WEST LEBANON — City and state officials appear to be making headway on plans to demolish dilapidated buildings inside the Westboro Rail Yard after a temporary impasse threatened to derail the cleanup effort last week.

A public row broke out during Wednesday’s City Council meeting when Lebanon officials learned the state had declined to prohibit further development within the 22-acre property along the Connecticut River.

The New Hampshire Department of Transportation, which owns the historic parcel, also refused to include language in a pending agreement that would grant Lebanon a long-term lease on a portion of the rail yard.

The moves resulted in an outcry from councilors, who accused state officials of failing to negotiate in good faith and called on state lawmakers to intervene.

“The state is not being a good partner or an honest broker,” Councilor Sue Prentiss, a former mayor who represents West Lebanon, said during the meeting. “This has been the difficulty almost since day one of this.”

Others expressed frustration with past DOT policy positions, including those they said discourage the cleanup of a local eyesore and delay further development of West Lebanon.

The slight was so serious that Mayor Tim McNamara threatened to pull Lebanon’s in-kind contribution to cleanup efforts, valued at roughly $287,000.

“I think we’ve given more than enough and helped the state out more than enough,” he said. “And I think it’s very reasonable to ask that we’re able to control the property that we’re facilitating the cleanup of.”

DOT officials declined to comment on the matter last week, other than to say the state has “no intention of expanding the Rymes facility.”

Rymes Propane & Oil operates an offloading facility within the rail yard — trucking fuel carried in by railcars — that the city opposed for public safety reasons.

Lebanon’s leaders — including Prentiss and McNamara — have spent years lobbying for cleanup of the state-owned rail yard, eliciting the help of the city’s Statehouse delegation and Executive Councilor Mike Cryans.

Last year, they succeeded in getting money included in the state budget to take down Westboro’s historic bunkhouse, roundhouse, sandhouse and chimney.

In return, the city agreed to accept construction and demolition debris from the property at the Lebanon Landfill at no cost.

That agreement was the sticking point that resulted in Wednesday’s uproar after the DOT asked Lebanon City Manager Shaun Mulholland to draw up a formal document.

The draft he crafted included two longtime city goals — no additional development of the rail yard and a 99-year lease of rail yard land for use as a public, riverside park.

When the DOT returned the draft omitting both requests, Mulholland decided to seek guidance from the City Council.

“I think our policy position is we’re not going to write a blank check for $287,000 and then they turn around and do things that we really don’t want to happen in that property when we have other plans for it ourselves,” he told the City Council.

However, tensions had eased by Friday and the DOT was back at the negotiating table, according to Mulholland.

The state is working to “provide more assurances” that the Rymes operations won’t expand outside its current footprint, Mulholland said, adding that he’s “fairly confident” their differences will be resolved.

“Both the state and the city, of course, have a strong desire to get this project done,” he said in a phone interview.

Last week’s wrangling was one of many disagreements between city and state officials surrounding the rail yard.

Last year, state regulators declined to require Rymes to mound, or bury above ground, a pair of propane tanks at the West Lebanon site as a safety precaution to prevent major damage to the neighborhood in the event of an explosion.

Lebanon leaders were told at the time that federal regulations prohibited the DOT from taking action at the property, and they would only ask Rymes “to be a good neighbor.”

State transportation officials also squared off with Lebanon lawmakers over a bill requiring the state to notify a municipality before railroad property within its boundaries is sold, leased or transferred to another entity.

City officials said the proposal was meant to close a loophole in state law that resulted in them not being informed of the initial Rymes lease, while the state contended it would preempt federal regulation. The bill favored by the Lebanon officials ultimately died on the House floor.

Tim Camerato can be reached at tcamerato@vnews.com or 603-727-3223.