STB has decided that the CP acquisition of DM&E is major transaction

[RRKen]

I would say the Iowa Northern of today is a far different railroad from what it was in 1985.  I would guess that instead of stopping the sale, they are possibly looking to gain access to some trackage.  For my money I would think access to some of the elevators on the "corn line" across northern Iowa.  

Jeff, you hit the nail on the head.  IANR has become quite aggressive in attracting business.   Partnering with the ICE and DME was part of that equation. Same thing with Iowa Traction.    Both were vocal in order to preserve their interests during the DME control of ICE case before the STB if you will recall.  

 

Iowa D.O.T. feels they have invested a lot in the ICE and other roads connected, and to protect that, desire further information.  Combined, there must have been enough in their collective comments to convince the STB to change the transation from "minor" to "significant". 

 Just another hurdle to cross is all, not a case killer in my opinion. 

[RRKen]

In all this, many here fail to see the major comments CP made in it's application to the STB for this transaction.  Let me reprint it here for you.

 ".......DME still faces a number of significant hurdles before it can implement the PRB line project.  DME has not completed the process of acquiring (thorugh purchase, easement, or condemnation proceedings) all of the right-of-way it needs to build the proposed PRB line.  Nor has it executed agreements with PRB mines to connect with, and to operate over, their loading tracks and facilities.  Most importantly, DME has not secured sufficient commitments from prospective coal shippers to route their traffic over the proposed PRB line to justify the very large investment required to build it.   Finally, to date, DME has not been successful in arranging financing for the project.

The proposed acquistion of DME by CPR would not, in and of itself, eliminate all of these obstacles.  To be sure, as a Class 1 railroad, CPR possesses far greater financial capability than DME to undertake the PRB line project."    "However, several significant milestones must be achieved before the project can be justified economically."   "Moreover, the regulatory climate must remain conducive to substantial new investment in rail infrastructure.  If the proposed transaction is approved, CPR will work diligently with DME to satisfy these preconditions to construction of the proposed PRB line."

"Regardless of whether the PRB line is ultimately built, I firmley believe that CPR's acquisition of DME will be beneficial for CPR, DME, and their respective customers and the communities that they serve.   It is on that basis - and not on the basis of speculation regarding the future of the PRB line project - that CPR made its decision to acquire DME.   This reality is deomonstrated by the consideration that CPR agreed to pay under its acquistion agreement with DME, which is structured to reflect the separate nature of the decision whether to proceed with the PRB line project."

So you see, there is no absolute in this case regarding the PRB line project.   If you still believe there is, contact your fairy godmother for guidence.  

[Convicted One]

The problem is that the opposition is only concerned with their backyard and the railroad that runs through it.  In the bigger picture, that railroad serves several states and quite a few people.  Do the needs of the mayo clinic (which has had a railroad next to it for the entire life of the clinic) outweigh the needs of 3 or 4 state economies?  I think not. 

  I highly doubt that the STB will hold up this purchase JUST because of the Mayo clinic.  There is absolutely no justification for that. 

 

Do you seriously believe that the Mayo had absolutely no influence into DMEs loan/grant rejection? 

I think it's a stretch to claim that the best interest(s) of 3 or 4 states is the altruistic goal of the railroad...since they have demonstrated already that they could care less about one city's protests, my take on it is that the railroad only favors the well being of it's supporters, and has a caustic regard for anyone else.

My bet is that the  dedication they have  is toward getting their own revenue stream in motion and the argument that they have the best interests of 4 states at heart is about as specious as the claims the coalition has  made about 'safety' being their foremost concern.

 

[Convicted One]

If there were cooperation, what would be the end result on the ground?

 

Thinking about that some more over the evening, I have one thought that I will offer. As I recall, there is some restriction or prohibition that blocks DM&E from routing coal trains over the southerly ICE route...am I remembering that correctly?

The railroad should perhaps have considered partnering with Mayo, to get that prohibition undone. Mayo might have proven to be a formidable ally.

