to share our concerns with Palmetto Railways and both ... railroads," Tecklenburg said in a July 31 letter to the Army Corps.

Bobby Hitt, the state's Commerce Secretary, said in a statement that the project is critical to "ensure that we're working to meet the needs of South Carolina's business community by being able to transport goods more efficiently across our state and beyond."

Hitt said the Army Corps permit has been "a long time in the making." The project was announced more than a decade ago.

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Palmetto Railways has said construction will begin next year, with a late 2020 completion scheduled.

The rail yard is designed to reduce the number of trucks hauling cargo over highways from the Port of Charleston. The facility will be located near a new terminal being built by the State Ports Authority, so cargo containers will move from the port directly to trains for transport. It's estimated each train can haul as much cargo as 280 trucks.

As proposed, the rail yard would include multiple tracks, cranes, container stacking areas and administrative buildings. Palmetto Railways says it will develop the site with the environment in mind. For example, the use of electric cranes would reduce noise and emissions while partial automation would eliminate some truck traffic on nearby roads.

The rail line also would run through the Charleston Naval Hospital Historic District, and Charleston area preservationists were not happy with the Army Corps' decision to grant the permit, said Chris Cody of the Historic Charleston Foundation.

"We believe there are better alternatives for the rail line,” Cody said Monday.

However, Cody said if the project does get built, he is pleased with an agreement that preservation groups have struck with Palmetto Railways to mitigate damage to historic buildings in the former base's hospital district. That deal includes the formation of a new nonprofit.

That group, to be called the Charleston Navy Base Historic Trust, would start with $2 million in seed money from the rail agency and would be able to strike favorable leases for the old hospital building and the Marine Barracks, two historic but vacant and deteriorating properties. The deal also stipulates that Palmetto Railways shall ensure that both the Power House and two major warehouse buildings are restored.

"We also have taken steps to preserve the Navy base through this memorandum of agreement, and we're very proud and very excited about this memorandum," Cody added.

Robert Behre of The Post and Courier contributed to this report.

Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_