Change of tactics at DME?

[solzrules]

http://www.trains.com/trn/default.aspx?c=a&id=1035.

I'm sure most of you read this at the trains news wire - I am curious what everyone thinks about it?  Could it be that the DME is preparing for an end run around Rochester in a "worst case" scenario?

It is interesting that this deal was re-opened at the behest of the ICE, the offspring of Cedar American Rail Holdings, the parent company of DME. 

 

[fuzzybroken]

If ya can't beat 'em

[Datafever]

http://www.trains.com/trn/default.aspx?c=a&id=1035.

I'm sure most of you read this at the trains news wire - I am curious what everyone thinks about it?  Could it be that the DME is preparing for an end run around Rochester in a "worst case" scenario?

It is interesting that this deal was re-opened at the behest of the ICE, the offspring of Cedar American Rail Holdings, the parent company of DME. 

Hey, you guys, I am confused again.  First, I don't get Trains magazine, so I was not able to read the article in question.  But with a little snooping around the web, I was able to determine that DM&E (IC&E) is trying to get approval to operate coal trains on the old IMRL tracks so that such trains would not need to operate through Rochester.  I also understand that Mayo & friends would also like to see the coal trains operate on the old IMRL tracks.  But the STB has filed a ruling that refuses to allow DM&E to run those coal trains until an environmental impact can be performed.

Do I have that part of the story right?

Then, I was also under the impression (as stated by solzrules) that Cedar American Rail Holdings was the parent company of DM&E and also of IC&E.  But in the STB ruling, it clearly states that Cedar American Rail Holdings is a wholly owned subsidiary of DM&E.  So, which is it?

[nanaimo73]

  Hey, you guys, I am confused again.  First, I don't get Trains magazine, so I was not able to read the article in question.  

Here you go-

WASHINGTON - The Surface Transportation Board has agreed to a request by the Iowa, Chicago & Eastern Railroad to reopen the decision allowing it to acquire I&M Rail Link in 2002. When the STB approved the acquisition four years ago, it specifically precluded IC&E's sister railroad, Dakota, Minnesota & Eastern, from routing Powder River Basin coal trains over the IC&E until the Board considered the environmental impacts. IC&E has asked the STB to reopen the IMRL case and allow PRB coal to be routed over the IC&E on the grounds that there would be no significant impact on the environment.

The STB has agreed to reopen the case, and directed the railroads to prepare documentation for public review and comment setting out the basis that there would be no significant environmental impact. In the meantime, the Board did not lift the restriction.

Dakota, Minnesota & Eastern is seeking to build a new line into Wyoming to handle the coal. IC&E wants the routing restriction removed now, before construction begins, claiming that the environmental conditions have impeded DM&E's ability to secure financing for the project. IC&E further argued that the restriction on routing DM&E coal trains over the IC&E lines is unnecessary and should be lifted, because the environmental review can and should be resolved before the new line is operational, which would not be before 2009. The U.S. Department of Transportation, Iowa Department of Transportation and the City of Dubuque, Iowa supported IC&E's request to proceed now with an environmental review but are opposed to removing the routing restriction until the review has been completed.

The IC&E and the DM&E connect in Owatonna, Minn. The IC&E is a "Y"-shaped 1,100-mile regional railroad connecting Chicago, Kansas City, and St. Paul, with secondary lines running across northern Iowa and southern Minnesota, and into southern Wisconsin

[Anonymous]

I don't see this as a change a tactics in regards to the whole Mayo victimization BS, as it is a request to correct an idiotic restrictive caveat of the IM sale, e.g. DM&E can't run coal trains over it's sibling line, but BNSF or UP could, right?

[solzrules]

Perhaps DME is preparing for a end run scenario in case the Mayo's hissy fit actually ruins the whole project. 

Personally I don't understand why DME couldn't run coal trains on ICE's track.  It is owned by the same company. 

[Anonymous]

Personally I don't understand why DME couldn't run coal trains on ICE's track.  It is owned by the same company. 