Using the route as currently planned, the end of the haul is Winona, correct? with a loading to barge?  They get a longer haul via the southern alternative, meaning more $$$. And isn't there even to possibility of hauling all the way to Chicago via this route, permitting hand-off to the eastern roads? just a thought.

[beaulieu]

If there were cooperation, what would be the end result on the ground?

 

Thinking about that some more over the evening, I have one thought that I will offer. As I recall, there is some restriction or prohibition that blocks DM&E from routing coal trains over the southerly ICE route...am I remembering that correctly?

It's not exactly blocked, but rather the STB has ruled that the railroad will have to go through the whole Environmental Impact Statement process again to route coal trains over those lines.  Also part of that route is over trackage rights on the Iowa Northern which adds complications, and then there is Calmar Hill to contend with.

 

The railroad should perhaps have considered partnering with Mayo, to get that prohibition undone. Mayo might have proven to be a formidable ally.

Using the route as currently planned, the end of the haul is Winona, correct? with a loading to barge?  They get a longer haul via the southern alternative, meaning more $$$. And isn't there even to possibility of hauling all the way to Chicago via this route, permitting hand-off to the eastern roads? just a thought.

No there would be no barge terminal at Winona. The DM&E joins the CP mainline at Winona, which then gives access to two large powerplants in Wisconsin currently, and potential access to a third one. Also the IC&E would require heavy rebuilding all the way to Chicago, while the CP mainline would not require substantial investment for many years. The 43 coal trains per day of course is pure garbage, BNSF and UP aren't going to rollover and play dead, and CP would have no advantage in serving plants in the Southern US. Indeed with Eastern powerplants being forced to install expensive pollution control equipment the eastern market will probably grow only as Applachian mines become too expensive. If CP cannot justify the PRB extension on something near 10 loaded trains per day I don't think it will ever be built.

Re; Kevin Schieffer and the Mayo Clinic, I think the only reason there is a problem between them is because the Mayo Clinic won't settle for anything less than a Rochester bypass, and Kevin Schieffer couldn't give them that, I don't think CP can give them that either, and therein lies the problem.  

[trainboyH16-44]

CP is the *good* railroad with red AC locomotives and the steam engine. CN is the *bad* railroad with black locomotives, a long string of accidents, and the former WC and IC.

I can only say I support this statement  

[Anonymous]

I think this decision also implies that the CN + EJ&E will also be considered a "significant" transaction which must displease CN. As far as DM&E and IC&E becoming "Class I" carriers as a result of this transaction, probably only if the PRB extension is built. 

As far as the CP and the Mayo Clinic goes, I think the CP has two choices, either fight Mayo to the bitter end, or fight for the option to route coal via the IC&E. A Rochester bypass would almost certainly be so expensive as to make the PRB project unfeaseable, the economics of operating via the IC&E may also be too expensive to make the PRB project happen.

The IANR is probably looking for what it can get out of the deal, perhaps trackage rights to Chicago.

Do you really think IANR would be angling for trackage rights to Chicago??  Granted - they're a solid short-line between Manly and Cedar Rapids and they're doing well on the ethanol and grain business, but do you really think they'd be in a position to want trackage rights all the way to Chicago?

[Convicted One]

The 43 coal trains per day of course is pure garbage, BNSF and UP aren't going to rollover and play dead, and CP would have no advantage in serving plants in the Southern US. Indeed with Eastern powerplants being forced to install expensive pollution control equipment the eastern market will probably grow only as Applachian mines become too expensive. If CP cannot justify the PRB extension on something near 10 loaded trains per day I don't think it will ever be built.   

 

Interesting...just for the sake of discussion, forgetting about CP for the moment, do you think that the original DM&E could have paid back the $2.1 billion government loan with only 10 loaded trains per day?

[Ulrich]

CN is far far frar from a bad railroad... They are an EXCELLENT railroad...and like most roads today they are coping with large increases in volume over some difficult terrain. CN is not only the most profitable road...it is a safety innovator. What other road has been running safety cabs on all new units since 1974? 

