Is the DM&E project dead?

Posted by Andy Cummings
on Thursday, September 03, 2009

DM&E 6083 West at Winona, Minn.It's a fair question, to be sure. Canadian Pacific's Dakota, Minnesota & Eastern withdrew 19 lawsuits attempting to seize land from Wyoming residents; the land was to be used for a new right-of-way into the Powder River Basin coalfields. I spoke with DM&E spokesman Mike LoVecchio last week about the decision, and he tells me it represents a change of tactic, not an abandonment or even suspension of the project as a whole. Still, CP makes no secret that regulatory and economic factors aren't exactly pushing the project forward.

When CP took over last fall, DM&E's coal project went from facing one hurdle to facing a totally different one. Before CP takeover, DM&E's managers and owners wanted desperately to build the project, but didn't have the money to do it. Now the money is there, but the new managers and owners aren't sure it'd be a wise investment.

Even in the days when Powder River coal volumes were growing sharply each year, some economists questioned whether the project made any sense. We've spoken on background to analysts who've said the project never made financial sense, though of course, not everyone agreed. Still, factor in lower demand for electricity, dropping natural gas prices, and the possibility of legislation that could hurt coal's economics, and CP doesn't have to dig too deep to find reasons not to lay out billions of dollars to tap the coalfields. 

The good news: DM&E's main line has, for the past five years, been undergoing an amazing transformation. When I was growing up along the line, it was 25 mph with a slew of 10 mph slow orders. When I worked for DM&E in ’05 and ’06, it was gaining new ribbon rail each year. This summer I drove most of the length of the line (649 miles), and was astounded at what I saw: long stretches of 40-mph ribbon rail totaling hundreds of miles. Last week CP began bumping up speeds through my hometown of Rochester, Minn., from 10 mph to 40 mph. For as long as I've been alive, that track was in abysmal condition.

The DM&E project isn't dead, but barring significant changes, it may sit forever on the back burner, always just out of reach. Still, for a line on the verge of abandonment 25 years ago, every mile of ribbon rail added should be viewed as a victory.

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