I'm puzzled.
This is not the first time I've seen a reference to the DM&E being a connection to KCS at Kansas City. As far as I am aware, the southmost point the DM&E achieves is Manley Iowa (or perhaps Mason City) on trackage rights on the UP.
I think the KCS connection being discussed is the IC&E line that runs down the Mississippi and then southwest from Muscatine. Even assuming DM&E has rights over that line, for any shipment originating or terminating in the Dakotas (or Powder River), it is very much the long way around. Both the UP and the BNSF have routes that are much shorter.
Perhaps I have confused two different advantages to the CP for this combination? The first being the proposed line to Powder River coal and the second a bridge between the KCS at Kansas City and the Chicago railroad complex.
Do you ever get the feeling that everyone in a room knows something that you don't?
DM&E and IC&E are both owned by the same holding company, Cedar American if I am not mistaken.
The IC&E lines are the former I&M Rail Link, CP Rail, Soo Line, Milwaukee Road lines between Chicago, Kansas City and other Midwest places respectively.
So, things are moving. It seems that CP Rail is rethinking its sale of those lines.
greetings,
Marc Immeker
That is really a shame. I wanted it to go to KCS.
Gabe
Dan
A legal technicality. Actually Cedar American was created by DM&E Corp. for their IC&E aquisition. Therefore, DM&E Corp. owns DM&E Railroad as well as Cedar American, which in turn owns the IC&E. Thus, the sale of DM&E Corp. would include DM&E Railroad and Cedar American/IC&E.
This was a wise move by CP, as this was the last good chance for any real expansion without a merger. No doubt CN's bidding helped boost the price up a several notches.
Looks like Mayo is going to be left kicking and screaming.
Future forcast: CP & KCS?
gabe wrote:That is really a shame. I wanted it to go to KCS.Gabe
Here is the link to the announcement from CP's site:
http://www8.cpr.ca/cms/English/Investors/Strategy/Growth/default.htm
As a current CPRS employee all I can say is that this is HUGE and EXCITING!!! First off, CP made a monumental mistake when they sold off the "Kansas City Corn Lines" back in 1997. When news broke earlier this summer about Cedar American looking for possible "investors", I was excited that CP was mentioned as a possibility but even then I thought that eventually it would be rival CN who would wind up with DME/ICE; simply because it would be a good fit for them, too and, let's be honest here, they've been a lot more aggressive than CP in the last 10 years or so in making acquisitions. So you can imagine my utter shock (and happiness) when I learned of this breaking news when I came into work this A.M. But I also believe that CPRS really, REALLY needed to do this because it would have been shut out of ANY real expansion possibilities had it lost out on this. And now, with this move, CPRS has a real opportunity to be a REAL player in the next few years and I personally hope that somewhere not too far down the road that CPRS makes a play for the KCS.
Gabe, I understand your disappointment that it wasn't KCS who made the move. That would have been a good fit for them as well. But CPRS needed this much more than KCS or even CN needed it.
I'm really hoping that this also means that CP and KCS will now conisder a merger down the road.
I remember reading not to long ago that there were a couple of companies (UP, BNSF, CN) interested in KCS, but it was unlikely that the STB would approve any of these mergers as such a merger would give them too much of a monopoly in the region. A CP/KCS merger would keep the competition more or less where it is today.
Limitedclear wrote: gabe wrote: That is really a shame. I wanted it to go to KCS.GabeGabe -KCS doesn't have the cash or borrowing capacity to take on this deal and also has no direct connection to the DM&E. LC
gabe wrote: That is really a shame. I wanted it to go to KCS.Gabe
Sorry, I had just assumed that ICE would be part of the deal. By the way, wasn't the ICE initially owned by CP?
gabe wrote:By the way, wasn't the ICE initially owned by CP?Gabe
By the way, wasn't the ICE initially owned by CP?
CP used to own the old ICE trackage under its SOO brand (SOO aquiring it from its purchase of the Milwaukee Road). Hopefully I will be able to see some periodic white and red SOO's running through Genoa again.
I think CP will be a good fit in this, they seem to me to be a great company. Also doesn't this put the core of the MILW back in the hands of a single company again.
Go Huskies. Forward Together Forward
Fan of - C&NW - Milwaukee Road - CGW -
edbenton wrote:Lets see here STB plan to build into the PRB check approved by the STB check. Cash and finacing ready CHECK. Seeing the MAYO group PUKE and Spew a LATTE all over their papers if you are an employee of the DM&E today PRICELESS. Somethings even Mastercard can not get you it takes a merger to do.
Freaking HILARIOUS!!!!
Los Angeles Rams Guy wrote: edbenton wrote:Lets see here STB plan to build into the PRB check approved by the STB check. Cash and finacing ready CHECK. Seeing the MAYO group PUKE and Spew a LATTE all over their papers if you are an employee of the DM&E today PRICELESS. Somethings even Mastercard can not get you it takes a merger to do. Freaking HILARIOUS!!!!
Could not help myself today I remember reading and hearing all the fights that DM&E was having with Rochestor and esp MAYO Clinic. The head of the Mayo Clinic today probaly needed Maylaox after reading that in the local paper knowing that they just lost big time. I looked at the CP rail system they will be able to haul PRB coal all the way to Philly if they want now and NOT even have to interchange it at all with the system they have.
Thanks to Chris / CopCarSS for my avatar.
The part of this that really has me laughing is the effect on BNSF. I just have to believe that BNSF had a hand in a considerable amount of the resistance that was stired up over this expansion.
Had it worked out the way DM&E wanted, they might have been able to continue to act as an indepentent carrier--which would not be as competitive against UP/BNSF--while conducting the PRB expansion. But, because BNSF won the battle, they are going to lose the war by having a high-roller/Class I competing in the PRB instead of a regional.
I think BNSF would have been better off had they bankrolled the project for DM&E.
Since there is not much duplication of lines - the operating crews should see little change. DME/ICE office staff may very well see lost jobs or a move in their future.
BTW, the Winona - Owatonna line is still out of service from the flood. At least two major bridges are down and about 1/2 mile of rail was washed out. Ballast trains and lots of heavy equipment are on the line right now. I was out there on Sunday and I would expect maybe 1 - 2 more weeks of work before the line is operational. Rochester industries are being served by a turn job from Owatonna or Waseca. A ballast train is sitting in Rochester at this time.
Jim
Modeling BNSF and Milwaukee Road in SW Wisconsin
gabe wrote: Limitedclear wrote: gabe wrote: That is really a shame. I wanted it to go to KCS.GabeGabe -KCS doesn't have the cash or borrowing capacity to take on this deal and also has no direct connection to the DM&E. LCSorry, I had just assumed that ICE would be part of the deal. By the way, wasn't the ICE initially owned by CP?Gabe
Gabe -
Actually you are correct. IC&E is included in the deal. You are also correct that IC&E which is the former IMRL was CP/SOO Line's "corn lines" before they were sold to IMRL. Still, the KCS doesn't have the cash to do this deal (witness the NS/KCS JV on the Meridian Speedway and the recent KCS application for an FRA RRIF loan for the Rosenberg Line). I misread which DM&E CP was acquiring. They are acquiring DME Corp which is the parent of both RRs.
LC
I had actually hoped DM&E would build their own Powder River line, buy / lease a lot of modern diesels in blue and gold for coal trains and then I would go to the US and take pictures of them.
So much for sympathy for the little guys.
EJE818 wrote:Maybe that means the IC&E and DM&E engine will be able to roam the CP system, which I really wouldn't mind at all.
Ah, I forgot that! Thanks for the reminder.
nanaimo73 wrote:Quite a few of DME's SD40-2 locomotives are ex CP. Probably some of them are still in CP paint.
So you could patch the patch on the repaint?
Here is the complete CP press release:
Canadian Pacific announces agreement to acquire DM&E Railroad September 4, 2007Calgary, Alberta
Canadian Pacific Railway Limited (TSX/NYSE: CP) announced today that it has reached an agreement to acquire Dakota, Minnesota & Eastern Railroad Corporation and its subsidiaries (DM&E) for US$1.48 billion. With this value-enhancing transaction, CP expands its current network by approximately 2,500 miles and increases its access to U.S. Midwest markets including agri-products, coal and ethanol. The deal consists of a US$1.48 billion cash payment at closing and future contingent payments of up to approximately US$1.0 billion. Future contingent payments of US$350 million will become due if construction starts on the Powder River Basin expansion project prior to December 31, 2025. Further future contingent payments of up to approximately US$700 million will become due upon the movement of specified volumes of coal from the Powder River Basin over the Powder River Basin extension prior to December 31, 2025.
"The DM&E is an excellent fit for Canadian Pacific making this a strategic end-to-end addition to our network," said Fred Green, President and Chief Executive Officer of CP. "The DM&E is a high-quality, growing regional railroad that complements our existing franchise. This investment presents the opportunity for future growth through further expansion of our network and is accretive to our EPS in 2008."
"There are natural synergies between our two railroads which make this a very attractive transaction. We have a solid transition plan that I am confident we will implement successfully. CP is the safest railroad in North America and we will work together to build on the significant improvements the DM&E has made in operating efficiency and safety over the past several years. This includes CP's intention to spend an additional US$300 million of capital for further upgrading of the regional railroad over the next several years."
"Canadian Pacific is our natural partner and we are very pleased with this deal. The logic of this acquisition is compelling," said Kevin Schieffer, President and CEO of the DM&E. "I'm proud of the DM&E and the organization we've built; our operating ratio is one of the best in the industry. The combination of our two companies and the resulting efficiencies will be very positive for our customers. CP is not only a natural operating fit; we also share a commitment to our employees, our customers and the communities we serve as well as a vision for the potential of the Powder River Basin."
The addition of the DM&E extends the reach of CP's network. It increases the rail network, and adds new customers and expands the service available to customers of both companies. The DM&E is the largest regional railroad in the U.S. and the only Class II railroad that connects and interchanges traffic with all seven Class I railroads, connecting with Canadian Pacific at Minneapolis, Winona, MN and Chicago. It had 2006 freight revenues of approximately US$258 million, which is expected to grow to approximately US$280 million, or by nine per cent in 2007. The DM&E is headquartered in Sioux Falls, SD and has approximately 1,000 employees, 2,500 miles of track and rolling stock that includes 7,200 rail cars and 150 locomotives. It serves eight states; Illinois, Iowa, Minnesota, Missouri, Nebraska, South Dakota, Wisconsin and Wyoming with access to Chicago, Minneapolis/St. Paul, Kansas City and key ports.
The DM&E has been pursuing a strategy to become the third rail carrier in Wyoming's Powder River Basin. The Powder River Basin is North America's largest and most rapidly growing source of low-cost, low-sulphur coal as well as the largest single rail market in terms of volume.
"Canadian Pacific is excited about the prospect for growth in the coal-rich Powder River Basin," Mr. Green said. The DM&E's favorable geographic position provides a unique ability to create an efficient and competitive additional link to midwestern and eastern utilities. We have created a disciplined plan aimed at facilitating a decision on the expansion and ensuring the investment provides returns that exceed our thresholds. Our purchase agreement has been structured to share further upside as the benefits of the expansion are realized. We are confident this will provide maximum long-term value for our shareholders."
"With our strong balance sheet, this investment represents the best use of our free cash," said Mike Lambert, Chief Financial Officer of CP "We have secured fully committed acquisition financing as part of this transaction. Permanent financing for this acquisition and future financing for a potential PRB expansion will be structured to preserve appropriate debt and coverage ratios for our investment grade rating."
In conjunction with this purchase, Canadian Pacific has suspended activity under its current share repurchase program that commenced in March of 2007. CP has purchased 3,209,790 shares in 2007.
With the successful completion of this transaction, which is expected to close in the next 30 to 60 days, Canadian Pacific confirms that its outlook in 2007 for diluted earnings per share, excluding foreign exchange gains and losses on long-term debt and other specified items, remains unchanged in the range of CDN$4.30 to CDN$4.45.
