Past
News Reports
(Yesterday's News is Tomorrow's
History)
DM&E/IC&E
Michael Blaszak
January 2007 (courtesy North Western Lines):
The Federal Railroad Administration accepted public comments on DM&E's
application for a $2.3 billion loan to construct its Wyoming expansion and
main line rebuilding project through October 10. After that, the FRA has 90
days to decide whether to grant the loan. Economic interests throughout
Minnesota and South Dakota filed comments in support of the loan, but the
Mayo Clinic and the City of Rochester remained opposed.
On October 3 South Dakota officials voiced their support for
the loan at a public forum in Huron, South Dakota. "The issue at hand is one
of the most important issues our state has faced in many, many years. We
have a once-in-a-lifetime opportunity now," said Senator Tim Johnson.
Senator John Thune, who sponsored the legislation that made the project
eligible for public financing, said "I think this project has the potential
to have a transformational effect on South Dakota's economy. It's that big."
Representative Stephanie Herseth and Governor Mike Rounds also told Shane
the loan application should be approved. Over 5,000 comments supporting the
loan had been filed with the FRA as of October 9. Support from Minnesota
politicians was restrained, at best. Two Wisconsin agencies filed comments
in support of the loan, noting that 60 percent of Wisconsin's electricity is
generated by burning coal and that the extension would enhance supply
capacity and competition.
The Mayo Clinic retained a Washington law firm to fight the
FRA loan application. Mayo also retained former South Dakota Senator Tom
Daschle and Governor William Janklow to oppose the financing, although
Janklow reportedly quit the assignment in early October.
At the urging of Senator Coleman, efforts to resolve Mayo's
objections resumed following the close of the public comment period. "I need
to soon see a mitigation plan" for adverse impacts on the clinic, Coleman
said during a November 16 conference call with reporters. "If there isn't a
plan," he continued, "then I'll do everything in my prerogatives as senator
to stop this project, either through the appropriation process or the
legislation process."
On December 4, U.S. Transportation Secretary Mary Peters
traveled to the Midwest on a "listen and learn" tour. Peters first went to
Cedar American Rail Holdings' office in Sioux Falls to meet with President
Kevin Schieffer and other DM&E officials and other proponents of the loan.
Then Peters traveled to a retirement home in Rochester to meet with Senator
Coleman, Minnesota Governor Tim Pawlenty, and Representative-elect Tim Walz
(who defeated Gutknecht in the November 7 election, in part by opposing the
DM&E project), along with representatives from the City of Rochester and the
Mayo Clinic.
Peters did not address the press after that meeting, but
Coleman said "I asked her to go back [to Washington] and process a
mitigation program that makes sense." What Coleman had in mind was a program
that would address the concerns of the city and the Mayo Clinic while still
being acceptable to DM&E. Coleman continued that he would back off his
threat to kill the project by the end of the year if no settlement was
reached, saying "If she wants a few more weeks, I'll give her that."
On November 19 DM&E announced an agreement with Coreslab
Structures Inc. to construct a bridge component manufacturing plant in Rapid
City. The plant will build precast/prestressed bridge components for the
Wyoming extension project, specifically girders in 60- to 80-foot lengths.
Over 750 such girders will be required. GCC Dacotah of Rapid City will
supply cement for the components, and aggregate will be purchased from local
suppliers. The plant will have 35 employees when it reaches full production,
anticipated for June 2007.
DM&E signed the agreement even though it does not know
whether it will be receiving the FRA loan it needs to finance the project.
"The execution of this agreement represents another significant calculated
risk for us," according to Kevin Schieffer. In order to build the project in
a timely manner, "plant construction has to begin now in order to be able to
produce enough parts to build the line." Schieffer recognized that "we run
the risk of spending several million dollars developing this plant that will
be lost if the project is not built."
DM&E and IC&E on May 12, 2006, asked the Surface
Transportation Board to lift a condition imposed by the 2002 decision
approving acquisition of the assets of I&M Rail Link that prevented DM&E
from routing Wyoming coal over IC&E without further regulatory review of
"cumulative environmental impacts." On October 18 the STB served a decision
requiring DM&E and IC&E "to prepare environmental documentation for public
review and comment" supporting their position that "there would be no
potentially significant cumulative impacts."
The railroads filed their Environmental Appendix on November
8. They argued that IMRL had always been planned to serve as DM&E's
preferred eastern connection for Wyoming coal moving to Chicago and markets
east of there. Therefore, the subsequent addition of IC&E to the DM&E
corporate family will not make any significant difference in DM&E's routing
choices. About two-thirds of coal trains operating via Chicago would run on
IC&E east of Owatonna, Minnesota. Alternate routes that DM&E anticipates
using are CP east and west of Minnesota City, Minnesota, and Canadian
National-Iowa Northern east of Lyle, Minnesota, to Dubuque, Iowa, where the
trains would return to IC&E. The Environmental Appendix stated that
construction of the Wyoming extension would not be completed until 2009, and
significant numbers of coal trains would not begin running before 2010. No
more than four loaded coal trains per day are expected to move over IC&E
through 2011.
