CPR to buy Dakota, Minnesota & Eastern Railroad Corp

[Boyd]

All in all if Rochester again tried to kill the RR building into the PRB the CPR could go heavy on the Mayo and perform CPR to this ten year effort.

[Victrola1]

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.  

[trainfan1221]

Originally regional railroads proved that a cast off line or lines from a class 1 railroad could be succesful, and were seemingly a big part of railroadings future. Now any regional that does well seems to be taken over and merged out of existence.  Its a shame because I always thought that DM&E was a rather interesting railroad to read about, but I guess thats going to be a thing of the past too.  I guess WC led the way with this.

[petervonb]

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.

 

 

 

[Anonymous]

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!

[Andy Cummings]

JSGreen —

Fair point — I suppose Mayo could fight to stop the STB approval, in theory, of the CPR/DM&E merger. However, since CPR doesn't even say they necessarily intend to build the PRB project, it seems to me approval of the CPR/DM&E merger has little to do with the PRB project. Regardless, since the PRB project has already been approved, I'm not sure under what grounds Mayo would argue against the CPR takeover.

Also, I'd be very surprised if the STB denied the DM&E/CPR merger. Judging by the STB's past acceptance of much much larger mergers with a much greater potential to impact competition, I can't imagine on what grounds they'd make a decision like that. Then again, stranger things have happened...

Andy Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

[beaulieu]

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.

[inch53]

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.

[james_hunt]

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,

James.

[james_hunt]

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.

 

[beaulieu]

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. The IC&E is probably a lot closer than the DM&E. My thinking is that the DM&E will remain separate from the Soo Line, at least until the employees gat identical contracts. As long as there is an advantage to it, CP will keep them separate.

[Anonymous]

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?

[GTW4914]

Hello everybody yes CP has trackage rights on NS and CSX they have about 6 trains each way a day on NS and on CSX across michigan thier is one eastbound train number Q500. Q500 is on CSX.

[JSGreen]

 

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...

 

[Anonymous]

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 Cummings
Associate Editor
Trains Magazine
Waukesha, 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...

[Anonymous]

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 Cummings
Associate Editor
Trains Magazine
Waukesha, 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. 

[nanaimo73]

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.

[Kevin C. Smith]

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!!!!

[Andy Cummings]

Batooski —

Perhaps somebody on the list is qualified to answer for that specific line; I'm not. There are many reasons railroads chose to build lines on varying alignments other than directness of route, including but not limited to:

— Topography. See previous example. When they could, railroads liked to build along rivers, for example, because when you follow a river, you usually have a flat right-of-way in the flood plain. As expensive as long, indirect routes can be, pulling heavy trains up and down steep grades can be even more expensive — and dangerous, especially when these lines were built in the late-1800s. Let's just say brake technology has improved a lot since 1860.

— Cities and towns along the way. If you're building a line from Chicago to St. Paul, why not add a few miles and run through Milwaukee, thus picking up freight and passenger business there?

— Competition. If your competition already serves a town, build through a different town so you can have a monopoly. Or, if you're like a lot of rail barons of the 19th Century, build a rail line directly parallel to your competition just a few hundred feet away. Then, slash your prices to stations along that line for a few years, wait until he goes out of business, then take advantage of your monopoly by jacking your rates up! I learned this technique in Sid Meier's Railroad Tycoon computer games — lots of fun!

— Corporate welfare. When railroads were plotting their lines, cities along proposed lines would often try to persuade railroads to run through their town by giving away free land for stations and terminal facilities, or voting bonds to support the railroad. Build your railroad through the towns that vote the biggest bonds for you, and avoid the ones that would make you pay your own way!

There are many others I'm missing. If you're interested in why a particular line was built where it was, you can usually find that out by reading history books or newspaper articles from the time period when the line was built.

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 Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

[Anonymous]

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 Cummings
Associate Editor
Trains Magazine
Waukesha, 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?

[Andy Cummings]

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 Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

[Anonymous]

       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. 

 

[Anonymous]

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]

     I can picture the Rochester thing working itself out this way:  The Rochester group knows they have lost this battle.  The next step is to win a *psuedo-battle*, to save face by claiming a victory.  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.

[TimChgo9]

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 Editor
Trains Magazine
Waukesha, 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.

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."  

[james_hunt]

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.

[Anonymous]

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 Cummings
Associate Editor
Trains Magazine
Waukesha, 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.

[Andy Cummings]

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 Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

[Andy Cummings]

John —

Of course BNSF would prefer less competition to more. But keep in mind, BNSF leaders didn't grant these trackage rights out of the goodness of their hearts. There was a whole deal involved where BNSF got the core lines, which they really wanted. They also prevented any possibility of coal trains running over the DMV&W between DM&E and CP. If a judge had clarified the trackage rights deal, he could have found that DM&E and DMV&W had every right to interchange whatever commodity they wanted, regardless of destination.

Andy Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.