The CP/DM&E transaction is subject to review and approval by the U.S. Surface Transportation Board (STB), during which time the shares of DM&E will be placed into an independent voting trust. The review process is expected to take less than a year. CP expects that the operation will become part of CP's U.S. network upon completion of the review. The voting trust is required by US law so that CP does not exercise control over DM&E prior to approval of the transaction by the STB.
Conference Call
Fred Green, President and CEO, Mike Lambert, Executive Vice President and CFO and Kathryn McQuade, Executive Vice President and COO, will be available to discuss this announcement with investment analysts and the media in a conference call beginning at 11 a.m. Eastern time (9 a.m. Mountain time) on September 5. Dial-in numbers: 416-640-1907 or 800-732-9303. Callers should dial in 10 minutes prior to the call. A replay of the conference call will be available by phone through September 30, 2007, at 416-640-1917 or 877-289-8525, pass code 21237495 followed by the pound key.
This call will also be Webcast: live via CP's website at www.cpr.ca. To access the Webcast, click on Investors and follow the links. The Webcast will be archived through August 31, 2008.
Note on forward-looking information
This news release contains certain forward-looking statements relating but not limited to the proposed acquisition transaction and our anticipated financial performance. Undue reliance should not be placed on forward-looking information as actual results may differ materially.
By its nature, Canadian Pacific's forward-looking information involves numerous assumptions, inherent risks and uncertainties, including but not limited to the following factors: changes in business strategies; general North American and global economic and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of litigation; labour disputes; risks and liabilities arising from derailments; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions on the financial position of pension plans; and various events that could disrupt operations, including severe weather conditions, security threats and governmental response to them, and technological changes.
There are factors that could cause actual results to differ from those described in the forward-looking statements contained in this news release. These more specific factors are identified and discussed in the Outlook section and elsewhere in this news release with the particular forward-looking statement in question.
Canadian Pacific undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise except as required by law.
About Canadian Pacific
Canadian Pacific, through the ingenuity of its employees located across Canada and in the United States, remains committed to being the safest, most fluid railway in North America. Our people are the key to delivering innovative transportation solutions to our customers and to ensuring the safe operation of our trains through the more than 900 communities where we operate. Our combined ingenuity makes CP a better place to work, rail a better way to ship, and North America a better place to live. Come and visit us at http://www.cpr.ca/ to see how we can put our ingenuity to work for you. Canadian Pacific is proud to be the official rail freight services provider for the Vancouver 2010 Olympic and Paralympic Winter Games.
end
Contacts:
Media Investment Community
Leslie Pidcock Janet Weiss, Assistant Vice-President Investor Relations
Tel.: (403) 319-6878 Tel.: (403) 319-3591
e-mail: leslie_pidcock@cpr.ca e-mail: investor@cpr.ca
I worked for the Soo, CP, I&M Rail link and currently work for the ICE . When I found out last night at 0200 I couldn't believe it!!!!!!!! I Hope we get the conductor craft back. I trained in Pigs eye back in 1996 and was a qualified conductor. Then they sold us and everone took a $12 a day pay cut and removed the conductor craft. It was hell ever since. I know alot of employees have protection agreements in place and the ICE is very strong about keeping us protected. I hope it's all wrapped up in 6 months. Alot of us have been beaten prior to the ICE and worry that not much will change. I hope alot changes, we deserve a class1 status.
I would love to find a link to their T&E and Yardmasters Contracts Anyone?
Jess
EJE818 wrote:It is kind of too bad that the blue and yellow IC&E and IMRL power will fade eventually, but that progress. Maybe that means the IC&E and DM&E engine will be able to roam the CP system, which I really wouldn't mind at all. Another good thing is maybe CP will be be able complete the PRB project faster then the DM&E would have done.
I said the same thing when I saw ex-MILW Bandits in Portage, WI about 7 years ago, but I still see them. CP has never been known for re-painting merger engines. I saw a picture of a CP train in Oconomowoc, WI with two engines in the consist, a CP and a SOO. They had the exact same roadnumbers. I wouldn't expect to see any of the power on the DM&E to get re-painted.
Same thing goes with MOW equipment. There is still a Jordan spreader and a Russell plow in Thieft River Falls, MN, and both are still in SOO paint and numbers. Also, Portage has a SOO-Milwaukee system push plow. When CN gets MOW equipment, they just scrap it.
I am curious about the CP SD40-2's that DM&E owns. Maybe someone was thinking ahead...
Phil
Dakguy201 wrote: I'm puzzled.This is not the first time I've seen a reference to the DM&E being a connection to KCS at Kansas City. As far as I am aware, the southmost point the DM&E achieves is Manley Iowa (or perhaps Mason City) on trackage rights on the UP.
Heartland to Albert Lea via UP's Heartland sub., then south to Mason City via the Albert Lea sub. Even that will not last much longer. DME/ICE are one in the same as far as cars moving on either line. Anything on DME goes to ICE, Mason City, then east to the River before going south again to KC.
Dakguy201 wrote: I think the KCS connection being discussed is the IC&E line that runs down the Mississippi and then southwest from Muscatine. Even assuming DM&E has rights over that line, for any shipment originating or terminating in the Dakotas (or Powder River), it is very much the long way around. Both the UP and the BNSF have routes that are much shorter.
My figures show almost 600+ miles more from the PRB to KC via DME/ICE versus UP's route via the Marysville to KC. Not even close to being competitive as far as coal.
CP feeds lots of traffic to UP every day out of St. Paul for Ft. Worth, and DME interchanges most all their traffic for the south to UP at Mason City. It has been my experience that most of the traffic ends up at customers on UP's lines anyway. UP's Spine line can out run the ICE line to KC by almost a day. And CP's traffic from St. Paul does not sit in some yard on UP. The train only works one station all the way to FTW. In most cases, by the time the ICE gets to KC to interchange their cars out of St. Paul, the cars leaving about the same time on UP have almost arrived in McAlester, OK. The customer will be the final guage of what goes where off the DME.
Lets see. Initial cost of DME purchase is $1.45 billion. With something of a $1 billion by 2025 if the coal line is built. I forget the exact wording of that proviso. None the less, add to that the estimated $6 billion to complete the PRB project, and you are talking about some serious money. DM&E was not able in the ten years since they announced this project to come up with the funds. Everyone told me what a "Hot Prospect" this was going to be. I have said in the beginning, show me the money. It never appeared. Also remember, the DME was run by a lawyer who had no previous experience in running a railroad. His underlings did. His purchase of the IMRL assets was a prime example of how he handles things. So after blowing $40 million on this proposed project (they needed a loan from the FRA to pay off the debt incurred in jumping through all the hoops), he will probably end up with a Gold Parachute.
RRKen wrote: EJE818 wrote:It is kind of too bad that the blue and yellow IC&E and IMRL power will fade eventually, but that progress. Maybe that means the IC&E and DM&E engine will be able to roam the CP system, which I really wouldn't mind at all. Another good thing is maybe CP will be be able complete the PRB project faster then the DM&E would have done. Lets see. Initial cost of DME purchase is $1.45 billion. With something of a $1 billion by 2025 if the coal line is built. I forget the exact wording of that proviso. None the less, add to that the estimated $6 billion to complete the PRB project, and you are talking about some serious money. DM&E was not able in the ten years since they announced this project to come up with the funds. Everyone told me what a "Hot Prospect" this was going to be. I have said in the beginning, show me the money. It never appeared. Also remember, the DME was run by a lawyer who had no previous experience in running a railroad. His underlings did. His purchase of the IMRL assets was a prime example of how he handles things. So after blowing $40 million on this proposed project (they needed a loan from the FRA to pay off the debt incurred in jumping through all the hoops), he will probably end up with a Gold Parachute.
All right, here's a dumb question; (I always get DM&E and IC&E mixed up) which one wants to go into the Powder River Basin?
EDIT: Answeared in above post.
Union Pacific Corp. and Burlington Northern Santa Fe Corp., the two largest U.S. railroads, probably will challenge Canadian Pacific Railway Ltd.'s purchase of Dakota, Minnesota & Eastern Railroad Corp., an analyst said.
"They would probably lose the regulatory fight, but they would just be playing for time and could delay approval for up to one year," Rick Paterson, a UBS Securities analyst based in New York, said Wednesday in a note to investors. The acquisition must be reviewed by the U.S. Surface Transportation Board.
DM&E has been trying to expand into Wyoming's Powder River Basin coal fields, where Union Pacific and Burlington Northern are the only railroads with access. U.S. regulators in February rejected closely held DM&E's application for a $2.33 billion loan to build a rail line into the region.
Canadian Pacific's planned $1.48 billion purchase of DM&E, announced last night, is a long-term "negative" for Union Pacific and Burlington Northern, Paterson said in his note. He rates Omaha, Nebraska-based Union Pacific a "buy" and Fort Worth, Texas-based Burlington Northern a "neutral."
Union Pacific spokesman James Barnes said he couldn't comment on whether the railroad will challenge the acquisition. Burlington Northern is "not in a position to speculate on it right now," spokeswoman Mary Jo Keating said.
Union Pacific shares fell $3.76, or 3.3 percent, to $108.79 at 3:04 p.m. in New York Stock Exchange composite trading. Burlington Northern declined 46 cents to $82.44. Calgary-based Canadian Pacific dropped C$2.72, or 3.7 percent, to C$70.75 on the Toronto Stock Exchange.
Coal is the largest single product shipped by both Union Pacific and Burlington Northern. Union Pacific said 61 percent of the coal it moved in August came from the Powder River Basin, where the two railroads share a joint line to ship the fuel east to electric utilities.
The purchase probably would lower coal-hauling rates from the region for the utilities, which might mean less revenue for Union Pacific and Burlington Northern, said Jason Seidl, a New York-based analyst for Credit Suisse. He rates both railroads "outperform."
Seidl said he expects U.S. regulators to approve the transaction.
When Canadian Pacific becomes established in the Powder River Basin, "you're not going to be able to get some of the growth rates you've had in the past," he said. DM&E under Canadian Pacific ownership could haul 25 million tons of coal a year as soon as 2012, he said.
Union Pacific's Barnes said an average coal train for the railroad hauls 14,900 tons.
U.S. railroads won't feel the effect for several years after the purchase of Sioux City, South Dakota-based DM&E is completed, because of the time needed to get regulatory approval and finish construction of a new line, Bear Stearns & Co. analyst Edward Wolfe said in a note to investors.
"DM&E has always represented a potential threat," Wolfe said in the note. "Our sense is that today's announcement brings this threat much closer to a reality but that it likely remains 3-4 years out (after STB approval and build out) at the earliest before CP/DM&E could take meaningful share."
Wolfe, who is based in New York, rates Union Pacific and Burlington Northern both as "peer perform."
Union Pacific "has had a right of first refusal to purchase the DM&E since it acquired the Chicago & Northwestern in 1995," Barnes said. "Subsequently, Union Pacific concluded that regulatory agencies would not allow a purchase of the DM&E by Union Pacific and therefore took steps to ensure that this right didn't interfere with the DM&E's opportunity to attract financing or investors."
So if the purchase of the ICE doesn't work out for the CP, does that mean they're going to sell it to the MRL?? Just my gut feeling that the CP is more interested in the ethanol traffic than the possibility of future coal traffic from the PRB if, an when, an extension is ever built. The UP & BNSF might have tolerated a smaller regional invading their PRB turf, but another class I?
CC
Postbulletin.com: DM&E sale seen as a 'fresh start' by Rochester leaders
The sale of the Dakota, Minnesota & Eastern Railroad to Canadian Pacific Railway is Rochester's and Winona's chance for a fresh start, local officials say.
"We think this is a new opportunity," said Mayo Clinic spokesman Chris Gade. "A new set of owners that will, hopefully, be responsive to the needs of our community and other communities along the line."
Canadian Pacific announced the $1.48 billion transaction late Tuesday. The deal, scheduled to close in the next 30 to 60 days, includes added incentives for completion of DM&E's planned expansion into Wyoming's Powder River Basin coal territory.
DM&E and CP intersect in Minneapolis, Chicago and Minnesota City, just north of Winona.
Serious concerns over projected train traffic increases from the Powder River Basin expansion remain, but local officials say they intend to set aside the old enmity with DM&E when they make the first call to CP, said Rochester City Council President Dennis Hanson.