They are prohibited from running coal trains on the ICE until they file the required environmental impact reports. It was a requirement placed  by the STB at the acquisition, I believe.

Outlined on page 32 here  where it says in part: - " In both of these consolidation proceedings the Department pointed out that through the transactions in question DM&E would extend its system so that communities previously on the IMRL or IC&E would no longer be "down line" from the DM&E but effectively "on line," and they therefore deserved the same solicitude for any impacts they would feel from large numbers of PRB coal trains. 3 In light of various uncertainties about the actual construction of the PRB project and subsequent operations, the Board responded with two conditions. The first prohibited PRB coal trains from being routed on IMRL and IC&E lines until such time that an appropriate environmental review could be
conducted, and the second required notice of the start of construction of the PRB line and
submission of information sufficient to enable the STB to conduct that review."-

Maybe this boils down to the DME sees fulfilling the EI requirement as an easier task than dealing with the Mayo obstruction?

path of lesser resistance, in other words

[Datafever]

STB ruled that DM&E could not use the IMRL trackage to haul coal trains.  Mayo has appealed that and taken STB to court over that decision.  DM&E has also requested STB to review that decision.  As both parties are working to get the STB to reverse their decision, why do you state it in such a way that DM&E is doing an "end run" around Mayo?

[solzrules]

Personally I don't understand why DME couldn't run coal trains on ICE's track.  It is owned by the same company. 

They are prohibited from running coal trains on the ICE until they file the required environmental impact reports. It was a requirement placed  by the STB at the acquisition, I believe.

Outlined on page 32 here  where it says in part: - " In both of these consolidation proceedings the Department pointed out that through the transactions in question DM&E would extend its system so that communities previously on the IMRL or IC&E would no longer be "down line" from the DM&E but effectively "on line," and they therefore deserved the same solicitude for any impacts they would feel from large numbers of PRB coal trains. 3 In light of various uncertainties about the actual construction of the PRB project and subsequent operations, the Board responded with two conditions. The first prohibited PRB coal trains from being routed on IMRL and IC&E lines until such time that an appropriate environmental review could be
conducted, and the second required notice of the start of construction of the PRB line and
submission of information sufficient to enable the STB to conduct that review."-

Maybe this boils down to the DME sees fulfilling the EI requirement as an easier task than dealing with the Mayo obstruction?

path of lesser resistance, in other words

That's my point, too.  I suppose if the whole thing fails because of Mayo than maybe they can keep hope alive by proposing a bypass route around Rochester - I think the ICE connects with the DME at Owattana.  It certainly wouln't be the best business model for DME, but if the Rochester plan fails then it maybe their only choice.  I suppose a prudent person would at least keep all options open. 

I am guessing that re-opening this case with the STB and the subsequent enviromental impact studies will add years onto the approval process. 

[Anonymous]

Looks like a better route to me.

Mason City IA being the largest on line town a fraction of the size of Rochester, and I believe Mason City already has a rail bypass in place.

Little more mileage to the River, but it puts them in a lot better position to interchange with other Railroads than the northern route.

HOLD ONTO YOUR HAT, I applaud the DM&E for their willingness to seek alternative solutions.

What I don't see is why DM&E needs the approval now (contingent upon the EI reports being completed) when by their own admission the first trains would not roll till 2009, at the earliest?

Seems like getting the reports done by 2009 would accomplish the same thing.

[solzrules]

Looks like a better route to me.

Mason City IA being the largest on line town a fraction of the size of Rochester, and I believe Mason City already has a rail bypass in place.

Little more mileage to the River, but it puts them in a lot better position to interchange with other Railroads than the northern route.

HOLD ONTO YOUR HAT, I applaud the DM&E for their willingness to seek alternative solutions.

What I don't see is why DM&E needs the approval now (contingent upon the EI reports being completed) when by their own admission the first trains would not roll till 2009, at the earliest?

Seems like getting the reports done by 2009 would accomplish the same thing.

HAT FIRMLY IN HAND

I'm not sure why they have to get the studies done either - my guess is because the STB requires it (by specifically excluding it in the approval of the purchase).  Now that the topic has been brought up, I suppose they must do as they are required. 

