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10/1/2008



Rail News: Rail Industry Trends

STB gives CPR/DM&E merger the thumbs up


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Canadian Pacific Railway's year-long quest to acquire the Dakota, Minnesota & Eastern Railroad Corp. (DM&E) is over.

Yesterday, the Surface Transportation Board (STB) gave its final blessing to the CPR/DM&E marriage, which includes the DM&E's Iowa, Chicago & Eastern Railroad Corp. (IC&E) subsidiary. The board's final decision takes effect on Oct. 30. The DM&E and its subsidiaries — which control more than 2,500 miles of track in Illinois, Iowa, Minnesota, Missouri, South Dakota and Wisconsin — now will merge their operations with CPR.

The board determined that the acquisition "encompasses minimal operational overlap among the involved railroads; no shipper will lose the option of competitive rail services as a direct result of the transaction," STB members said in the decision. They also ruled that the transaction won't create a monopoly or restrain freight surface transportation trade in any U.S. region.

"The DM&E is an excellent fit for Canadian Pacific, making this a strategic end-to-end addition to our network," said CPR President and Chief Executive Officer Fred Green in a prepared statement. "CPR customers will have direct single-line access to the Midwest U.S. markets and the Kansas City gateway, which will improve fluidity to and from the Southwest U.S. and Mexico. DM&E and IC&E customers will have access to single-line haul opportunities to new markets and access to CPR's car fleets."

However, the STB placed several conditions on the acquisition, which was first proposed in September 2007. One addresses potential environmental impacts of future coal train moves over CPR and/or DM&E lines if the Class I decides to construct a new line into the Powder River Basin (PRB), as long proposed by the DM&E.

The STB ruled that CPR and its holdings can't transport any coal originating on the new PRB line until the board prepares an Environmental Impact Statement addressing the environmental impacts of those moves and issues a final decision that allows those operations to begin.

The STB also imposed a condition that calls for continuing an ongoing safety integration plan review process, as well as standard labor-protection conditions.

But the board's conditions aren't enough to address "significant safety concerns" posed by the proposed PRB project, according to the Rochester Coalition, a group of Rochester, Minn., business and government leaders — including Mayo Clinic officials — who long have opposed the project. The STB has ignored the requests for a more thorough review, and will "require future assessment and oversight only if the Canadian Pacific decides to proceed with the DM&E's controversial PRB expansion," coalition officials said.

"The coalition has never opposed the Canadian Pacific's acquisition of DM&E," said coalition spokesman Chris Gade. "While not surprised by the ruling, we are nonetheless disappointed that our reasonable safety concerns weren't addressed. This failure to protect our community against increased rail traffic and speeds places us at significant risk."


Contact Progressive Railroading editorial staff.

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