Debatable.
I don’t forsee DM&E finding private financing. They have been trying for, what, 10. 15 years? The PRB plan has been portayed as the event that would thrust DM&E into the bigtime. Without it, they are a poor,well-worn grainger line, built out of some other railroad’s cast-off lines. Without the PRB goal, and several Federal railroad rehab loans, would there still be an independant DM&E?
What’s next? I’ll offer my guess-it involves Canada?
It’s hard to say what the DME offers that would cause any great amount of interest without the PRB extension. Scheiffer pretty much said that without it the railroad is doomed to failure. There’s a reason that the CNW got rid of that line across Minnesota (the backbone of the DME). Is wasn’t really making any money. I don’t know if that dynamic has changed much since the late 80’s when CNW exited the market. Both Canadian roads already have high capacity routes to Chicago, and they have transcon terminals on the west side of Canada. I don’t know that the DME would add much.
Except maybe an entrance into the PRB?
I’d love to see one of the big carriers from Canada step in! If CN or CP backs DM&E, that’ll keep the project alive without the need for the big govt.-backed loan, and would make for a serious, WELL-CAPITALIZED competitor in the PRB coal-hauling market. Things might get more interesting in a hurry.
Now of course the opponents, including the Mayo Clinic (which has disgracefully dirtied its hands in this matter), will need a new rabble-rousing theme to fight the case. Maybe they’ll call the whole thing a giant Canadian conspiracy to RUIN our healthcare industry, PARALYZE our cities with long trains, MONOPOLIZE our railroad system, and STEAL our coal? Yeah, that makes plenty of sense. Start bangin’ the drums!
If CP had been interested in striking out for PRB, they could have done it from western Minnesota as well.
CN probably still could, and save a lot of money in the attempt by just building a new line–the existing DM&E probably is about as good as your typical CN…did I just say that?
Actually, now DM&E is looking for private investors, and the Associated Press seems to be fairly upbeat about their chances:
Well, yes, but they were looking for private investors before the federal money came into play. What reason is there to be more upbeat about it today, than 1,2,5, or 10 years ago?
I could visualize CN considering the DME/ICE system.
They have some experience with the grain business out in Iowa with the former IC line. Not sure what the Kansas City line would do for them. All that automotive needs to be handed off to UP at Chicago and BNSF at Chicago. The longer haul would not help them on it.
However…they could get a couple of feathers - KCS and PRB coal. The KCS access might help and the PRB coal would require lots of capital. Not sure if either would be worth the investment.
Right now CN handles three coal trains off of BNSF and UP at Chicago (708, 764, 766) destined for Michigan. Not sure if they would want anymore. Their South Bend sub is pretty busy these days and terminal congestion in Chicago grinds things to a halt now. What would a few more coal trains do?
ed
Interesting comment. If PRB wouldn’t be worth the investment to CN, who has railroad connections, what would investors see that is different?
Now that’s an interesting scenario…you mean that CP or CN would front the money to build the line with the intent of buying them out once it is done? In essence DME would become a railroad construction company, to be amalgamated with the lessor, in this case a railroad, upon completion?
Here’s a different perspective.
What if the whole $6 billion dollar package was for the primo, state-of-the-art railroad, one to match BNSF and UP in terms of impressing the railroad community and getting full page spreads in TRAINS magazine? It’s Plan A, it’s Numero Uno on the Wish List, it’s being granted three wishes by the genie in the bottle.
Okay, now the FRA has popped that bubble.
So now, it’s on to Plan B - a scaled back version that still provides entry into the PRB, but maybe cuts back on other line improvements such as the Rapid City to Colony line, etc. Hey, we’ve got commitments for $4 billion from private investors, so let’s go ahead and start building the priority stuff, and we’ll make a different request for aid from the feds more in line with what other railroads are getting.
We’ll just have to wait on improving that line through Roachester, but we’re still going to run our coal trains right smack dab through town. Of course, it’ll be on subpar trackage, so we might have to have slower running times, and we’ll still have more derailments, but that’s the price the Roachies pay for sticking their snob noses where they don’t belong.
Or maybe we just abandon that whole line through Southern Minnesota and just use the ICE for our connection to the coal plants, e.g
Curiously, my new SPV map of Minnesota shows a short spur, just east of Rochester,MN. It’s labeled: Rochester Pub. Utilities / Silver Lake Power Plant. I wonder who supplies the coal to that power plant?
One interesting fly in the ointment. UP has right of first refusal. Say CN decides to pump money in, and later on want to merge it into the system, they would have a hard time doing that without UP first refusing. The best they could do is to purchase a certain percentage as allowed under the sales agreement with CNW (if there is one).
