…and some counterfactual history thrown in to boot…
Right at 10 years ago, the DM&E seemed to have all their ducks in a row to expand in to the Powder River Basin coal producing area. The only thing it lacked was financing. Two years later, DM&E kind of threw in the towel and was bought by Canadian Pacific. As I recall, CP left the door open for the expansion.
If DM&E had found funding for the expansion, and didn’t find the need to sell to CP, what would have happened to the railroad as the coal dream fell out from under it?
The “War on Coal” for the past several years undoutabtly influenced the earlier decision. The question about reserecting this project also will be influenced by future use of coal for generation of electricity. I doubt there will be any definitive answers from our group.
As a sort of side note: On Sunday, we had a BNSF unit grain train pass by(guess is 6,000’+) with a string of large covered hopper cars, they were mostly lettered for “SDPX and WRFX”; they also carried the graphics for South Dakota Soybean Producers Assoc.[ their major operation is a bean crushing plant in Volga,SD (Brookings Cnty) on what was the DM&E.]
It may now be on the Rapid City,Pierre & Eastern RR(?) Which CPR sold off back in 2014. Not sure where it was headed; from where it was stoppped it could go West onto Transcon, or even turn South toward the Gulf (?)
Today’s (Mon. 10 Apr 2017) Wall Street Journal had a medium-length article on the last page of the B-section - “The Coal Industry Is Reviving but Not Because of Trump” [caps as in original] (bottom of pg. B-10, cols. 1 - 5).
From the article (cols. 4 - 5): “The key is the price of U.S. natural gas . . . Friday morning [front-month futures] fetched $3.33 a million British thermal units.” . . . “Arch Coal* reckons that at prices above $3.00, coal from the Powder River Basin in Montana and Wyoming, where they and Peabody have enormous reserves, is competitive with natural gas almost anywhere in the contiguous 48 states.”
*Above in the article (col. 3) it said: “The two largest U.S. coal producers, Arch Coal and Peabody Energy, have left bankruptcy.”, and “Companies shorn of billions in debt can make money today and possibly a good deal more in the future.” (col. 4)
I don’t think it will ever get resurrected as I didn’t think it made any financial sense to begin with. Apparently the bankers agreed with me. I was more curious about what would have happened if DM&E had gotten the green light and was deep into construction 10 years ago.
If the possibility of access to the PRB had not occurred, 2/3rds of the line, especially to the west, would already have abandoned and the rest might have gone to the great scrapyard in the sky eventually. (remember - the track and subgrade conditions allowed parked railcars to abandon, in-place, overnite.)
Thanks for the info from WSJ regarding coal. I love the use of the word “fetch” in the article.
FWIW…the NS Chicago line here in NW Indiana seems to be running more and more coal. There is almost a daily NS880 which is an EB movement with 2 BNSF motors. Today there were two such EB loads. This is a huge increase over a year ago, when it would be normal to see one such train per week.
With those two coal companies coming out of bankruptcy, it could be good times…for awhile.
Probably as soon as the coal market dropped in the last 2 -3 years, DM&E would not have been able to cover its ‘fixed charges’ = repayment of any bonds and loans it obtained to build the line. Then we would have seen what I believe would have been the first financial reorganization of a significant railroad under the ‘new’ U.S. Bankruptcy Code (based on the 1978 rewrite, before that it was a ‘Section 77 proceeding’). If the DM&E had any chance of making money on just the operating revenues and costs going forward, then its financial structure would have been altered accordingly so that it would be a ‘going concern’. Likely the bankers - more accurately, any bond/ debt holders - would have gotten a ‘haircut’ = bonds greatly devalued. Evidently they were concerned about that possibility.
If I recall correctly, it was the refusal of the Feds to participate with a loan guarantee that finally killed this proposal. With hindsight, they were correct; and the downturn in Powder River coal shipments would have made this line the weakest competitor in market with surplus capacity.
Out here the idea was sold with less than objective information. The best example of that was the promotion of a portion of the line (Sioux Falls to Rapid City) as a passenger rail route.
The chief lobbyist for the deal was a between-public-jobs career politician. He has since regained elective office.