A key agreement overseeing how Southwest light rail and freight trains will operate alongside each other for a portion of the route calls for an $18.5 million settlement for Glencoe-based Twin Cities & Western Railroad (TC&W).

The deal intended to help the railroad manage the ramifications of light rail construction on its business won approval from the Metropolitan Council on Wednesday. TC&W hauls agricultural and other commodities from western Minnesota and South Dakota to the Twin Cities.

The settlement, reached after four mediation sessions, is about $6.4 million more than what the council originally offered TC&W last spring. In return, TC&W has agreed to drop a federal lawsuit it filed against the Met Council and Hennepin County in April.

The Hennepin County Regional Railroad Authority will vote on the pact Thursday. Should it pass, the agreement will be sent to the federal Surface Transportation Board for final approval.

Southwest’s planners say the higher price tag of the settlement won’t increase the project’s overall $2 billion cost.

Agreements with the three railroads along Southwest’s proposed 15-mile route between downtown Minneapolis and Eden Prairie must be in place before the council can apply for $929 million in federal funding.

Planners had already worked out the details with Canadian Pacific Railway and BNSF Railway. Shoring up the remaining outstanding issues with TC&W “was something we needed to move forward,” said Southwest Project Director Jim Alexander.

But the proposal drew fire from Mary Pattock, a Minneapolis resident representing the citizens’ groups LRT Done Right and the Lakes and Parks Alliance. (The latter group has sued the Met Council in U.S. District Court claiming the project violates federal environmental laws. The case is on appeal.)

“When will you declare [Southwest light rail] wrong and dangerous, and either fix it or stop it altogether?” Pattock asked the council on Wednesday. “It is unconscionable to spend millions to protect the railroads from financial harm, and do nothing to protect us, the people you are supposed to represent.”

Pattock said operating light-rail trains alongside freight rail cars that may be carrying ethanol and other flammable materials is potentially disastrous.

Last spring, the council imposed an agreement that called for TC&W to be paid $11.9 million, plus $230,000 in expenses — a deal the railroad declined, sparking a chain of events that led to the deal announced this week. The full agreement will not be released to the public until after Hennepin County votes on the matter.