"For us to extend a hand for a good handshake to get off on the right foot is pretty important," Hanson said.
Winona Mayor Jerry Miller described Canadian Pacific as easy to work with -- "a lot better than any other railroad, I feel, in our area here."
Winona contacted CP about two to three weeks ago, Miller said, after news reports that it was trying to buy DM&E.
"To me, it just made sense then that the Canadian Pacific would make a viable match," he said.
Miller believes the purchase gives Winona the right, finally, to ask for mitigation. Before, the city was thwarted in its requests because DM&E does not actually enter the town, although its traffic passes through on other railroads' lines.
"Now, we should have a little bit of clout in this deal," Miller said.
DM&E President and CEO Kevin Schieffer could not be reached for comment this morning. Rochester officials believe the sale means they have seen the last of him -- and if so, it's a fact they'll celebrate. The war of words between Schieffer and local officials was often scathing and personal, and the chance of a deal between the two sides seemed bleak.
"Frankly, (Canadian Pacific) can't be more difficult to deal with than Mr. Schieffer has been," said Ken Brown, an Olmsted County commissioner. "Nobody has been more difficult than Mr. Schieffer."
Rochester Coalition Statement:
ROCHESTER, Minn., Sept. 5 /PRNewswire/ -- We are encouraged by the Canadian Pacific's acquisition of the Dakota, Minnesota and Eastern Railroad (DM&E) and we look forward to meeting the railroad's new owners.
As proposed, the DM&E rail expansion remains a major concern for our community and the railroad's acquisition doesn't change our commitment to protecting the people of Rochester and the patients and staff at Mayo Clinic.
Several major obstacles must be addressed before the rail expansion project moves forward, including litigating complex eminent domain challenges in South Dakota and Wyoming, completing an environmental impact review on DM&E's critical Iowa line, solving bypass issues in Mankato, Minn., and Pierre, S.D., and reaching mitigation agreements with the cities of Brookings, S.D., and Rochester, Minn.
The Rochester Coalition represents the city of Rochester, Olmsted County, the Rochester Area Chamber of Commerce and Mayo Clinic. For more information, visit http://www.dmetraintruth.com.
deepspire wrote:BNSF, Union Pacific may challenge railroad merger | Dallas Morning News....DM&E has been trying to expand into Wyoming's Powder River Basin coal fields, where Union Pacific and Burlington Northern are the only railroads with access. U.S. regulators in February rejected closely held DM&E's application for a $2.33 billion loan to build a rail line into the region.....\
....DM&E has been trying to expand into Wyoming's Powder River Basin coal fields, where Union Pacific and Burlington Northern are the only railroads with access. U.S. regulators in February rejected closely held DM&E's application for a $2.33 billion loan to build a rail line into the region.....\
This statement is a bit misleading. It appears right after the paragraph stating the acquisition must be approved by the STB and thus implies that the STB rejected the loan application. Of course, we know the loan application was rejected by the FRA and the FRA has nothing to do with the STB approval.
The $6 billion bandied about in the last year included the FRA loan to expand to the PRB and upgrade the rest of the line to carry the traffic and weight increase; and it undoubtedly included investment in motive power strong enough to haul the coal. With the CP acquisition, the motive power costs would not necessarily be so great - CP might well be able to efficiently move locomotives around so that fewer new ones would need to be purchased. CP might also have less expensive in-house MOW capacity, or might be able to get better pricing for the work.
I look at the proposed acquisition as a lot more than just CP access to the PRB - though that in itself can be a big deal: As was mentioned above, CP can transport the coal all the way to Philly.
CP currently hauls intermodal trainloads of imports from Vancouver to the east, including Chicago. In Chicago, the loads move to NS, CSX or south on CN.
CP can now pick up intermodal - and a whole lot of other stuff - in Kansas City and move it across their system. That would mean shipments from LA/Long Beach could be picked up in KC instead of Chicago for delivery in Toronto and Montreal. Tons of stuff from the South and Southwest (and Mexico) destined for Winnipeg and Calgary and Vancouver - or anywhere else in Canada - won't have to go through Chicago via BNSF/UP but can be picked up from KCS (or BNSF/UP) in Kansas City
CP will increase their options exponentially with this acquisition - with or without the PRB.
deepspire wrote:BNSF, Union Pacific may challenge railroad merger | Dallas Morning News U.S. railroads won't feel the effect for several years after the purchase of Sioux City, South Dakota-based DM&E
U.S. railroads won't feel the effect for several years after the purchase of Sioux City, South Dakota-based DM&E
beaulieu wrote: .....The money amounts quoted by Murphy Siding are conditional hedges of the purchase price for DM&E. If the hurdles to constructing the PRB line are too high, then the CP will pay less for the DM&E. Make no mistake the PRB is the main prize in all this, .....
Murphy Siding wrote: beaulieu wrote: .....The money amounts quoted by Murphy Siding are conditional hedges of the purchase price for DM&E. If the hurdles to constructing the PRB line are too high, then the CP will pay less for the DM&E. Make no mistake the PRB is the main prize in all this, ..... That is really an interesting thing, if you stop to think about it. CP pays another $1B, if it can get into the PRB by a certain date. Yet, the ones who hold the key to getting there now, are CP! It makes for a somewhat weird setup to me. I wonder is CP didn't feel they had to buy DM&E before somebody else did?
Chris30 wrote: So if the purchase of the ICE doesn't work out for the CP, does that mean they're going to sell it to the MRL?? Just my gut feeling that the CP is more interested in the ethanol traffic than the possibility of future coal traffic from the PRB if, an when, an extension is ever built. The UP & BNSF might have tolerated a smaller regional invading their PRB turf, but another class I? CC
ICE is heavy, or will be heavy with ethanol soon. Plants in Aurora, SD; Janesville, MN; for DME and Welcome, MN; Winnebago, MN; Lyle, MN; Hartley, IA; Charles City, IA; Dyersville, IA for ICE. Much tonnage to be sure. Winnebago is the only small plant on either line. The plant in Welcome, MN will be joint with UP, and UP as well gets a lot of traffic from the Charles City plant via interchange at Mason City. There is still question about the Hartley plant being joint with UP since they have long standing trackage rights up there (the confusion is the exact location of the plant). Seems UP's more direct route to Texas and Mexico is an asset.
petervonb wrote: deepspire wrote:BNSF, Union Pacific may challenge railroad merger | Dallas Morning News ....DM&E has been trying to expand into Wyoming's Powder River Basin coal fields, where Union Pacific and Burlington Northern are the only railroads with access. U.S. regulators in February rejected closely held DM&E's application for a $2.33 billion loan to build a rail line into the region.....\ This statement is a bit misleading. It appears right after the paragraph stating the acquisition must be approved by the STB and thus implies that the STB rejected the loan application. Of course, we know the loan application was rejected by the FRA and the FRA has nothing to do with the STB approval.
deepspire wrote:BNSF, Union Pacific may challenge railroad merger | Dallas Morning News ....DM&E has been trying to expand into Wyoming's Powder River Basin coal fields, where Union Pacific and Burlington Northern are the only railroads with access. U.S. regulators in February rejected closely held DM&E's application for a $2.33 billion loan to build a rail line into the region.....\
Not at all, both the FRA and the STB are regulatory agencies.
Murphy Siding wrote: Arggg!!! They've got their Siouxs mixed up again! It's Sioux Falls, S.D. (my home town), and Sioux City, Iowa! Silly Fort Worth Morning News anyhow!
The easy way to remember which is which is Sioux Falls is the one nearest the North Pole, a difference most apparent in February!
Over to you, Murph, lol
petervonb wrote: The $6 billion bandied about in the last year included the FRA loan to expand to the PRB and upgrade the rest of the line to carry the traffic and weight increase; and it undoubtedly included investment in motive power strong enough to haul the coal. With the CP acquisition, the motive power costs would not necessarily be so great - CP might well be able to efficiently move locomotives around so that fewer new ones would need to be purchased. CP might also have less expensive in-house MOW capacity, or might be able to get better pricing for the work.
The rough breakdown for the project is $3B for track, $1B for locomotives and $2B for the coal cars. It is expected CP will use utility owned cars, thus bringing the project back to $4 billion.
SFbrkmn,
You make a good point, I think CP is indeed looking south in the future. I don't know if how many people remember the article in Trains not too long ago where they were talking about the merger puzzle and KCS and CP came up. The author basically ruled out a CP/KCS merger as the two RR's didn't come anywhere near connecting, so it wouldn't work. The other class 1's with the exception of CN would give too much dominance in the region and likely be denied by the STB. Seems with this merger CP took a giant step toward closer ties with KCS.
Also there is a strong plug on the CP website about their partnerships which allow CP access to Mexico. It's been there for quite a while, only now it seems that CP is a little closer to being able to make it their on their own.
One final thought as someone pointed out, I'm sure CP is eager to get PRB coal moving across it's network. But only a few people have commented on the strong up and coming ethanol market in the region. While not as big a deal as PRB coal, I'm sure that was also a huge factor in helping CP decide.
Indeed, with improved DM&E track, there is a possible upside in this deal for ethanol being shipped out of the farm country. In South Dakota, according to data from the SD DOT (2006 data), there are 14 ethanol plants in operation or close to operation. However, 12 of those are along the BNSF and 2 on the DM&E. I do not have similiar data for Minnesota or the ICE in Iowa/Missouri.
Perhaps some of these plants will be expanded. However, I question how many more ever will be built. With corn north of $3, a plant that looked great using $2.20 corn a few years ago is not such a great deal anymore. Likewise, without the federal subsidy, it is questionable that any plant would be profitable. A lot of research is being done on the production of ethanol from less costly ag products than corn.
My point is that corn based ethanol production may be near its peak, and if I were the CP I would not rely upon it to generate any large increase in traffic.
Folks, I'm confused about what the merger will mean for the DM&E / Mayo Clinic / Rochester battle. I thought that the city & clinic were fighting DM&E expansion within Rochester that would expedite DM&E's access to the PRB. Doesn't the merger mean that DM&E / CP trains could just bypass the city?
Just a few things here:
1. UP may want trackage rights from Clinton to KC. I'm told they pay high dollars for rights over the BNSF currently, and BNSF limits them to the amount of trains they can run a day. I dont know why UP would want to give that up, even after building the Edelstein Connection.
2. One ICE manager emailed me they know about as much as us railfans do. They only have received one letter from Schieffer. There was an employee meeting in Sioux Falls for the office folks Wed p.m., not sure what was all said there.
3. CN I'm told was one of the finalists, but DME thought the CP was a better fit.
Only posting from what I hear, take it or leave it.
MILW86A
HankDiggs wrote: Folks, I'm confused about what the merger will mean for the DM&E / Mayo Clinic / Rochester battle. I thought that the city & clinic were fighting DM&E expansion within Rochester that would expedite DM&E's access to the PRB. Doesn't the merger mean that DM&E / CP trains could just bypass the city?
Rochester's only effective weapon to fight the DM&E was lobbying the FRA to turn down the loan request for the upgrades and the Powder River extension. To that end, they hired a whole staff of lobbyists (including the former Majority Leader Tom Dashle). They won that battle, but the presence of CP makes a federally guaranteed loan unnecessary.
I don't believe DM&E has any intention of bypassing Rochester but instead continuing to run right through town. I'm sure they would be willing to discuss a bypass constructed primarily at Rochester's expense.
Murphy Siding wrote: deepspire wrote:BNSF, Union Pacific may challenge railroad merger | Dallas Morning News U.S. railroads won't feel the effect for several years after the purchase of Sioux City, South Dakota-based DM&E Arggg!!! They've got their Siouxs mixed up again! It's Sioux Falls, S.D. (my home town), and Sioux City, Iowa! Silly Fort Worth Morning News anyhow!
I recommend that you SUE!!
LOL...