[Andy Cummings]

Re: Beauleau's post:

I agree with you that this is the reason they haven't been able to come to an agreement. Mayo/Rochester have been insistent that the coal trains not pass through Rochester under any circumstances. They've suggested a bypass and a tunnel under the city, both exorbitantly expensive options, and Schieffer has simply said, no, we're not going to do that, unless you want to write the check for it.

But there's a piece I'm still missing here in the logic being kicked around in this discussion: The STB has ruled that DM&E can build the coal project, sans bypass, and run trains through downtown Rochester over the current (1864) alignment. So what's the problem? Why is Rochester/Mayo a barrier of any kind? Don't get me wrong — I'm not saying the railroad should snub them, or kick sand in their faces, or anything like that. But clearly, Mayo is going to continue to demand a bypass, CPR is going to say no, and none of it will matter, because when it gets DM&E, CPR will inherit DM&E's authorization to run coal trains, as part of the PRB project, through downtown Rochester. What's left unsettled? Where's the barrier? I know a lot of intelligent folks on this list are saying there is one, but I have yet to hear a coherent explanation, on any forum, as to why Mayo/Rochester are barriers of any kind.

I also wouldn't read too much into the STB considering this a major transaction. I admit that it surprised me, but there certainly are a lot of interested parties here. That it's a major transaction doesn't prejudge whether it will be approved or not. I still don't see any way anyone is going to convince the STB to deny the DM&E/CPR merger. Sure, they may impose conditions, such as trackage rights, just as they did with the UP/SP merger. But so what? As far as saying "no," what would be the basis for that? It's an end-to-end merger, there aren't any communities losing competitive access, so I'd be shocked if the STB didn't ultimately approve this merger, even if it takes longer than DM&E and CPR initially anticipated.

Best,

Andy Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

[Soo 6604]

CP is the *good* railroad with red AC locomotives and the steam engine. CN is the *bad* railroad with black locomotives, a long string of accidents, and the former WC and IC.

I can only say I support this statement  

Didn't the CP just have a derailment across the river from La Crosse due to a sleepy crew?

Paul

[beaulieu]

Re: Beauleau's post:



But there's a piece I'm still missing here in the logic being kicked around in this discussion: The STB has ruled that DM&E can build the coal project, sans bypass, and run trains through downtown Rochester over the current (1864) alignment. So what's the problem? Why is Rochester/Mayo a barrier of any kind? Don't get me wrong — I'm not saying the railroad should snub them, or kick sand in their faces, or anything like that. But clearly, Mayo is going to continue to demand a bypass, CPR is going to say no, and none of it will matter, because when it gets DM&E, CPR will inherit DM&E's authorization to run coal trains, as part of the PRB project, through downtown Rochester. What's left unsettled? Where's the barrier? I know a lot of intelligent folks on this list are saying there is one, but I have yet to hear a coherent explanation, on any forum, as to why Mayo/Rochester are barriers of any kind.

I also wouldn't read too much into the STB considering this a major transaction. I admit that it surprised me, but there certainly are a lot of interested parties here. That it's a major transaction doesn't prejudge whether it will be approved or not. I still don't see any way anyone is going to convince the STB to deny the DM&E/CPR merger. Sure, they may impose conditions, such as trackage rights, just as they did with the UP/SP merger. But so what? As far as saying "no," what would be the basis for that? It's an end-to-end merger, there aren't any communities losing competitive access, so I'd be shocked if the STB didn't ultimately approve this merger, even if it takes longer than DM&E and CPR initially anticipated.

Best,

Andy Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

I think that Rochester/Mayo will seize on any possible reason that the CP shouldn't be allowed to merge with DM&E, and failing that will try to get conditions inserted into the STB ruling giving them what they what. The STB isn't the same animal it was in the past. I note that the STB chose to consider this transaction as "significant" rather than "major" since it won't force any kind of realignment by the other Class Is.  