During the week of September 4, DM&E began carrying processed
Powder River Basin coal for KFx, Inc. (which renamed itself Evergreen Energy
on September 26) from Rapid City to Chicago (via IC&E). Evergreen Energy is
testing its process to make coal burn hotter and cleaner, meeting new
Federal Clean Air standards for mercury and other emissions that go into
effect in 2007.
Evergreen Energy's pilot conversion plant in Gillette,
Wyoming, can process 750,000 tons of coal a year. Gillette is served by
BNSF, and KFx's initial rail shipment went east on that railroad in August.
However, BNSF has capacity constraints and is not interested in handling
less-than-trainload shipments of coal from Wyoming to Eastern consumers
taking the processed coal in test lots. Thus, KFx had to resort to trucking
the coal from Gillette to Rapid City and transloading it into hoppers for
the move east to customers, primarily in Ohio, Michigan, and Illinois. DM&E
expects to handle about 3,000 carloads of coal a year from this shipper.
Kevin Schieffer told reporters he thought the potential
market for the processed coal is enormous, particularly at ethanol plants.
Only about five percent of ethanol plants burn coal now; the rest rely on
costly natural gas.
Interestingly, DM&E has hauled coal to the Rochester power
plant for some time, despite the city's opposition to Powder River Basin
coal moving through its limits. This coal originates in southern Indiana on
the former Milwaukee Road. Since CP/Soo Line's sale of this trackage to
Indiana Rail Road in May 2006, the coal has been moving in INRD-marked
hoppers. --Ron Barber, Dan Grossell
Trains between Rapid City, Belle Fourche, South
Dakota, and Colony, Wyoming, operate at unpredictable times. The westbound
train departs Rapid City either during the afternoon or at night. Train
speeds are generally limited to 10 mph.
April 2007
(courtesy North Western Lines): On February 28 the Federal
Railroad Administration denied DM&E's application for a Railroad
Rehabilitation and Improvement Financing loan of $2.33 billion to fund the
construction of its extension to the Wyoming coal fields and rebuilding of
its main line. In a three-page letter, FRA Administrator Joseph Boardman
agreed with many of DM&E's arguments in favor of public financing of the
project, writing that the new coal line would "materially alleviate rail
capacity problems" in the Powder River Basin and preserve rural railroad
service in Minnesota and South Dakota.
However, Boardman "concluded that there is an unacceptable
degree of uncertainty with regard to the project and too high a risk
concerning whether the obligation can reasonably be repaid" in view of
DM&E's "highly leveraged financial position, the size of the loan relative
to the limited scale of existing DM&E operations, and the possibility that
the railroad may not be able to ship the projected amounts of coal needed to
generate enough revenue to pay back the loan." In addition, Boardman cited
concerns that the application did not sufficiently address how DM&E would
handle potential cost overruns and schedule delays in construction.
DM&E Chairman Kevin Schieffer took this setback in stride,
stating that "This is not something that changes our focus on getting this
project built or our confidence that it will be built," and that DM&E "expect[s]
to move forward" to secure private financing. "This program is too important
to the future of our company, regional rail transportation and the many
supporters in the agricultural and energy sectors, the communities we serve
and beyond who are relying on it," Schieffer continued. He told the Sioux
Falls Argus Leader in an interview that "There have been ups and downs
over the years, high ups and low downs. This past week certainly wasn't the
lowest down," and "this is not a process for the faint of heart."
The Argus Leader quoted Wall Street rail stock analyst
Tony Hatch as saying there's a good chance DM&E will find private capital to
fund the $6 billion project. "There is a ton of capital in general
interested in what can broadly be described as infrastructure deals," he
remarked. Continuing, Hatch told the reporter "I physically saw people
rushing to give him [Schieffer] their business cards" within the past year.
"He said 'Wait, wait, wait. I'm in the middle of something else,' meaning
the FRA loan application. Now that FRA has decided not to finance the
project, Hatch thinks these prospective lenders will reappear.
DM&E's stockholders, which include Lombard Investments, a San
Francisco banking firm, rail dealer L.B. Foster Co., a group of British rail
pension funds and the company's officers, remain strongly in favor of
proceeding with the project, the Argus Leader reported, even though
they might have to cede an ownership stake to whatever "800-pound gorilla,"
in Schieffer's words, may agree to invest in it.
DM&E did get some good news on December 28 when the Eighth
Circuit Court of Appeals affirmed the STB's final approval of the coal line
project over the objections of Rochester and the Mayo Clinic. Schieffer told
reporters in March that DM&E is considering basing its coal line
construction effort in Pierre, South Dakota.
A DM&E contractor was busy during mid-February surveying and
taking soil borings along the railroad's proposed alternate route around
Mankato's south side. Since there is no access to some of these locations by
road, the contractor used a helicopter to fly equipment to them. DM&E's
first choice is to continue operating via UP trackage rights through
downtown Mankato after the coal project is completed, but it has commenced
work on designing the bypass in case its negotiations with UP are
unsuccessful.