Couldn't pass that one up...lol...
petervonb wrote: CP can now pick up intermodal - and a whole lot of other stuff - in Kansas City and move it across their system. That would mean shipments from LA/Long Beach could be picked up in KC instead of Chicago for delivery in Toronto and Montreal. Tons of stuff from the South and Southwest (and Mexico) destined for Winnipeg and Calgary and Vancouver - or anywhere else in Canada - won't have to go through Chicago via BNSF/UP but can be picked up from KCS (or BNSF/UP) in Kansas City
I thought that the originating road usually dictated the hand off points to second carriers, arranged so that the originating line got maximum mileage?
For SF Brkman the CP trackage rights were highly conditional, and were created to insure IPSCO built their Steel Mill in Montpelier, IA. At the time that IPSCO was about to build their plant the IMRL was bankrupt and in the process of becoming IC&E, the trackage rights were granted so that IPSCO would have the confidence to build the mill. With IC&E being a sound company the CP could not exercise those rights.
For wyomingrailfan the PRB rights are the jewel in the deal, without them the combined DM&E/IC&E are worth about half of the $1.5 billion. Merging the DM&E into KCS does give access to Chicago, but KCS would have no ability to raise the money to reach the PRB. They had to give NS part ownership of the line known as the Meridian Speedway to NS in order to raise the money to upgrade the line, and like the DM&E had to get a RRIF loan to rebuild trackage known as the Macaroni Line (Rosenberg to Victoria, TX) which will improve access to their subsidiary Texas-Mexican Rwy. and thence Mexico. Unlike the DM&E the KCS got their loan.
Not much mentioned is that as part of the deal CP is taking on $350 million in DM&E debt, over and above the $1.48 billion purchase price.
beaulieu wrote: For wyomingrailfan the PRB rights are the jewel in the deal, without them the combined DM&E/IC&E are worth about half of the $1.5 billion.
For wyomingrailfan the PRB rights are the jewel in the deal, without them the combined DM&E/IC&E are worth about half of the $1.5 billion.
Batooski wrote: petervonb wrote: CP can now pick up intermodal - and a whole lot of other stuff - in Kansas City and move it across their system. That would mean shipments from LA/Long Beach could be picked up in KC instead of Chicago for delivery in Toronto and Montreal. Tons of stuff from the South and Southwest (and Mexico) destined for Winnipeg and Calgary and Vancouver - or anywhere else in Canada - won't have to go through Chicago via BNSF/UP but can be picked up from KCS (or BNSF/UP) in Kansas City I thought that the originating road usually dictated the hand off points to second carriers, arranged so that the originating line got maximum mileage?
Dakguy201 wrote: Indeed, with improved DM&E track, there is a possible upside in this deal for ethanol being shipped out of the farm country. In South Dakota, according to data from the SD DOT (2006 data), there are 14 ethanol plants in operation or close to operation. However, 12 of those are along the BNSF and 2 on the DM&E. I do not have similiar data for Minnesota or the ICE in Iowa/Missouri.Perhaps some of these plants will be expanded. However, I question how many more ever will be built. With corn north of $3, a plant that looked great using $2.20 corn a few years ago is not such a great deal anymore. Likewise, without the federal subsidy, it is questionable that any plant would be profitable. A lot of research is being done on the production of ethanol from less costly ag products than corn. My point is that corn based ethanol production may be near its peak, and if I were the CP I would not rely upon it to generate any large increase in traffic.
Asked and Answered. See my post above yours.
About a plant being profitable without the subsidy? Yes, the specifics were mentioned in a paper from the University of Minnesota in 2004 along with a spread sheet.
Expansion of plants depend a lot upon the local supply of feedstock. Shipping corn to a plant adds cost to the bottom line. Plants as so far have depended upon local supply to meet their needs. There is still capacity in some parts of Iowa, very little though. Saturation point is also coming to Nebraska, IL, Minnesota, and Indiana.
Postbulletin.com: Editorial: Railroad sale puts area at another crossroads
The sale of the Dakota, Minnesota & Eastern Railroad to Canadian Pacific is a major turning point in the fight to keep coal trains out of Rochester.
But it's hard to say which way the fight has turned.
As railroads go, DM&E was a relatively small fish in a very big pond. When CEO Kevin Schieffer tried to throw his company's weight around in Washington, D.C., he didn't create a huge wake. Without a well-placed senator to champion the cause, it's unlikely that DM&E's proposed expansion would have gotten as far as it did.
With Canadian Pacific in the picture, things could change. The railroad, which dates back to 1881, is an icon of industry and a source of national pride in Canada. Canadian Pacific's 14,000 miles of track span the continent and also serve Chicago and New York. Its stock is worth $12 billion, and recent takeover speculation put a purchase price for the corporation as high as $15 billion -- almost precisely 10 times the cash price it's paying for DM&E.
If the sale gains federal approval, there's little doubt that CP would haul low-sulfur coal east on what currently are DM&E lines. That's the purpose of the deal. With CP in the conductor's seat, investors would line up to finance a project that already has a thumbs-up from the federal government -- and that's assuming the corporation doesn't simply pick up the tab itself.
So, where would that leave Rochester? It's too early to say, but local officials are wise to begin making overtures to Canadian Pacific. The relationship between Rochester and Schieffer was, at best, testy. A "fresh start" would be welcome.
The downside, of course, is that a fresh start means we could be right back where we were a few years ago in the struggle to keep coal trains out of Rochester. It's certainly possible that the coal trains would follow the former Iowa, Chicago & Eastern route, which would be the preferred option from Rochester's perspective. But that's only one of myriad possibilities that city officials and Mayo Clinic leaders need to study.
Hopefully, Canadian Pacific will tip its hand a bit in the coming weeks. When the railroad's intentions become clear, Rochester can formulate a new strategy and make a proposal that will satisfy the railroad while keeping coal trains away from downtown.
If negotiations with Canadian Pacific ultimately can be viewed as a partnership, rather than a brawl, so much the better.
Reader comments:
catrunner - 09/06/2007Will those of us lowly barnyard tomcats be let in on the "myriad possibilities that city officials and Mayo Clinic leaders need to study" as they plan their next futile move? By the way, which one of you cats said Mayo Clinic leaders could keep on calling the shots? And what strategy and proposal will surface next to "keep coal trains away from downtown"? Whose backyard will Mayo sacrifice next? jeffathompson - 09/06/2007Lookie here. Mother Mayo has found someone bigger than her! Yup coal trains here we come. Drop a few cars off at the Silver Lake power plant, make sure the brakes are set so they don't end up in the river like the trucks do. Turn up the steam to the Mayo power plant right across the tracks. Hey, how come nobody complained about that noisy ugly eyesore when it was going up? If the PB is already turning the corner, how long before Mayo does? And once that happens, who's printing the yard signs. "Coal Trains for lower Electric Prices" 131541 - 09/06/2007justice? Mrs. Schieffer? where are you? LOL 156644 - 09/06/2007Right - give it up. Enough money has been spent on this dead horse. Move on. 131551 - 09/06/2007Sorry folks- First you look down and spit on the DM&E as a broken down wreck that deserves no respect. Now, all of a sudden, you are tip toeing up the steps of CP's front office, bowing the whole time and asking for respect. They'll wave you off as some street beggar, looking for a handout to buy some cheap port wine.
Postbulletin.com: Transition from DM&E to Canadian Pacific will be gradual
It will be at least two years before Canadian Pacific builds the long-planned coal line to eastern Wyoming that made Dakota, Minnesota & Eastern a household word in southeastern Minnesota.
Canadian Pacific announced Wednesday it's buying DM&E, but the ownership transition will be gradual.
It will take perhaps a year of scrutiny from federal regulators before Canadian Pacific can assume full day-to-day control of DM&E and its sister line, the Iowa, Chicago & Eastern Railroad. Canadian Pacific bought both railroads in a $2.7 billion deal announced Wednesday.
The IC&E railroad runs north-south through Austin into Iowa, with several road crossings, including Eighth Avenue Northeast just east of the Hormel Foods plant.
DM&E officials have focused on running a coal route through downtown Rochester but have considered an alternate route using the IC&E railway.
Austin city officials acknowledged last fall the potential for a significant increase in train traffic if the DM&E runs coal trains on the ICE railway but haven't discussed it much since.
Local officials who thought they might not have to deal any longer with Kevin Schieffer, the head -- and face -- of DM&E, might wish to think again.
"DM&E is managing this property for the foreseeable future, until the STB approves," said Fred Green, president and CEO of Canadian Pacific, in a conference call on Wednesday.
DM&E's management will report to a trustee, working on behalf of -- but also independently of -- Canadian Pacific.
"We can't do anything in the short term, under the STB rules, that would influence the day-to-day operations," Green said. "I want this transaction to go in a pristine fashion. We will not do anything to jeopardize the standards that the STB sets."
Canadian Pacific is, however, allowed to be involved in long-term capital planning. Canadian Pacific will form a joint team with DM&E to begin planning the extension of the rail line to the Powder River Basin, Green said.
That planning process will take at least a year, but probably no more than 30 months.
"Having made the decision, then we're saying probably pretty lucky to get it built in two years, and we'd be disappointed if we couldn't build it in three years," Green said. "So now you put that on top of whenever we make the decision."
If Canadian Pacific builds and operates the new line before the end of 2025, it will owe DM&E up to $1.05 billion in incentive payments. The incentives, plus a $1.48 billion cash payment due at the closing date, within the next 30 to 60 days, plus Canadian Pacific's assumption of DM&E's approximately $250 million debt, add up to the $2.7 billion purchase price.
Canadian Pacific engineers identified some $300 million in track improvements that must be done to bring the current line up to standard.
Dakguy201 wrote: HankDiggs wrote: Folks, I'm confused about what the merger will mean for the DM&E / Mayo Clinic / Rochester battle. I thought that the city & clinic were fighting DM&E expansion within Rochester that would expedite DM&E's access to the PRB. Doesn't the merger mean that DM&E / CP trains could just bypass the city?Rochester's only effective weapon to fight the DM&E was lobbying the FRA to turn down the loan request for the upgrades and the Powder River extension. To that end, they hired a whole staff of lobbyists (including the former Majority Leader Tom Dashle). They won that battle, but the presence of CP makes a federally guaranteed loan unnecessary.I don't believe DM&E has any intention of bypassing Rochester but instead continuing to run right through town. I'm sure they would be willing to discuss a bypass constructed primarily at Rochester's expense.
Thanks Dakguy, I appreciate the clarification. Also, is there a precedent for a railroad requesting funding from the FRA? I thought the FRA's function was primarily regulatory.
Indeed, the primarily function of the FRA is regulatory. However, Senator John Thune slipped a provision into legislation that greatly expanded the federal loan guarantee program to accomodate the DM&E with the FRA as the administrator.
South Dakota politicians were very prominent on all sides of the DM&E loan proposal. Senator Thune is a former lobbyist for the DM&E. Ex-Senator Dashle was invited to join the Board of the Mayo Clinic, and his wife's lobbying firm is believed to have Mayo as a client. Bill Janklow (ex-Governor, ex-Congressman, ex-convict from a manslaughter conviction) represented Mayo.
South Dakota is a low tax, low public services state so our politicans have to find some way to put bread on their tables!
Dakguy201 wrote: South Dakota is a low tax, low public services state so our politicans have to find some way to put bread on their tables!
South Dakota stepped up to the plate in 1980 and bought several hundred miles of the CMSP&P to preserve service, and did the same again in 1982. If there was a similar situation today, would the result be the same ?
RRKen wrote: The customer dictates where, who and when, not the carriers.
Ok, I'll grant you that, but if the customer has to deal with an originating carrier for the first 1800 miles, isn't that carrier in a better position to dictate terms than a secondary carrier moving only the final 400 miles?
Pricing power comes to mind.
nanaimo73 wrote: Dakguy201 wrote: South Dakota is a low tax, low public services state so our politicans have to find some way to put bread on their tables! South Dakota stepped up to the plate in 1980 and bought several hundred miles of the CMSP&P to preserve service, and did the same again in 1982. If there was a similar situation today, would the result be the same ?
How exactly do the CP and DME systems dovetail together? Is it possible that CP can use parts of it's existing system to bypass Rochester all together? I've tried looking at the system maps located at both RR's websites, but they really do not share many landmark locations.
Funny, but CP doesn't even seem to know for sure where Louisville KY is located, they show it in 3 various locations on differing service maps
Dakguy201: Funny, and true!