[beaulieu]

 

Interesting...just for the sake of discussion, forgetting about CP for the moment, do you think that the original DM&E could have paid back the $2.1 billion government loan with only 10 loaded trains per day?

No, the DM&E would require more trains than the CP since they would have a shorter haul, and I don't think that CP will have to finance as much as the DM&E would.  

[Convicted One]

and CP would have no advantage in serving plants in the Southern US. Indeed with Eastern powerplants being forced to install expensive pollution control equipment the eastern market will probably grow only as Applachian mines become too expensive.

First Energy Corp (Ohio), Detroit Edison (Michigan), And The Southern Company (Georgia Power) are already using PRB coal at some plants. All three in fact are supporting members of the PRB Coal Users Group.

Seems like any PRB sourced hauler would look with enthusiasm toward expanding their business with thos entities

[RRKen]

I think this decision also implies that the CN + EJ&E will also be considered a "significant" transaction which must displease CN. As far as DM&E and IC&E becoming "Class I" carriers as a result of this transaction, probably only if the PRB extension is built. 

The IANR is probably looking for what it can get out of the deal, perhaps trackage rights to Chicago.

Do you really think IANR would be angling for trackage rights to Chicago??  Granted - they're a solid short-line between Manly and Cedar Rapids and they're doing well on the ethanol and grain business, but do you really think they'd be in a position to want trackage rights all the way to Chicago?

 That is pure speculation and has no footing in fact.   Iowa Northern just wants it's interests covered, and who could blame them?    With Manly Terminal soon to open, and the gold mine UP gave them in the route to Oelwein, they are doing well.   The management of Iowa Northern seems quite focused upon their service to customers, as I have seen first-hand.  Their partnership with other lines seems to work for them, and all have prospered for it.  

[RRKen]

CN is far far frar from a bad railroad... They are an EXCELLENT railroad...and like most roads today they are coping with large increases in volume over some difficult terrain. CN is not only the most profitable road...it is a safety innovator. What other road has been running safety cabs on all new units since 1974? 

 

Ohhh boy, where to start.  First off, I find no connection between a carrier having a wide body type locomotive, and overall safety.   It maybe indeed a small factor, but does not impact overall operations.    Yes, they innovated with RCO, the most inefficient way to switch cars in a yard as compared to conventional service.   (Of the three fatalities reported by a carrier in 2007 in switching yards, all were RCO.   Real safe.)   Their take on safety is, if they can hide it, no one will know.  Just ask the line people.  

[RRKen]

Re: Beauleau's post:

But there's a piece I'm still missing here in the logic being kicked around in this discussion: The STB has ruled that DM&E can build the coal project, sans bypass, and run trains through downtown Rochester over the current (1864) alignment. So what's the problem? Why is Rochester/Mayo a barrier of any kind? Don't get me wrong — I'm not saying the railroad should snub them, or kick sand in their faces, or anything like that. But clearly, Mayo is going to continue to demand a bypass, CPR is going to say no, and none of it will matter, because when it gets DM&E, CPR will inherit DM&E's authorization to run coal trains, as part of the PRB project, through downtown Rochester. What's left unsettled? Where's the barrier? I know a lot of intelligent folks on this list are saying there is one, but I have yet to hear a coherent explanation, on any forum, as to why Mayo/Rochester are barriers of any kind.

 As far as I can tell, Mayo has no leg to stand on in regards to the original PRB line case.  However, with a new player, they can try to negotiate with CPR to reach an understanding.   From a business standpoint, it  makes perfect sense to do so.  

I also wouldn't read too much into the STB considering this a major transaction. I admit that it surprised me, but there certainly are a lot of interested parties here. That it's a major transaction doesn't prejudge whether it will be approved or not. I still don't see any way anyone is going to convince the STB to deny the DM&E/CPR merger. Sure, they may impose conditions, such as trackage rights, just as they did with the UP/SP merger. But so what? As far as saying "no," what would be the basis for that? It's an end-to-end merger, there aren't any communities losing competitive access, so I'd be shocked if the STB didn't ultimately approve this merger, even if it takes longer than DM&E and CPR initially anticipated.