As for one route being better than the other - I have little knowledge of the ICE's route other than it is former Milwaukee Road trackage in Illinois. 

I could see a couple of issues:

As bad as the track is on the Rochester route, would the ICE's track cost even more money to upgrade?  I think we can agree that the DME is incurring incredible amounts of debt already in the Rochester route.....

From a business stanpoint will the DME have access to a good number of friendly railroads?  I am assuming that BNSF and UP will be loathe to do business with the upstart third competitor. 

[fuzzybroken]

As for one route being better than the other - I have little knowledge of the ICE's route other than it is former Milwaukee Road trackage in Illinois. 

I could see a couple of issues:

As bad as the track is on the Rochester route, would the ICE's track cost even more money to upgrade?  I think we can agree that the DME is incurring incredible amounts of debt already in the Rochester route.....

From a business stanpoint will the DME have access to a good number of friendly railroads?  I am assuming that BNSF and UP will be loathe to do business with the upstart third competitor. 

ICE runs to Chicago and Kansas City -- there's lots of "friendly connections" to be made in either city!

From what I know of ICE's history, the track is in OK shape.  Some parts of the railroad already handle coal trains, though I've seen cars rocking quite a bit while they're rolling in some spots!  SOO/CP always seems to keep things in fairly decent shape, though I don't know how much IMRL did while they ran the property.  ICE runs a fair amount of rather large trains, so I don't see there being any huge need for a massive upgrade, unlike the old "Alco line" that the DME runs on, the former Cheap and Nothing Wasted...

DME's original plans for the Powder River expansion involved a rail-barge transload at the Mississippi River.  While that certainly sounds ok, the prospect for connecting to other railroads via rail sounds much more enticing to me, from my perspective of sitting here on my computer chair...  The whole transload idea doesn't really seem to have the potential for the "high number of trains" that Mayo is all bent out of shape over.  But then again, I've seen rail opponents in other parts of the country (SE WI) drastically over-inflate the number of trains that will "absolutely clog up everything"...  (In the case I am mentioning, the number swelled from 9 trains a week to 36 a day!  Ha!)

As to why DME wants ICE clearance now -- let's say that the EIS (German for ICE) finds that running coal down the ICE is a bad bad BAD idea.  If you were DME/Kevin Shieffer/potential investors/the Mayo Clinic/lobbyists/etc., would you want to find that out now (or as close to now as possible), or just put it off a few more years, "since nothing's going to run until 2009"?   Now I doubt that the EIS will find any horrible anti-environmental effects of running trains where there are already trains running, and have been running for well over a century, but "a six-pack in the fridge is better than a twelve-pack at the store"...

[beaulieu]

Here's my take on this; First the DM&E wanted to get the IC&E up and running as an extension of its system. At that point in time there was no assurance that the DM&E would be allowed to access the PRB. Any attempt to fight the coal trains restriction would have delayed the start up of IC&E or perhaps doomed it completely (the IMRL was going down the tubes). The DM&E has judged that the time is right to take on the restriction now, either as a tool needed to obtain loan approval, or as a counter to the Mayo Clinic. For certain potential customers, the IC&E was the best route for DM&E coal trains. They will however have to face Calmar Hill, which during the Soo Line days was the second toughest grade on the railroad. The toughest also was in Iowa, Rutledge Hill near Ottumwa, IA. I can't see Kansas City being a viable destination for operational reasons (longest route and two tough grades, poor route through Ottumwa), but Chicago would be important. Nevertheless, congestion on other routes would be the DM&E's only advantage going to Chicago. The DM&E would have significant mileage advantages to most locations in Minnesota and Wisconsin, but looses them the further south you get.

[MStLfan]

I am confused here. Why would they need those environmental impact studies? Are there no coal trains on the IC&E now? Do railroads now have to do these studies for every commodity they are not hauling already, e.g. ethanol trains or chlorine?

greetings,

Marc Immeker

[fuzzybroken]

Good question Marc...  In this case, it was a condition of DME's acquisition of the former IMRL (today's ICE) that they wouldn't run any of their proposed coal trains down the ICE.  Somebody may have raised the objection at acquisition approval time, and the solution at that time was to make a provision for STB approval that it wouldn't happen in order to expedite the acquisiton of  the failing IMRL.