Dale: In the case of DM&E,if the state had to choose between buying the line, or losing service, Im afraid the line would look a lot like the Dakota Southern. The Milwaukee's lines were, for the mos tpart, were considered vital to the state's farm economy. Most of those are still thriving, under BNSF ownership. The CNW>nowDM&E line wasn't/isn't seen as being as important.
I have a hard time believing that DM&E>now CP will ever make it into the PRB. But that's just me. You do have to give credit to Kevin Shaffer and crew. Had they not been trying to get this thing off the ground for the last 10 years, DM&E probably would have faded from sight, and the selling price would have been $1.48. Perhaps, as a reward, CP could hire him on. He could be something in the legal or PR department. Maybe *CP city/railroad planning coordinator-Minnesota division*
I am glad that CP got the DM&E-IC&E because i was affraid that if CN got it one of the lines between the mississippi river and chicago would have been axed. unless they used those lines for some kind of directional running.
RRKen wrote: Dakguy201 wrote: I'm puzzled.This is not the first time I've seen a reference to the DM&E being a connection to KCS at Kansas City. As far as I am aware, the southmost point the DM&E achieves is Manley Iowa (or perhaps Mason City) on trackage rights on the UP. Heartland to Albert Lea via UP's Heartland sub., then south to Mason City via the Albert Lea sub. Even that will not last much longer. DME/ICE are one in the same as far as cars moving on either line. Anything on DME goes to ICE, Mason City, then east to the River before going south again to KC. Dakguy201 wrote: I think the KCS connection being discussed is the IC&E line that runs down the Mississippi and then southwest from Muscatine. Even assuming DM&E has rights over that line, for any shipment originating or terminating in the Dakotas (or Powder River), it is very much the long way around. Both the UP and the BNSF have routes that are much shorter. My figures show almost 600+ miles more from the PRB to KC via DME/ICE versus UP's route via the Marysville to KC. Not even close to being competitive as far as coal. CP feeds lots of traffic to UP every day out of St. Paul for Ft. Worth, and DME interchanges most all their traffic for the south to UP at Mason City. It has been my experience that most of the traffic ends up at customers on UP's lines anyway. UP's Spine line can out run the ICE line to KC by almost a day. And CP's traffic from St. Paul does not sit in some yard on UP. The train only works one station all the way to FTW. In most cases, by the time the ICE gets to KC to interchange their cars out of St. Paul, the cars leaving about the same time on UP have almost arrived in McAlester, OK. The customer will be the final guage of what goes where off the DME.
There is NOTHING wrong with the former MILW mainline south of La Crescent. True, it may not be a straight shot like the former CNW (nee RI) "Spine Line" mainline is but don't let that deceive you. Keep in mind that a majority of interstate commerce moves east and west, not north and south. Also, keep in mind that dwell times in yard(s) is what brings you down when it comes to moving freight. Being a CPRS employee and knowing quite a few people currently on the ICE back home in Iowa I've heard stories about how the auto traffic coming out of Ford in St. Paul has sat on the UP while ICE has given that traffic the red carpet. And I expect that CPRS will do whatever upgrading is necessary to make it an even better line than what it is right now
Batooski wrote: RRKen wrote: The customer dictates where, who and when, not the carriers. Ok, I'll grant you that, but if the customer has to deal with an originating carrier for the first 1800 miles, isn't that carrier in a better position to dictate terms than a secondary carrier moving only the final 400 miles? Pricing power comes to mind.
We have a customer who for example, choose to short haul UP to Omaha, then to BNSF for the same destination that UP also serves in California. It was not that BNSF called the shot, but the customer who decided the rate and service via BNSF was a better deal at that time UP has since gotten that tonnage back for the entire haul.
DM&E tried as it might to divert traffic off of UP, instead interchanging with KCS in KC. Customer said no, and the traffic is still on UP from Mason City off the DME. Again rates and service were the leading factor. In this case, the customer bills on a UP rate, and DME gets the division even though DME originates the loads.
We have a cement plant in town who gets empties not from UP, but DME, and ships the loads on a DME rate, with UP however being the originating carrier. All UP gets is the switching charge in this case.
A last case. An ethanol plant in Glenville, MN on UP's Spine shipped tanks to a CN customer in Chicago. At first, they shipped all UP to Chicago. But later specified the routing as UP to Iowa Falls, CN to Chicago instead of an all UP routing. The tanks were billed under a CN rate. Now the plant trucks the product from their plant to the old Cedar Valley, RR, and CN gets the whole route from end to end, despite not directly serving the customer.
I can go on with cases, but interchange is governed by AAR, and customers instructions must be followed. It is up to the carriers to make the best deal with the customer to get longer hauls.
Wonder now if other RR executives were in their boardrooms/war rooms late this last week looking at possible options in regard to CPRS' planned acquisition of DME/ICE? Even though, on paper anyway, the CPRS - DME/ICE merger is classified as a "minor" transaction, in reality it's a major transaction as it now puts my employer back in the Kansas City gateway (where it should have been all along) and puts CPRS in a position to possibly expand beyond Kansas City (PLEASE take the KCS next Fred!!). In particular, I'm wondering now if BNSF and CN might start getting cozy again. As I see it, here are some possibilities:
CPRS + KCS
CN + BNSF + NS
UP + CSXT
The other class 1s will be looking to gain something from this. BNSF wants control of the crossing in Savanna, for example. There is a rumour that NS wants CP's 49% ownership of the IHB.
I really can't see CP getting KCS. I could see KCS selling the KC-Shreveport-New Orleans line to CP, allowing KCS to concentrate resources on the rest of their system, where prospects for growth are a lot higher.
nanaimo73 wrote:The other class 1s will be looking to gain something from this. BNSF wants control of the crossing in Savanna, for example. There is a rumour that NS wants CP's 49% ownership of the IHB.
That has to be untrue Dale, what would they gain from it. IHB isn't a cash generating machine. CP and the other carriers operate over the IHB via trackage rights which NS couldn't extinguish. What they would gain is a modest amount of fees from the trackage rights and a whole lot of Switch Jobs which most railroads want to get rid of. I can't see NS buying unless CP wanted out and the NS didn't want somebody else in. I can't see anybody buying the IHB unless it was an outsider who felt that he had found a way to extract more money from the Class Is in usage fees. The two most recent sellers (C&NW and NYC) both needed cash badly at the time they sold.
I can't see KCS selling their main North-South route either, since all but one of their coal-fired powerplants are located on these lines. If KCS sells it will be either one of their few remaining branche, or the whole railroad.
Los Angeles Rams Guy wrote: CP + KCSCN + BNSF + NSUP + CSXT
CP + KCS
Why on earth would UP or any other Class one want to offend either eastern road by a merger? UP for example has interchange with both eastern roads out of several gateways. Very good traffic too. Why risk loosing any portion of it? The status quo allows competition. And that is what the consumers want as well. You think that the STB will let those mergers go forwards? In looking at recent cases before them, I think not.
The only merger I can see happening that will not impact competition is PGR + Guilford.
Modeling the "Fargo Area Rapid Transit" in O scale 3 rail.
CP may buy KCS, but they (or any other potential buyer) will have to contend with KCS's midsection, which is one mean Ozark grade after another. The hills start somewhere north of Hope, AR and go past Heavener, OK, for somewhere in the neighborhood of 100 miles. I've been over the ground between Mena, AR (north of Hope) and Heavener many times, and it is railroad-unfriendly.
IIRC the highest point on the KCS is at Rich Mountain, AR, between Mena and Heavener. I've listened to trains going over Rich Mountain, with SD40's bellowing for all they were worth and barely able to move the trains. Any new owner trying to put a whole lot of traffic over that part of the line will have to spend rivers of cash to increase capacity.
gabe wrote: The part of this that really has me laughing is the effect on BNSF. I just have to believe that BNSF had a hand in a considerable amount of the resistance that was stired up over this expansion. Had it worked out the way DM&E wanted, they might have been able to continue to act as an indepentent carrier--which would not be as competitive against UP/BNSF--while conducting the PRB expansion. But, because BNSF won the battle, they are going to lose the war by having a high-roller/Class I competing in the PRB instead of a regional. I think BNSF would have been better off had they bankrolled the project for DM&E.Gabe
True...harsh, but fair and true.It will be interesting to see BNSF and the UP sweat over (if any) loosing coal contracts to a dirctly connected rail line that can offer a better service of delivering coal to the power plants,since BNSF & UP cant deliver when the plants need the coal.Furthermore,there are plenty of power plants that are complaining about the lack of coal trains not arriving on time by the BNSF and the UP.As for Rochester,MN, and the Mayo Clinic...gee..wasting money in the courts..when they cant even finish a building they started to build more than 10 years ago.Figure that one!!!
well...i'm glad ICE went to the beaver and not the noodles. CP runs things a LOT better than CN. and i also cant see anymore class 1 mergers. i COULD see a few regionals buying up shortlines or 2 shortlines merging together into a regional somewhere. but not 2 class 1s. in fact, i wouldnt be surprised if the government eventually breaks some of these mega roads apart one day.
this all is good news to some of my friends down in IA claiming that SOO power might come back to their area now. and i must say it'll make some of the consists look nice. CP red and ICE blue together
Your friendly neighborhood CNW fan.
A.K. Cummings wrote:Why would CP want to bypass Rochester? Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Why, to keep the good people of Rochester happy of course.
Unfortunately for Rochester, and I think a previous poster pointed this out, CP rail is not the DME. They don't need federal funding, and to be honest I don't think they are going to sign on to adding millions of dollars to the construction costs just as a 'feel good' line item in the budget. Not only that, but if CP WANTED to route around Rochester, then the NIMBY's could fire up the old 'we need to do 80 environmental impact studies on the new route' thereby delaying the construction for another 10 years.
I think Rochester is going to be in for a little rain in their lives pretty soon.
News Flash!
According to the Railway Age news report for today, the name of the railroad is the Detroit, Minnesota & Eastern. CP's getting a better deal than they thought?
(It's like those videos on TV--you laugh, but man, that's gotta hurt!)
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
spokyone wrote:Railway Age has since edited both of their stories about DM&E. On their Sept 6 report they say,"utilities captive to BNSF and UP are unlikely to be affected by this acquisition and could provide BNSF and UP with some offset to pricing pressures elsewhere"Sounds like we need another thread about Open Access.
Is that the thread that says the Carriers will be bled to death because track fees will not cover the actual costs? If you want an eye opener, go to the STB site and read Monday's decision "AEP Texas North v. BNSF".¹ Then tell me what a great thing Open Access will be.
¹ While in reading that Decision, you will find material errors on the part of both parties due to lack of arguments. Some of which were sophomoric on the part of BNSF as current industry practice would have been enough to persuaded the Board that the costs were indeed realistic.
I think this is just the first step toward a CP/KCS merger. Now that CP has DME/ICE in it's stable (upon STB approval), it has a direct connection to KCS, thus enabling CP to get all the way to Mexico to further compete with CN, UP and BNSF. KCS has the best route into Mexico with Texas-Mexican and TFM under it's control. What better way for CP to get the lion's share of the international rail traffic than to have a direct connection to KCS and the DME/ICE provides this. Take a look at a map of these rail lines (CP/DME/ICE/KCS/Tex-Mex/TFM) and see how combining them would make a superior routing, especialy in light of the fact that a new deep water port is being built on Mexico's Pacific coast (served by TFM), and a customs facility is being built in Kansas City for imports and exports to Mexico. And just where is KCS' headquarters located? Then it's just a matter of time before the KCS and it's affiliates are another fallen flag, now under the huge umbrella of CP.
If that pertains to my question on how the 2 systems dovetail together, and whether the combined system might make doing so possible... then merely as a means to bypass Mayo clinic's protests and all the related headaches.
It seems like the two biggest obstacles to building into the PRB have been money, and Mayo. So I was curious if now that the first dragon has been slain, I was wondering if CP's system offered a natural solution to the latter.