Best,

Andy Cummings
Associate Editor
Trains Magazine
Waukesha, Wis.

Andy, the transaction itself is "significant", meaning unlike a minor transaction, it will require a higher filing fee for the application, and more documentation.   No where near that of a "major" transaction.  I too will be shocked if the transaction is rejected by the STB, in fact, I look at it as a given.   Just a few more hoops to jump through for CPR is all. 

Step back for a moment and put yourself in the shoes of the STB.   They finally finished the PRB line case and EIS.   Do you think for  one moment they want to open up that can of worms again?   Not if they can help it.  However they must remain neutral in that as a regulator.   It is that neutrallity, along with the filings in the case so far, that made them decide upon the merits presented to them, and not their wishes to keep the case as smooth and simple as possible.  

[Ulrich]

So why did the railroads switch over to the more expensive wide cabs then..looks? CN has a good safety record and is working hard to improve certain problem areas. Keep in mind, also, that CN is a more complex far reaching operation that the others given that it is the only true transcontinental railroad...from Halifax to Vancouver/Prince Rupert and right down to the Gulf Coast. The other roads are basically super regionals.

[RRKen]

So why did the railroads switch over to the more expensive wide cabs then..looks? CN has a good safety record and is working hard to improve certain problem areas. Keep in mind, also, that CN is a more complex far reaching operation that the others given that it is the only true transcontinental railroad...from Halifax to Vancouver/Prince Rupert and right down to the Gulf Coast. The other roads are basically super regionals.

 

Yes, "Super Regionals" which make a heck of a lot more money than CN, have more route miles than CN, more employees than CN, and carry more tonnage than CN.  As well, some are improving P/E ratios, while not yet close to CN's, they are at least heading in that direction.   When I look in my portfolio, CN is not in it, but UP, BN, and NS are. 

 Two western "Super Regionals" have the same types of topography, and experience the same types of operational difficulties as CN.  In places, they have triple main tracks in place to accomodate capacity.   They run fast intermodals, fast guaranteed perishables, that meet customers expectations, and are expanding.    One needs not be Trans-Continental to get the job done.  

 Sorry old sock, I don't buy your sales pitch.

[Ulrich]

Yes indeed..more tonnage..more employees...more route miles...but not as profitable...and as an investor profit is all I care about. I haven't said anything disparaging about the others...they're good roads too.

So why the wide cabs if not for safety?  

 

[enr2099]

CN???? SAFE???? HAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!! Oh...that's too funny. A railway that's having major derailments almost everyday, a railway that killed the entire fish population of the Cheakamus River, oh yeah that's a real safe company. A company who's CEO is such greedy son of a b****, he's not spending any money on infrastructure. Locomotives and tracks are falling apart. I've seen abandoned railways in better shape than most of CN. Remember the bridge collapse on the BC North Line? Caused by Hunter's penny pinching.

 

A multi-billion dollar railway and they're too cheap to make sure everyone has radios, to properly maintain locomotives and track and to provide employees with proper training. New employees with only 3 months training are being foreman/conductor qualified with absolutely no familiarzation or experience as a helper/brakeman.  

[traisessive1]

CN is far far frar from a bad railroad... They are an EXCELLENT railroad...and like most roads today they are coping with large increases in volume over some difficult terrain. CN is not only the most profitable road...it is a safety innovator. What other road has been running safety cabs on all new units since 1974? 

 Since it's obvious that you are either A) A drooling foamer or B) A CN official ... you know nothing. As stated before, ask any person who works on the trains or in the track gangs for CN anywhere on their system and you will quickly find that CN is as far from safety as A is from Z in the alphabet.

 They preach it to make themselves look good. But heck its not safe. It's a cover their butt thing. It's all a way to harass employees and boost shares.

Since CN is losing money this year ... you should see the things they are doing ... heck NOT doing to save even more money by spending even less of what they already were not spending.