So the EIS needs to be done now to satisfy a transaction from a few years back, in order to be able to haul something a few more years from now!  There was never anything stopping other coal from running on the ICE, just DME coal.  Gotta love bureaucratic red tape...

[kenneo]

I'm surprised that they did not start the EIS right away - four years ago!  I can't speak for Cedar American, but I would want all possible impediments to "unfettered" operation removed as quickly as possible - whether or not I would use the "new freedoms".

I think that the UP and BNSF were behind the restrictions to throw up as many problems in front of the DME as they could.  They would be the only "usual suspects" for such a move.  The purchase of the IMRL by Cedar American is a real competition potential when the DME gets to the Powder River.  The DME does not present any competition problems to either BNSF or UP at present except for the coal issue.

Given the tonnage moving over the ICE in comparison to the DME, I would think that the track structure would be in better shape, so there would, probably, be less to up-grade in a route via the ICE than via Rochester.  This would make money easier to obtain.  Also, the Mayo tissy-fit is not going to assist the DME's efforts to gain backing.  A third point is that with the traffic moving over the ICE at present creates a cash flow advantage which looks good on loan documents showing that there is a going concern and not a pipe dream.

And, were I DME, I think that I would try to get all possible traffic to interchange to the ICE rather than go to the Missippippi River for interchange.  Cedar American would get a bigger part of the division whether the I/C D is westbound at Kansas City or eastbound at Chicago.  Even though the KC routing is a bit round-a-bout, it is not overly so.  This will also make raising funds easier - not only because of the amount involved, but also as a demonstration to the banks as a good heads-up business operation.  Also, if the interchange traffic increase (particularly at KC) is sufficient, even the most "non-friendly" connection will do everything they can to keep their traffic; so another reason to keep the DME traffic going via ICE.

[beaulieu]

I'm surprised that they did not start the EIS right away - four years ago!  I can't speak for Cedar American, but I would want all possible impediments to "unfettered" operation removed as quickly as possible - whether or not I would use the "new freedoms".

The reason is money, filing an EIS will cost more than a million dollars.

I think that the UP and BNSF were behind the restrictions to throw up as many problems in front of the DME as they could.  They would be the only "usual suspects" for such a move.  The purchase of the IMRL by Cedar American is a real competition potential when the DME gets to the Powder River.  The DME does not present any competition problems to either BNSF or UP at present except for the coal issue.

Given the tonnage moving over the ICE in comparison to the DME, I would think that the track structure would be in better shape, so there would, probably, be less to up-grade in a route via the ICE than via Rochester.  This would make money easier to obtain.  Also, the Mayo tissy-fit is not going to assist the DME's efforts to gain backing.  A third point is that with the traffic moving over the ICE at present creates a cash flow advantage which looks good on loan documents showing that there is a going concern and not a pipe dream.

And, were I DME, I think that I would try to get all possible traffic to interchange to the ICE rather than go to the Missippippi River for interchange.  Cedar American would get a bigger part of the division whether the I/C D is westbound at Kansas City or eastbound at Chicago.  Even though the KC routing is a bit round-a-bout, it is not overly so.  This will also make raising funds easier - not only because of the amount involved, but also as a demonstration to the banks as a good heads-up business operation.  Also, if the interchange traffic increase (particularly at KC) is sufficient, even the most "non-friendly" connection will do everything they can to keep their traffic; so another reason to keep the DME traffic going via ICE.

The IC&E only has one friendly connection at Kansas City, the KCS. The other two railroads accept interchange from the IC&E but do not reciprocate. BNSF usually turns over IC&E traffic in the Quad Cities, and the UP at either Clinton or Chicago, they try and keep as much of the money as possible. During Soo Line days the detriorating SP condition was the final nail in the decision to sell the KC connection.