Batooski wrote: A.K. Cummings wrote:Why would CP want to bypass Rochester? Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis. If that pertains to my question on how the 2 systems dovetail together, and whether the combined system might make doing so possible... then merely as a means to bypass Mayo clinic's protests and all the related headaches. It seems like the two biggest obstacles to building into the PRB have been money, and Mayo. So I was curious if now that the first dragon has been slain, I was wondering if CP's system offered a natural solution to the latter.
I would expect that as and if the coal trains become more numerous, some will use the ICE route. Four problems come to mind, none are unsolveable, but will entail above average expenditures. The need to use IANR tracks in Northern Iowa, The junction at Marquette, IA is laid out for EB to SB movements, good for trains to Iowa and Chicago but bad for trains to Wisconsin, the junction at Sabula, IA is laid out for NB to EB movements bad for those same trains to continue to Chicago, and finally heavier grades on the route via ICE to Chicago will require more power on trains routed that way(higher operating expense-more locomotives and more fuel burned).
moonrunner wrote: I think this is just the first step toward a CP/KCS merger. Now that CP has DME/ICE in it's stable (upon STB approval), it has a direct connection to KCS, thus enabling CP to get all the way to Mexico to further compete with CN, UP and BNSF. KCS has the best route into Mexico with Texas-Mexican and TFM under it's control. What better way for CP to get the lion's share of the international rail traffic than to have a direct connection to KCS and the DME/ICE provides this. Take a look at a map of these rail lines (CP/DME/ICE/KCS/Tex-Mex/TFM) and see how combining them would make a superior routing, especialy in light of the fact that a new deep water port is being built on Mexico's Pacific coast (served by TFM), and a customs facility is being built in Kansas City for imports and exports to Mexico. And just where is KCS' headquarters located? Then it's just a matter of time before the KCS and it's affiliates are another fallen flag, now under the huge umbrella of CP.
I would have to agree wholeheartedly here; at least I would hope this is what happens somewhere down the road when the time is right. It seems to be a natural and would be a nice fit and I think that new I.M.S. facility down at the Port of Lazaro Cardenas is going to do a lot of business in the future.
beaulieu wrote:I would expect that as and if the coal trains become more numerous, some will use the ICE route. Four problems come to mind, none are unsolveable, but will entail above average expenditures. The need to use IANR tracks in Northern Iowa, The junction at Marquette, IA is laid out for EB to SB movements, good for trains to Iowa and Chicago but bad for trains to Wisconsin, the junction at Sabula, IA is laid out for NB to EB movements bad for those same trains to continue to Chicago, and finally heavier grades on the route via ICE to Chicago will require more power on trains routed that way(higher operating expense-more locomotives and more fuel burned).
Thanks, so in what cities does CP and DME/ICE already have junctions?
beaulieu wrote: Batooski wrote: A.K. Cummings wrote:Why would CP want to bypass Rochester? Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis. If that pertains to my question on how the 2 systems dovetail together, and whether the combined system might make doing so possible... then merely as a means to bypass Mayo clinic's protests and all the related headaches. It seems like the two biggest obstacles to building into the PRB have been money, and Mayo. So I was curious if now that the first dragon has been slain, I was wondering if CP's system offered a natural solution to the latter.I would expect that as and if the coal trains become more numerous, some will use the ICE route. Four problems come to mind, none are unsolveable, but will entail above average expenditures. The need to use IANR tracks in Northern Iowa, The junction at Marquette, IA is laid out for EB to SB movements, good for trains to Iowa and Chicago but bad for trains to Wisconsin, the junction at Sabula, IA is laid out for NB to EB movements bad for those same trains to continue to Chicago, and finally heavier grades on the route via ICE to Chicago will require more power on trains routed that way(higher operating expense-more locomotives and more fuel burned).
Actually, the junction at Marquette does have a wye for movement to either Chicago or to River Junction/Wisconsin/Twin Cities so there's no problem there. Rather, I think where a problem may lie would be Calmar Hill where trains with even normal amounts of tonnage struggle sometimes.
A.K. Cummings wrote:So what are they going to do? What are these headaches to which you refer? And in what way has the Mayo "dragon" not been slain? I'm just not getting it. Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Reading others here, and elsewhere, suggests that an adversarial relationship exists between the Rochester coalition and the D,M,&E, over the prospect of increased traffic. A conflict that Mayo has been willing to devote resources towards their end. Time and money...those kinds of headaches.
So, I thought my initial (and as yet still unanswered) question was pertinent. Does CP's existing plant give them any creative work around? I have no idea. For all I know, they might have a superior alternative, which is kinda why I asked in the first place.
Batooski wrote: If that pertains to my question on how the 2 systems dovetail together, and whether the combined system might make doing so possible... then merely as a means to bypass Mayo clinic's protests and all the related headaches. It seems like the two biggest obstacles to building into the PRB have been money, and Mayo. So I was curious if now that the first dragon has been slain, I was wondering if CP's system offered a natural solution to the latter.
Gosh, you make too much sense there. I am wondering how much time and money was spent in litigation with Mayo? I am betting that money would have been better spent funding the bypass to begin with. But since there is a new player in CP, that last hurdle could be removed with the stroke of a pen, and several million dollars. CP indeed then would look like the White Knight.
It seems to me that the Rochester folk have run out of "just say no" tactics. With the CP in the picture, the loan becomes a nice but not absolutely necessary item.
If they want a bypass around the city, I would think they are going to have to shoulder most of the financial burden of creating it. I've never been there and know very little about the topography, but the acquisition of the land, the grade seperations, etc. can't be a cheap item. Off the top of my head, I would think something resembling the Reno trench on the current route would be more economical, but I suspect that if Rochester was faced with bearing the cost of either project, they would decide the status quo is preferable.
Brian (IA) http://blhanel.rrpicturearchives.net.
Jess72 wrote: I worked for the Soo, CP, I&M Rail link and currently work for the ICE . When I found out last night at 0200 I couldn't believe it!!!!!!!! I Hope we get the conductor craft back. I trained in Pigs eye back in 1996 and was a qualified conductor. Then they sold us and everone took a $12 a day pay cut and removed the conductor craft. It was hell ever since. I know alot of employees have protection agreements in place and the ICE is very strong about keeping us protected. I hope it's all wrapped up in 6 months. Alot of us have been beaten prior to the ICE and worry that not much will change. I hope alot changes, we deserve a class1 status.I would love to find a link to their T&E and Yardmasters Contracts Anyone?Jess
For Batooski - CP has the following interchanges with the DM&E
Winona, MN - this is the line through Rochester and is the most direct route to Wisconsin powerplants and it has the easiest grades for loaded coal trains.
Aberdeen, SD - This is via the shortline DMV&W for misc traffic to Canada, by agreement with BNSF coal and grain to West Coast is banned from this route.
With the IC&E
La Crescent, MN - on the Minnesota side opposite LaCrosse, WI (technically this Interchange is in St. Paul, MN with the IC&E using CP's tracks north of La Crescent).
Faribault, MN - south of the Twin Cities (inactive)
Bensenville, IL (Chicago area) - IC&E serves customers as far east as Pingree Grove, with CP serving from there into Chicago proper, interchange happens at Bensenville Yard. IC&E drops CP traffic at Bensenville, their traffic for other Chicago railroads goes to BRC's Clearing Yd.
For everybody in this dicussion, YES a bypass around Rochester is possible, it will be expensive and there will be opponents to any bypass, the people whose homes and farms will have to be condemned to create a path for the bypass. Rochester has spent minimal or no money on seeing if a bypass is possible, they just assume it will be.
The single biggest problem with the IC&E route is the fact that the STB has said that another EIS will be necessary if the coal trains are routed this way, I don't think the CP will risk the whole PRB project on the chance that this EIS might fail, for any reason. Once the PRB project is up and running a "fait d'acommpli" then they might try for the EIS. After the EIS then Calmar Hill with its 1.5% grades are the biggest problem.
My opinion is that CP will build the PRB line without a bypass, but will sign a agreement with Rochester to spend the money for a serious Engineering study of a bypass when traffic reaches a certain level. The agreement will NOT commit CP to build the bypass, this will allow Rochester leaders to save face with the voters. The bypass will only be build if traffic reaches high levels, at which point it will probably be needed anyway.
Andy- I think the problem with the Aberdeen, SD Interchange is the old "ya gotta know the territory rule". The agreement does ban movements to the UP at Eastport, ID. The reason BNSF didn't ban movements through Canadian ports is because effectively Canadian law already does this, the Canadian Wheat Board controls all grain exported though Canadian ports. Maybe the Canadian law could be changed, BNSF doesn't think it will. All Soo Line unit trains moving to the West Coast reenter the US for movement to Portland, Kalamah, or Longview. (might be some to SeaTac)
As to your second point, I agree, I don't think a bypass around Rochester will be built, but CP might offer Rochester's leaders, a piece of paper to cover their backside with. Of course it's only a piece of paper, carefully worded to not actually promise a bypass.
I am reminded of an analogy to Scatman Cruthers' line when standing on the last car of the Silver Streak [in the movie of the same name]--HELLLLOOOO! NEW ORLEANS!
[ as welll as Mobile, Al. Beaumont,Tx and Lazaro Cardenas. ]
Will Big Mike Haverty become tri-lingually conversational, or retire???
Will we get to see CP Steam running on the headend of the Southern Belle in Kansas?
A.K. Cummings wrote:Batooski —Theoretically, the answer to your question is yes, but in practice, not really — at least, not right away. You could conceivably use IC&E north from Owatonna to a connection with the CP, then run trains east down the River Sub and thus bypass Rochester. But the switch at Owatonna faces the wrong way for that, and track conditions on the Owatonna Sub north of Owatonna are very bad. That routing would also be substantially longer. We'll have a good map of this in the December issue that will make it plain, but there's a map of the CP/DM&E/IC&E system at dmerail.com that you can get a look at and see what I mean.Then again, DM&E already had the ability to route traffic around Rochester using IC&E south from Owatonna that would be far more practical than the routing I just described. So it's kind of a non-issue.Unfortunately, many cities have adversarial relationships with their railroads. That doesn't mean those cities can prevent trains from passing through. Rochester tried and lost. Their only remaining option is to appeal to the Supreme Court, but they'd be guaranteed to lose. Rochester isn't a problem in any way, shape, or form. Period. No sense giving them more credit than they deserve. Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
First, thankyou for (finally) a straight forward answer to a straight forward question. My curiousity was simple enough that I was having a hard time understanding where all the friction was coming from.
I see from the portion of your text that i have highlighted, you share the same anti-rochester sentiment common to many on this board, which is fine. But, I don't really think that a company such as CP is going to make Mr Schieffer's bygone hostilities into a cause celebre or sacred cow just for the satisfaction of tormenting the coalition.
If it makes sense to bypass (via existing alternate routing)Rochester and doing so would save CP time, trouble, and further hassle that they would just as soon avoid, then I am sure that is exactly what they would do. I don't think that serving Mr Schiffer's revenge is high on CP's agenda, no matter how much certain parties might prefer to think otherwise
thanks
beaulieu wrote: For Batooski - CP has the following interchanges with the DM&EWinona, MN - this is the line through Rochester and is the most direct route to Wisconsin powerplants and it has the easiest grades for loaded coal trains.Aberdeen, SD - This is via the shortline DMV&W for misc traffic to Canada, by agreement with BNSF coal and grain to West Coast is banned from this route. With the IC&E La Crescent, MN - on the Minnesota side opposite LaCrosse, WI (technically this Interchange is in St. Paul, MN with the IC&E using CP's tracks north of La Crescent).Faribault, MN - south of the Twin Cities (inactive)Bensenville, IL (Chicago area) - IC&E serves customers as far east as Pingree Grove, with CP serving from there into Chicago proper, interchange happens at Bensenville Tard. IC&E drops CP traffic at Bensenville, their traffic for other Chicago railroads goes to BRC's Clearing Yd.
Bensenville, IL (Chicago area) - IC&E serves customers as far east as Pingree Grove, with CP serving from there into Chicago proper, interchange happens at Bensenville Tard. IC&E drops CP traffic at Bensenville, their traffic for other Chicago railroads goes to BRC's Clearing Yd.
Thanks for all the additional information.
