A dispute between a freight rail operator and Twin Cities transit planners is coming to an end, clearing one of the biggest obstacles to construction of the Southwest light-rail line, the largest public works project in the state.

A pact struck with Glencoe-based Twin Cities & Western Railroad (TC&W) would allow light rail and freight trains to share part of the nearly 15-mile corridor between downtown and Eden Prairie.

The deal still needs final approval from the Metropolitan Council, Hennepin County Regional Railroad Authority and the federal Surface Transportation Board, but officials emphasized its importance in announcing it Monday.

"Without an agreement, this project could not go forward," said Hennepin County Commissioner Peter McLaughlin, who was involved in mediation sessions with the railroad.

Terms of the pact will not be released until after the Met Council and the county rail authority vote on it, part of a confidentiality agreement that was struck before mediation began with TC&W.

The council and the county requested that TC&W agree to release the terms to the public, but there's no guarantee the freight carrier will. TC&W could not be reached for comment Monday.

"Our preference is to share it publicly given the interest in [Southwest]," said Met Council Chairwoman Alene Tchourumoff.

Southwest light rail, a $2 billion extension of the existing Green Line, is slated to begin service in 2023. Between Minneapolis and Eden Prairie, stops are planned for St. Louis Park, Hopkins and Minnetonka.

In the works for decades, Southwest has encountered numerous delays and cost increases due to a range of issues, from litigation by neighbors to a crash-protection wall between freight and LRT trains.

In recent months, progress on the project has stalled due in part to the disagreement between TC&W and the Met Council. The conflict centered on ownership and operational issues along the part of the route where LRT and freight trains run alongside each other.

TC&W filed a lawsuit in federal court in April against the Met Council and the county, charging that a previous agreement crafted by the council violated earlier contracts, federal interstate commerce laws and the U.S. Constitution. The railroad wanted the agreement thrown out, an undetermined amount of financial damages and attorneys' fees, plus a jury trial.

However, the new pact calls for TC&W to drop the suit.

Until those issues were worked out, construction could not begin on the line. Plus, an agreement with freight carriers along the Southwest route must be in place before the council applies for a $929 million grant from the Federal Transit Administration (FTA).

On Monday, Tchourumoff said she is "pretty optimistic about this agreement with TC&W. This really is the last major milestone of site control so that we can begin construction." The council hopes to begin construction on Southwest this fall.

The machinations between TC&W and the Met Council could also delay the project up to two months — although council officials weren't sure how much that would cost. Tchourumoff said the agreement with TC&W would not result in an increase in Southwest's overall $2 billion price tag.

Bids to build the line were expected to be awarded Aug. 1. However, the Met Council is now asking bidders to extend their bids for up to 60 days. The lowest bid was $799 million, submitted by Lunda/C.S. McCrossan, while Ames Kraemer bid $812 million. The firms have 10 days to reply to the council's request.