DM&E SD40-2 6068 was repainted in DM&E blue and yellow by
Wisconsin & Southern's Horicon Shops in February and returned to the
railroad in March. --Terry L. Peterson
May 2007:
Iowa Chicago and Eastern... Unusual Moves in February …
During the month of February, a couple of unusual moves took place. On
February 24th, westbound rail train WCCSE23 (Engineering Chicago, Illinois/BRC's
Clearing yard-Sleepy Eye, Minnesota) was seen going west on the Chicago Sub
with IC&E 6456 leading. The LNA2 (formerly the 910 local) out of Nahant
delivered a transformer to the Commonwealth Edison Plant at Cordova,
Illinois on February 26th. The unit was moved from Chicago via Galesburg,
Illinois on the BNSF to the Quad Cities for interchange. Foreigners … While
KCS power is sometimes common on the FKCMC trains out of Kansas City, TFM
power is seldom seen. However, a FKCMC-24 was spotted at Ottumwa, Iowa on
February 25th with TFM 1430/KCS 4000. The TFM 1430 still wears its original
FNM two-tone blue scheme. -A.L. Coe, Erik Rasmussen, and Nick Trimberger.
Dakota Minnesota and Eastern... FRA tells DM&E No on Loan …
While coal for test burns continues to be loaded on the DM&E at Whitewood,
South Dakota, the Federal Railroad Administration decision to deny the
DM&E's loan application on February 26 stunned employees and supporters
alike. Citing an "unacceptably high risk to federal taxpayers," Federal
Railroad Administrator Joseph H. Boardman denied the railroad's loan
application. Boardman found that the project met some of the requirements of
the Railroad Rehabilitation and Improvement Financing program. However, he
said the risk was too high that DM&E would be unable to repay the loan. He
was concerned about several things, including DM&E's high debt load; the
size of the loan compared with the small scale of existing DM&E operations;
the possibility that the railroad might not be able to reap enough coal
revenue to repay the loan; and that the application did not sufficiently
address how the railroad would handle potential cost overruns or schedule
delays. DM&E issued a statement after the FRA ruling on $2.3 billion loan
request to fund a rebuild of its 600-mile east-west line across Minnesota
and South Dakota, and lay new track west and tap Wyoming's Powder River Coal
Basin. In the statement, Kevin Schieffer, President and CEO said, "While
DM&E is disappointed in the Federal Railroad Administration's decision
denying our loan application, we expect to move forward and will spend some
time assessing alternatives to accomplish that objective. This project is
too important to the future of our company, regional rail transportation and
the many supporters in the agriculture and energy sectors, the communities
we serve, and beyond who are relying on it. DM&E will make appropriate
announcements about next steps in the process as it moves forward." 2007
Capital Projects … The railroad is planning an ambitious season of work over
the system in 2007. The largest of these improvements include: --Thirty
miles of new and used 115-pound continuous welded rail (CWR) between Colony,
Wyoming, and Sturgis, South Dakota, as well as new ties and surfacing. The
rail project will eliminate all jointed rail from the main line north of
Rapid City. --22 miles of rail, ties, turnouts, and surfacing between Rapid
City and Wasta, South Dakota. --22 miles of rail, turnouts, ties, and
surfacing between Sleepy Eye, Minnesota and Mankato, Minnesota. --Nearly 800
miles of surfacing and over 120,000 tons of ballast on DM&E including the
remainder of the PRC (Pierre to Rapid City) Subdivision and the DM&E main
eastward. Test Coal Project Continues … You may be surprised to know that
Wyoming coal is already rolling over the DM&E. The specially processed coal
is trucked from Wyoming to Whitewood, South Dakota and is trans-loaded into
cuts of DM&E and Norfolk Southern hoppers. The coal moves in regularly
scheduled DM&E trains from western South Dakota to Chicago. A total of
3000 carloads of coal were ordered by KFx, a Denver-based firm that's
testing a process to make coal burn hotter and cleaner in a plant at the old
Fort Union mine a few miles north of Gillette, Wyoming. The coal is
transported to utilities, hospitals and universities, mostly in Illinois,
Michigan and Ohio. KFx president Ted Venners said that his company could do
more business with the DM&E even before the expansion project begins. KFx
can keep trucking coal to Rapid City as long as there is available trucking
at affordable rates, Venners said. "As long as the market demands it, we
will keep doing it." Ethanol Plant Planned for Belle Fourche … On February
23, ProEco Incorporated officials announced the construction of an ethanol
plant adjacent to the DM&E main line in Belle Fourche, South Dakota. The
plant will be the first ethanol-based facility built in the West River
region of South Dakota, and plans to experiment with processing pine chips
from the Black Hills in the creation a new type of ethanol. The plant could
be in operation by late 2008, producing approximately 100 million gallons
annually, and is projected to provide 75 new jobs in the community. This new
business, along with other expansions in the local bentonite processing
industry, will likely dictate an increase in switching duties by the five to
six-day a week Belle-Colony turn. Three More "Reds" Receive Repaints … Three
former CP Rail SD40s have recently received a new coat of blue and yellow
paint. Locomotives 6068, 6090 and 6094 are yet to be named, but the latter
was also given special logos and lettering for the railroad's 20th
anniversary, as did GP38 number 4002.