Reading that and looking at the new *.PDF map of the combined systems that Andy mentioned, what occurs to me is that the route through Rochester and on eastward, linking with CP in Winona, is by far the best route to Chicago.
Batooski wrote:I see from the portion of your text that i have highlighted, you share the same anti-rochester sentiment common to many on this board, which is fine. But, I don't really think that a company such as CP is going to make Mr Schieffer's bygone hostilities into a cause celebre or sacred cow just for the satisfaction of tormenting the coalition.If it makes sense to bypass (via existing alternate routing)Rochester and doing so would save CP time, trouble, and further hassle that they would just as soon avoid, then I am sure that is exactly what they would do. I don't think that serving Mr Schiffer's revenge is high on CP's agenda, no matter how much certain parties might prefer to think otherwisethanks
Batooski- Rochester didn't start asking for a bypass until they failed to get the whole project cancelled, they want the railroad to build a bypass at the railroad's expense. And they don't care about anyone who's homes or farms would lie in the path of this bypass, unless of course they can vote in Rochester's elections. CP owes nothing to Rochester except that their opposition to the DM&E's plans created the opportunity for CP to buy the DM&E. CP is well aware that Rochester wants a lot, but has nothing to offer in return.
BTW - after only a cursory glance at a topographic map a Rochester bypass would be a very difficult and expensive project. The existing railroad took the best route and the city built around it.
A.K. Cummings wrote:John —This is really interesting. I called the Canadian Wheat Board regarding this. Their PR person talked to the head of their Vancouver operations about it. To their knowledge, there's nothing that would prevent West Coast ports from handling non-CWB grain. She described it to me that the CWB is just a customer to the West Coast ports. A large customer, I'm sure, but they aren't aware of any law that limits Canadian ports to handling only CWB grain.Might there be something else out there? I'd definitely like to find out for sure before my story goes to press.Best, Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Andy, it was in a statement by by one of the Ag groups regarding the DM&E purchase, but it wasn't direct. I am no conspiracy theorist but I don't think BNSF would have left that possibility out if they thought that US grain would use Canadian Ports. If the grain could easily move via Canadian ports, the only people hurt are the UP, and the US ports. I can see them wanting to keep the business away from UP, but the US ports? If CP could move the grain via Canadian ports at a competive rate why does BNSF care if it comes back into the US at Eastport for movement via Portland? BNSF is protecting their rates pure and simple.
The comment was in one of the small town newspapers, amongst hundreds discovered via Google News, I'll keep looking.
I think I would contact one of the South Dakota Farm groups for their side of the story. Some of the Elevators at Vancouver can only be reached via the CN which might be part of the problem as well. It also might be useful to just ask CP about what the agreement allows and doesn't allow.
Andy further to my previous post
BNSF's grain train rates are lower where they face CP's competition.
US farmer's selling their grain to Pacific Rim countries don't care which ports their grain is shipped through US or Canadian.
BNSF specifically banned the grain from reentering the US through Eastport gateway.
BNSF might do this to hurt UP, but money talks and animosity doesn't.
CP isn't getting any of the grain for export to Vancouver.
I don't believe in those kind of coincidences.
I would ask a South Dakota elevator what the unit train rate is to Portland and then compare it to what the Elevator in the closest competitive location.
I am not convinced that the Rochester opposition will be of no consequence from this point forward. While it may be true that they are asking for something that many other cities are more worthy of receiving, those other cities are not making noise like Rochester. I think their cause rises above the ostensible concerns about crossing safety, vibration, delays, dust, etc. At their core, their objections are almost spiritual, and in the particular state of Minnesota, they have righteousness on their side.
I am not sure what they can accomplish, but I think they will amass tremendous political sympathy for their cause from the State of Minnesota. Plus, they will have unlimited resources to wage their fight. Back in the days of the robber barons, CP could have said, "Mayo Be Damned," but not today.
beaulieu wrote:Bucyrus, I think CP will talk to Rochester, and I think they will say that if Rochester will build an acceptable bypass the CP will lease and use it. Acceptable as in, not appreciably longer and no heavy gradients. I think Rochester will baulk at a price tag I suspect will be above $100 million dollars and that will be the end of the conversation.
I see that as a possibility. Somehow there will be a compromise, and I think it will pivot around extra infrastructure. A bypass would be one such example, but the price tag for a bypass will soar as the landowners on the proposed route find themselves in the driver's seat in a confrontation where CP arrives on its knees. And those landowners are likely to be armed with the same moral outrage as the present opposition.
In my opinion, a more likely compromise will be special provisions for the route through the city. There is no problem that cannot be solved by encasing it in concrete. Kevin Schieffer once said that he was not going to build a tunnel under Rochester. I would not be surprised if CP feels the same way. Certainly Rochester is not going to build the tunnel, but the citizens of Minnesota probably won't mind building it.
A.K. Cummings wrote: What I'm saying is this: For CP/DM&E to use a longer routing than necessary adds a great deal of cost to the thing. Every additional mile a train travels beyond what it must results in additional fuel burned. Put that up against the "time, trouble, and further hassle" that you cite for moving trains through Rochester. You criticize me for not answering your question directly, yet you still can't name a single delay, cost, or hassle trains passing through Rochester will face. Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Put that up against the "time, trouble, and further hassle" that you cite for moving trains through Rochester. You criticize me for not answering your question directly, yet you still can't name a single delay, cost, or hassle trains passing through Rochester will face. Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
First paragraph: Which is exactly why I asked about how the two systems dovetailed together in the first place. Not knowing if a rerouting made from the combined systems would be longer or shorter, I simply asked. Then the friction (from your end) started, for reasons I have no idea why.
Second paragraph: Well, I didn't really think that my curiousity as to how a combined system might work, needed to be expanded into a defense of how the coalition might choose to continue their little whizzing contest. The possibilities are really unlimited however. For instance they might cook up some as yet unheard (and unruled upon) grievance, lord only knows what that might be. With the Mayo's deep pockets, it could go on forever.
It doesn't matter if the objections have merit or not, they still become costly to CP to fight against. However now I see from the map you pointed to that no easy reroute exists based upon the existing lines. My initial curiousity was in wondering if one MAY exist, that would perhaps be seen as easier to use than it would be to continue bumping heads with the coalition.
Boy I hadn't expected this much "insightfull" discussion when I started the thread. I figured there would be a few quick posts, and interest in CP would vanish quickly. Nice to see that's not the case.
I think there are some big picture things to look at here, especially in deciding what CP will do and what will happen to Rochester.
A lot of people recently have been wondering about what CP planned to do to continue to grow and ensure it's position as an independant Class 1 railroad. It was pointed out that CN aquired BC Rail and WC, while CP's last major aquisition was the D&H. People speculated that CP was slowly being closed in and surrounded. CP was certainly not in a position to merge with another Class 1 and come out on top.
Really what CP was doing was focussing on building it's internal position, buying back it's own stock, and making it's self a more valuable company. It almost made it's self too much of a valuable company as was witnessed by the Brookfield Group when they floated the idea of buying CP. CP however said it wasn't interested in a merger and planned on going it alone. The aquisition of DM&E/ICE certainly now gives CP a much better opportunity to do just that. A 2 Billion + merger and 2400 miles of track is no small transaction. While it may not be as big as something like the UP/SP merger, it's certainly a majore investment, and it definitely puts CP in a strong position in the mid-west. The strength of this position is further enhanced should CP decide to open up the powder river basin option. While DM&E/ICE by it's self would have been a major addition to CP's network, I believe there were to long term strategic coals at play here. Acess to the PRB, CP already hauls a lot of coal out of BC, they like coal and they're good at moving it. I can't see CP buying the DM&E and not intending in the long run to enter the PRB. I'm sure they'll do it slowly and make sure the infrastructure can handle it, but they'll do it.
Secondly this aquisition also extends CP south as far as Kansas City. Trade between Canada and Mexico keeps growing each year and CP has been pushing this trade on their website for a while now. Extending the reach to Kansas City gives CP more options on getting Mexican freight to and from Canada. They no doubt will build a direct connection with KCS as well as continuing to use UP. The advantage here is that CP can now go as far as Kansas City on their own which will increase the amount of money they can make from Mexican traffic.
So how does the city of Rochester play into this? As stated this is obviously a major long term aquisition for CP and they're doing it to ensure the continued growth of the railway. I can't see them letting a city like Rochester get in the way of that long term plan. I'm sure they will talk to the city and try to work with them as much as they can. CP's always been a community oriented railway, but if Rochester continues to make unrealistic demands on the company, I'm sure CP will eventually say too bad, so sad. Here's a tissue for your issue. As Andy has already pointed out the legal battle have already gone in the railroad's favor. I doubt even CP will let a cit like Rochester mess with it's long term plans.
Just my 2 cents,
James.
Batooski wrote: A.K. Cummings wrote: What I'm saying is this: For CP/DM&E to use a longer routing than necessary adds a great deal of cost to the thing. Every additional mile a train travels beyond what it must results in additional fuel burned. Put that up against the "time, trouble, and further hassle" that you cite for moving trains through Rochester. You criticize me for not answering your question directly, yet you still can't name a single delay, cost, or hassle trains passing through Rochester will face. Andy CummingsAs far as the old trees go, many were cut down, because they were rotting from the inside. Even Associate EditorTrains MagazineWaukesha, Wis. First paragraph: Which is exactly why I asked about how the two systems dovetailed together in the first place. Not knowing if a rerouting made from the combined systems would be longer or shorter, I simply asked. Then the friction (from your end) started, for reasons I have no idea why.Second paragraph: Well, I didn't really think that my curiousity as to how a combined system might work, needed to be expanded into a defense of how the coalition might choose to continue their little whizzing contest. The possibilities are really unlimited however. For instance they might cook up some as yet unheard (and unruled upon) grievance, lord only knows what that might be. With the Mayo's deep pockets, it could go on forever.It doesn't matter if the objections have merit or not, they still become costly to CP to fight against. However now I see from the map you pointed to that no easy reroute exists based upon the existing lines. My initial curiousity was in wondering if one MAY exist, that would perhaps be seen as easier to use than it would be to continue bumping heads with the coalition.
A.K. Cummings wrote: What I'm saying is this: For CP/DM&E to use a longer routing than necessary adds a great deal of cost to the thing. Every additional mile a train travels beyond what it must results in additional fuel burned. Put that up against the "time, trouble, and further hassle" that you cite for moving trains through Rochester. You criticize me for not answering your question directly, yet you still can't name a single delay, cost, or hassle trains passing through Rochester will face. Andy CummingsAs far as the old trees go, many were cut down, because they were rotting from the inside. Even Associate EditorTrains MagazineWaukesha, Wis.
Put that up against the "time, trouble, and further hassle" that you cite for moving trains through Rochester. You criticize me for not answering your question directly, yet you still can't name a single delay, cost, or hassle trains passing through Rochester will face. Andy CummingsAs far as the old trees go, many were cut down, because they were rotting from the inside. Even Associate EditorTrains MagazineWaukesha, Wis.
It would seem, that the Rochester coalition has been overtaken by events. This bunch will be like alot of other NIMBY groups that tried to stop a project; they lost, but will still continue the fight, even when it becomes pointless. I have seen this happen a few times in my life and can only remember one being successful.... Around near where I used to live, a developer bought an old golf course from the Forest Preserve District, and unveiled their plans to turn it into a housing development. Well, some community activists got together halt the planned development because they felt, believed, or were told the old trees on the property were "virgin forest". So, the group fought, planned, marched, and took the developer to court to prevent the development. Well of the regulatory agencies (village board, zoning commision, forest preserve district, yadda, yadda, yadda) had already given their stamp of approval, it was, in effect, a done deal. Well, 2 years later, and several resounding defeats in court, including one where a certfied arborist independently confirmed that a: the tress were dying, and b: they weren't "virgin forest", the development is nearing completion, and yet, the group still fights. For what? I don't know, but they can't get anyhwere, they have lost, but have yet to realize it.
