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7/23/2002



Rail News: Rail Industry Trends

STB: DM&E's I&M Rail Link acquisition can proceed; IC&E control requires scrutiny




Surface Transportation Board July 22 denied requests by several labor organizations and Iowa Department of Transportation (IADOT) to further delay Iowa, Chicago & Eastern Railroad Corp.'s (IC&E) exemption to acquire and operate I&M Rail Link's (IMRL) rail lines and assets.


The board also removed a housekeeping stay it imposed on the transaction June 26, enabling IC&E's exemption request to go forward. However, STB soon will consider some parties' requests to revoke the exemption when the board considers Dakota Minnesota & Eastern Railroad Corp.'s (DM&E) application for control of IC&E.


The Board concluded that allowing the acquisition to proceed presents shippers the best opportunity for uninterrupted — and possibly improved — service on IMRL.


Under the asset-purchase agreement between IC&E and IMRL, the parties must consummate the transaction by the end of July. IC&E officials believe IMRL most likely will face bankruptcy if the transaction isn't completed (per feedback from IMRL lenders).


For that reason, STB determined that a stay would have potentially harmful consequences for IC&E, and for IMRL customers and employees.


Some parties, including IADOT and the U.S. Department of Transportation, raised concerns regarding IC&E's relationship to DM&E, which recently received STB approval to build a $5 billion rail line into Wyoming's Powder River Basin (PRB). The parties noted that there could be cumulative effects of new DM&E coal traffic from the PRB moving over IC&E lines.


STB determined that DM&E hasn't yet obtained necessary authority to control IC&E, and that IC&E must be operated independently until it does. The Board also imposed a condition precluding IC&E from handling any traffic moving to or from DM&E's future line until an appropriate environmental inquiry is conducted. (The inquiry wouldn't be initiated until DM&E gains STB approval to control IC&E, notifies the board that it's begun constructing the PRB line, and provides STB with additional necessary traffic and environmental information.)


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