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Rail News: Rail Industry Trends

STB decision puts DM&E's plan to form Powder River Basin line-managing subsidiary on hold


The Surface Transportation Board (STB) recently issued a stay on the effective dates of an intra-corporate family transaction exemption sought by the Dakota, Minnesota & Eastern Railroad Corp. (DM&E) and its parent, Cedar American Rail Holdings Inc.

The DM&E plans to transfer authority of the STB’s decision allowing the railroad to build and operate a rail line into the Powder River Basin (PRB) to a newly created subsidiary, Wyoming Dakota Railroad Properties Inc. (WDR). Creating a separate subsidiary to build and operate the new line would facilitate financing and insulate DM&E shareholders from the risks associated with the project, DM&E officials said in a STB filing.

However, the Mayo Clinic and city of Rochester, Minn. — which oppose the project — and Olmsted County, Minn., filed petitions seeking to revoke the exemption. The petitioners raised concerns about the implementation of environmental mitigation conditions the STB imposed on the DM&E in its previous decision and the proposed transaction’s impact on the railroad’s “financial fitness.”

The STB issued the stay to “provide sufficient time for the board to fully consider the issues raised,” according to its decision.

The DM&E plans to build a 262.3-mile line through western South Dakota and eastern Wyoming, and upgrade 600 miles of other lines in South Dakota and Minnesota to access the PRB. The railroad is awaiting the Federal Railroad Administration’s decision on a $2.5 billion Railroad Rehabilitation and Improvement Financing program loan that would fund the project and other trackwork.

Contact Progressive Railroading editorial staff.

More News from 6/21/2006