And you know how CN copes with large volumes of traffic? By making half of their trains 7000-12000 feet and only having 2 units on it. You are in Notch 8 all the time ... even down hill half the time. The units never get a rest. They are so power short they just run everything to the max 100% of the time.  They are getting a whole whack of new units. And you know what they are doing to help themselves with their power shortage ... you guessed it ... scrapping units!

 And as for wide cabs ... its all in the models. The standard widecabs on the new units today are a heck of a lot nicer than the CN widecabs.

 As the guy ahead of me posted. You can walk along the tracks on the high speed jointed rail mainlines and see just how badly it is in disrepair. Also yes in the Canadian collective agreement there is no wait time before you can be a conductor. You do your 15 yard trips and your 30 (15 there and back) roads and bam you are a conductor that is EXPECTED to be as good as the old heads with 20+ years.

New guys are smashing stuff up everywhere.

[enr2099]

 As the guy ahead of me posted. You can walk along the tracks on the high speed jointed rail mainlines and see just how badly it is in disrepair. Also yes in the Canadian collective agreement there is no wait time before you can be a conductor. You do your 15 yard trips and your 30 (15 there and back) roads and bam you are a conductor that is EXPECTED to be as good as the old heads with 20+ years.

New guys are smashing stuff up everywhere.

 

Our collective agreement says, I believe, six months training is required. CN is trying to say that the six months starts at the start of rules class, but apparently it is meant to be six months training as a helper/brakeman.  Might be different for you guys back east though.

 

After the strike, I was on an afternoon yard trying to switch out a train and went through 2 sets of power trying to switch this train out. The first set, one unit wouldn't load, the other one was low on water and kept dying, the second set one of the units was low on water and died, the other one just kept slipping(no sand).  

[Ulrich]

I'm not a drooling foamer or a CN official..however if things ARE THAT BAD why don't you grow a pair (of BALLS)) and QUIT? I'm sure there are alot of other McJobs in SK that pay as well as CN does... CN is losing money? Not according to my dividend checks...

[RRKen]

... you know nothing. As stated before, ask any person who works on the trains or in the track gangs for CN anywhere on their system and you will quickly find that CN is as far from safety as A is from Z in the alphabet.

 They preach it to make themselves look good. But heck its not safe. It's a cover their butt thing. It's all a way to harass employees and boost shares.

Since CN is losing money this year ... you should see the things they are doing ... heck NOT doing to save even more money by spending even less of what they already were not spending.

And you know how CN copes with large volumes of traffic? By making half of their trains 7000-12000 feet and only having 2 units on it. You are in Notch 8 all the time ... even down hill half the time. The units never get a rest. They are so power short they just run everything to the max 100% of the time.  They are getting a whole whack of new units. And you know what they are doing to help themselves with their power shortage ... you guessed it ... scrapping units!

 And as for wide cabs ... its all in the models. The standard widecabs on the new units today are a heck of a lot nicer than the CN widecabs.

 As the guy ahead of me posted. You can walk along the tracks on the high speed jointed rail mainlines and see just how badly it is in disrepair. Also yes in the Canadian collective agreement there is no wait time before you can be a conductor. You do your 15 yard trips and your 30 (15 there and back) roads and bam you are a conductor that is EXPECTED to be as good as the old heads with 20+ years.

New guys are smashing stuff up everywhere.

 

Very well put.  

[enr2099]

And loose my entire pension? I don't think so. I'm stuck with CN.

[Ulrich]

A pension huh? nuff said...

[enr2099]

I've said my piece, now I'm done with you before this turns into a flame war.

[RRKen]

And loose my entire pension? I don't think so. I'm stuck with CN.

 In 11 years, I'll take my 401k, Railroad Retirement, move to the Mississippi river.  I earned it.

[Ulrich]

No flame wars...but you maybe shouldn't flame your employer so openly on a public forum. They try hard and they don't deserve to be disrespected in that way. Hopefully things will work out.  You have a nice evening...