As for the dynamics, I was just reading the news article about ethanol in the March 2007 issue of Trains. The author wrote there are several ethanol plants expected to come on line on the DME soon. Of course, who knows how many many get shelved now.
Just a guess, but I think Schieffer will stay and keep running the DM&E as well as the ICE. He has always presented himself to the press as a railroader, and I find nothing in his behavior to disqualify him. I have followed this sad saga from the git-go and, all opinions aside, he has always taken the tack that he is doing something new and a little unorthodox (even the West-to-East name of the company is unorthodox); but that he intended to see it through.
Maybe the Canadians will try to buy out one or both of his lines, and I can only say that that is Schieffer’s business, pun very much intended. Our friendly neighbors to the North are on track to a cheaper American dollar if this stock-market muss doesn’t resolve itself somehow.
Most Americans will glance over this topic and assume that the nearly $2.5 billion consists (or would have consisted) of loans, not loan guarantees. Apparently a company has to be really big to get some of that federal largesse: Chrysler, Lockheed . . . and didn’t BNSF and UP go bawling to their elected officials that the washed-out triple track wasn’t their fault? If their MOW people have neither the time nor the wit to tell that coal is taking the place of neutral ballast, that is very much their concern and their problem IMHO. Bituminous coal is a soft black rock that burns–believe it or not, that is the standard geological description of the stuff.
In fact, one reason I have always supported the Schieffer plan is that it would provide some real competition to the BNSF/UP duopoly leading into PRB. I don’t like the idea of Illinois having to incorporate coal-fired power plants into its power mix, but even bringing in many more windmills (including the ones Mr.
[#ditto]
The “UP first right of refusal” may be a misconception. Whatever agreement existed in 1993 between the DM&E and the C&NW might not be enforcable with the UP today. The STB would still have the final say in any such sale, and given a choice between someone who’s already in the PR like UP and a fresh competitor like CN, which do you think the STB would side with as being competitively in the public’s best interest?
My guess is that CN will come in and ensure the line is built. They are well-aware of the profit windfall they could actualize with a direct line into the PR. I can see them routing some trains past the Mayo for direct access into Wisconsin, and route coal trains through Waterloo-Dubuque and Savanna. (And possibly route ‘empties’ westward via Galena/Dubuque and Marquette.) Who knows? This is fascinating to watch, and I feel this is really only the beginning.
Honestly, I think where DM&E screwed up was way back when the Mayo offered them a “genteman’s agreement” proposal where they wouldn’t object to the federal loan if DM&E quietly agreed to route trains over to the IC&E at Owatonna. Anybody else remember that? I think the DM&E should have quietly agreed, gotten the loan and then let the Mayo try and fight them. =)~ This wasn’t thought out, and unfortunately it became a huge battle of nothing more than wills and ‘might.’
The coal for the Silver Lake powerplant comes in by the DM&E and is coal from either Southern Illinois, or Indiana. The plant can’t handle PRB coal. Rochester Public Utilities is also a partner in Unit #3 at Becker, MN northwest of the Twin Cities. The Silver Lake powerplant is quite small and only gets 20-25 cars per week.
I will give DM&E a lot of credit for dreaming and daring greatly. However, it appears that the dream is dead and DM&E will have to return to its original role of not much more than a glorified grain branch that C&NW couldn’t afford to keep.
I see a different scenario that has not been mentioned in this thread. If I were the President of DM&E, I would look for a financial partner in one of the Eastern roads and work out a revenue sharing agreement with one using their less leveraged financial clout to guarantee the return. There is more than one benefit to this arrangement outside of PRB.
[quote user=“deepspire”]
The “UP first right of refusal” may be a misconception. Whatever agreement existed in 1993 between the DM&E and the C&NW might not be enforcable with the UP today.
An old agreement that was rumored to give UP the first chance to buy DM&E’s lines if the railroad were to fail recently stirred up new criticism of DM&E’s plans. The United Transportation Union that represents rail workers had argued the federal loan should be denied, because if Union Pacific bought DM&E, the taxpayer money would end up benefiting Union Pacific.
Officials at Union Pacific and Dakota, Minnesota & Eastern railroads said the old agreement was not likely to mean what the union and other DM&E critics say it will.
Union Pacific spokesman James Barnes said the agreement was between Dakota, Minnesota & Eastern and the Chicago & North Western railroads, and it was created in 1993 when the C&NW sold some of its lines to DM&E. He said it gave the C&NW “first right of refusal” to buy DM&E’s rails. Union Pacific acquired Chicago and North Western in 1995.
The agreement ensured that “C&NW would have an avenue to collect the significant financial concessions given to the DM&E and that the owners could not sell the company and not reimburse the C&NW,” Barnes said. Provisions like these are common in railroad sale agreements. This could not be exercised without Surface Transportation Board authorization, he said.