The point I am making, is that in these groups, they tend to get idealistic, or be idealistic from the start, and believe they are on some grand crusade of some kind. And, in their idealistic zeal, they tend to avoid logical thinking, and in some cases, some members begin to see "conspiracy" on the part of the opposition. So, I fully expect the Rochester coalition to continue their fight, even after the firsrt coal trains roll through the town. They talk about "bypasses" and "alternate routes" but, never fully think about, or even look at the implications for other people, just so long as they win their victory. I don't know much about the Rochester coalition, but, from what I have read, it has more to do with preventing a business deal than it has to do with "community concerns, humanity, and the environment."
Based upon the map Andy pointed to, does anyone know why they chose (for the PRB expansion) such a round about way of getting from Gillette to Rapid city?
And for that matter, the dotted lines shown on that map, like the one from Sudbury to Smith Falls and Between Duluth and Minneapolis...are those lines "trackage rights" or something else? (just curious)
Murphy Siding wrote: The Rochester group (TRG for short) has said in the past, that they didn't want coal trains running through their fair city on those naughty, old, DM&E tracks.(!) Nevermind, that we all know(TRG included) that DM&E would have had to improve the tracks. Now, TRG can *demand* that CP fix up the tracks before running lots of coal trains through town. They can also *encourage* CP to work with them on grade crossing and safety issues. Once these things are accomplished, (which DM&E or CP was going to do anyway), TRG can claim *victory*, as they will have *gotten what they wanted all along*. Everyone lives semi-happily for a fair amount of time.
With all the*energy* that has been put into this conflict already, can you imagine all the "I told you so's" that will be flying after there eventually is a grade crossing accident in Rochester? Double that if an ambulance happens to be involved.
A.K. Cummings wrote:Batooski —Dotted lines are indeed trackage rights. The reason for DM&E's southerly arc is the Black Hills, and the relatively flatter profile along the Cheyenne River versus crossing a variety of watersheds. In short, topography.Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Well then by garwsh, I have the perfect solution, tell the mayo clinic to move to the Black hills. Everybody will then be happy.
When did CP get a southerly line from Detroit to Chicago?
Batooski wrote: Well then by garwsh, I have the perfect solution, tell the mayo clinic to move to the Black hills. Everybody will then be happy.
ROF LMAO!!!!
John, Andy-
I thought Canadian and US grain was cleaned and dryed at different ends of the system. If US pratice is to clean and dry at the export terminal, while it is done at originating terminals in Canada, this would make exporting US grain through Canada difficult and expensive.
I can't remember which country does which, or if this has changed.
A.K. Cummings wrote:Bucyrus —Rochester certainly has amassed political power in its fight against DM&E. That power fought to persuade the STB not to approve the project. It lost. Then, it fought to force DM&E to bypass the city. It lost. Then, it fought to deny DM&E the FRA loan. It won. But now there's no need for the FRA loan.Enough political influence can win any political match. But the matches have all been fought, the winners all decided. How, exactly, are they supposed to stop the project now that it's been approved? They already tried the courts and lost. I just don't see any leverage on the part of Rochester in this whole deal, regardless of the political muscle they've enlisted. And interstate commerce laws pretty well protect them from any law or ordinance to try and route coal trains elsewhere. Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Andy,
I don't know how they could stop the project, but while that appears to be their ultimate goal, it seems quite improbable. I think the best they can hope for is the forcing of concessions in the line structure through Rochester. But if they now have no leverage at all, as you say, I don't see how they can force any concessions.
There seems to be a perception that RC won the second to the last battle, but lost the last one, so the war is over. I guess it would be over if the fight to prevent FRA funding was the last weapon in their arsenal. They seemed to have been quiet since that chapter, so it will be interesting to see if they resume the fight now that CP has replaced their original adversary.
I'm curious. When you say that RC won their fight to deny DM&E the FRA loan, do you mean they won by actually causing the denial, or that they won just because the decision matched their preference? I had the impression that it was the latter, and that RC had no effect on the FRA decision.
A.K. Cummings wrote:Batooski — Also, I should note that CP actually runs trackage rights over Norfolk Southern between Chicago and Detroit — they don't actually own that line. Hope this helps, Andy CummingsAssociate EditorTrains MagazineWaukesha, Wis.
Thanks, yeah that is what was driving my curiousity there, I believe those lines belong to NS.
Too bad DM&E cannot even publish a map accurately depicting what is company owned versus access by arrangement. makes one wonder...
Bucyrus wrote: Andy,I don't know how they could stop the project, but while that appears to be their ultimate goal, it seems quite improbable. I think the best they can hope for is the forcing of concessions in the line structure through Rochester. But if they now have no leverage at all, as you say, I don't see how they can force any concessions. There seems to be a perception that RC won the second to the last battle, but lost the last one, so the war is over. I guess it would be over if the fight to prevent FRA funding was the last weapon in their arsenal. They seemed to have been quiet since that chapter, so it will be interesting to see if they resume the fight now that CP has replaced their original adversary. ...
...
Is it truly over? Doesn't the STB have to approve the merger/purchase? That then would be the next skirmish....if you are not out of money yet, keep those high priced lawyers busy, filing objections with the STB. Do they have grounds to do so? Does it matter...keeping it tied up as long as possible may be thier only hope....and their plan. If they make it more trouble than it's worth, will the CP go away and leave them alone?
So far, the fat lady hasn't started singing...
If I recall properly, DM&E qualified as a class one, but opted to remain as as a class two railroad, to avoid the extra burdens of paperwork required of a class one.
Does this merger mean that all the lines will now be operated as a class one RR?
Don't forget that CP Rail is purchasing both DM&E and IC&E railroads. I would be lying if I said I knew how close the two companies would be in size to becoming a Class 1. But the DM&E & IC&E is described as the largest Class 2 railroad in the U.S. so I'm guessing they're not that far from Class 1 status.
As for the second question, CPR now operates all it's trains as part of the same railroad/railway. As SOO units get refurbished they are now being repainted into CP colors (with the beaver) and are being fully integrated into the CPR network. I think SOO still owns and operates the track the same way as the D&H still exists. Purely for accounting purposes regarding infrastucture. So I'm guessing that the DM&E may still exist on paper for quite some time to come. Most likely the first thing that will happen upon approval is that the motive power will get absorbed into CP's roster and units will be shuffled around as needed. Though this will also depend on crews and qualifications. Since the DM&E doesn't own any GE's, they may keep the EMD's around till the crews are certified on the GE power.
Then as Beaulieu pointed out most likely the crews will get absorbed into the CP network as union contracts are re-written, if they need to be.
Interestingly enough I just found this document on the DM&E website talking about the PRB basin expansion project;
http://www.icerail.com/PRB/DME%20Rail%20Upgrade%20Background%20WEB.pdf
The document does state that if the PRB goes forward that it will create another Class 1 railroad in the U.S. So it appear that the DM&E/IC&E were on the verge of Class 1 status and the PRB project would give them that status.
Hope this helps,
nanaimo73 wrote: John, Andy-I thought Canadian and US grain was cleaned and dryed at different ends of the system. If US pratice is to clean and dry at the export terminal, while it is done at originating terminals in Canada, this would make exporting US grain through Canada difficult and expensive.I can't remember which country does which, or if this has changed.
DALE,
I think I can answer your question maybe. Drying would be done at the local elevators for storage. The only times terminals would dry grain is if comes direct from the field. If FM [foreign material] cleaning is needed at the terminal, they would charge [dockage] the shipper for it.
Shippers sell to different terminals as to what each handles. Domestic terminals that handle food Grade want, little or no FM higher, high weight [oil content]. Feed grades terminals do not dock as much for FM, or lower weight grains. Export terminals [either in the US or Canada] use a little different grade standards, depending on who's buying; I don't know what those are for sure.
http://www.trainboard.com/railimages/showgallery.php/cat/500/ppuser/4309
james_hunt wrote:Don't forget that CP Rail is purchasing both DM&E and IC&E railroads. I would be lying if I said I knew how close the two companies would be in size to becoming a Class 1. But the DM&E & IC&E is described as the largest Class 2 railroad in the U.S. so I'm guessing they're not that far from Class 1 status.
The next largest Class II by physical size is MRL, by money it might be FEC. The WCL stopped being a Class II when the CN bought them. For the record the seven US Class I rail carriers according to the STB are (in no order) UP, BNSF, NS, CSX, KCS, Soo Line Rail Corp (includes D&H), and Grand Trunk Rail Corp. (includes IC, GTW, WCL, Cedar Valley). The last two are the US holding companies of the two big Canadian Railroads.
As for the second question, CPR now operates all it's trains as part of the same railroad/railway. As SOO units get refurbished they are now being repainted into CP colors (with the beaver) and are being fully integrated into the CPR network. I think SOO still owns and operates the track the same way as the D&H still exists. Purely for accounting purposes regarding infrastucture. So I'm guessing that the DM&E may still exist on paper for quite some time to come. Most likely the first thing that will happen upon approval is that the motive power will get absorbed into CP's roster and units will be shuffled around as needed. Though this will also depend on crews and qualifications. Since the DM&E doesn't own any GE's, they may keep the EMD's around till the crews are certified on the GE power. Then as Beaulieu pointed out most likely the crews will get absorbed into the CP network as union contracts are re-written, if they need to be.
The DM&E and the IC&E will likely exist on paper for a while but will cease to be Class II railroads as far as the STB is concerned as soon as they approve the acquisition. They will be folded into Soo Line Rail Corp. Soo Line Rail Corp will then own four railroads, the Soo Line Railroad, the Delaware & Hudson Railroad, the Dakota, Minnesota & Eastern, and the Iowa, Chicago & Eastern. The US subsidiaries of CP and CN are a little less of "paper" railroads than you might realize, even though their locomotives are painted in the parents colors. They have specific locomotives owned or leased by them, and they have their own railcars. For example CP painted GE AC4400CWs numbered in the 8500 and 8600 series are leased long term by the Soo Line and are maintained in St. Paul, MN. They are not leased from the parent CP. This is because Soo Line Rail Corp pays US taxes, and the failure to have depreciation and other capital expenses would increase the amount of money paid to the US Government. I would expect that functions like payroll, accounting, and dispatching, will move to Minneapolis. CP may chose to have the DM&E remain more separate until the PRB extension in order to protect itself from some liabilities, since it will be a large project.
beaulieu wrote:Batooski, that was the WC that asked the STB to raise the limits for becoming a Class I carrier, the DM&E was never pushing those limits, just not enough traffic. .
OH ok, thanks. Then I guess that I don't recall properly..lol!
Bucyrus wrote:When you say that RC won their fight to deny DM&E the FRA loan, do you mean they won by actually causing the denial, or that they won just because the decision matched their preference? I had the impression that it was the latter, and that RC had no effect on the FRA decision.
When you say that RC won their fight to deny DM&E the FRA loan, do you mean they won by actually causing the denial, or that they won just because the decision matched their preference? I had the impression that it was the latter, and that RC had no effect on the FRA decision.
Many people find it hard to accept the argument that the FRA's decision regarding the DM&E loan request was based on the merits, specifically that the loan was too risky. FRA did not go into the reasons for their decision in any detail, and it was quite apparent to all observers that the combination of politicians of all parties, and newspaper editors who didn't know what they were writing about, believing the hype put forth by the Rochester Coalition and its paid consultants was sufficient influence on the FRA to lead to the denial. It was a political decision. The STB is not so easily influenced, and the issues are not that easy to gloss over or fake.
DM&E and FRA could not make DM&E's financial information public so FRA could just as easily make whatever claims about it they wished to make.
I trust CP has the money for much maintenance. Newspapers in N. E. Iowa all too often have a story of a derailment between Minnesota and Sabula. Marquette to Mason City seems to be the most wreck prone.
Running west from Marquette, the line follows one of Iowa's few trout streams. Exploring the upper end of Bloody Run on Monday did not result in trout, but the sight of a clean up crew removing wrecked grain cars. It was cause to leave tackle in the car and head back to Marquette.
Fishing just west of the Marquette yard was productive. No Hazardous Material had effected the stream's stocked residents. New rail was lying alongside the ballast just west of the Marquette yard.
A spill along this trout stream would be bad publicity the not too distant NIMBYs of Rochester would love to latch onto. The last thing needed is a photo op of dead trout mingling with dead carp where the waters meet next to Marquette's gambling boat.
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