Dakota, Minnesota and Eastern Railroad

The Dakota, Minnesota and Eastern Railroad is a wholly owned U.S. subsidiary of the Canadian Pacific Kansas City.[1] Before its purchase, it was the largest Class II railroad in the United States,[2] operating across South Dakota and southern Minnesota in the Northern Plains of the United States. Portions of the railroad also extended into Wyoming, Nebraska, Iowa, and Illinois. It interchanged with all seven U.S. Class I railroads.

The DM&E began operations on September 5, 1986, over trackage spun off from the Chicago and North Western Transportation Company in South Dakota and Minnesota. The DM&E purchased the assets of I&M Rail Link railroad in 2002, renaming it Iowa, Chicago and Eastern Railroad. DM&E combined its management and dispatching duties with those of ICE under the holding company Cedar American Rail Holdings. The combined system connected Chicago through Iowa to Kansas City, Minneapolis-St. Paul and continued west to Rapid City, South Dakota. Smaller branches extended into Wisconsin

1997–2006: plans for expansion into the Powder River Basin

Expansion plans

In 1997, DM&E announced plans to expand into the Powder River Basin (PRB) in Wyoming and provide unit coal train service from that area. The railroad filed an application for the expansion to the Surface Transportation Board (STB) on February 20, 1998. Burlington Northern Railroad built into this area in 1979, and the Chicago and North Western Railway (CNW) also sought to access the PRB coalfields, a project accomplished by CNW's successor Union Pacific Railroad.[14] DM&E would become the third railroad to tap into the coal deposits in the region.

DM&E's expansion would require the construction of 281 miles of new track, upgrading 598 miles of existing track (including all of the railroad's mainline track in Minnesota), new mainline connections at Owatonna, and Mankato, Minnesota, and three new rail yards. The plan would be the largest new railroad construction in the United States since the completion of the Chicago, Milwaukee, St. Paul and Pacific Railroad (Milwaukee Road)'s Pacific extension to Seattle, Washington, in 1909.[15]

Initial approval

The STB approved the application on December 10, 1998, pending completion of an Environmental Impact Statement (EIS), which was released by the STB on September 27, 2000.

An analysis of the plan by Minnesota's Dakota, Minnesota and Eastern Railroad Working Group in 2001 showed support among customers and freight shippers, but DM&E's expansion plan led to complaints among residents in communities along the railroad's right-of-way.[15] While some communities welcomed the railroad's expansion plan as an opportunity for increased business within their own cities, other residents and businesses felt that roads in the area were not built with enough overpasses and underpasses to deal with the traffic flow problems that the longer and more frequent unit trains would produce at grade crossings. The objectors cited concerns of the general public in safely and quickly traversing their communities as well as the ability of emergency vehicles to cross the tracks to reach emergency scenes or hospitals. The city of Rochester, Minnesota, filed with the STB to compel the railroad to build a bypass around the city as a condition to granting the railroad permission to build the Powder River extension. The bypass was estimated to cost around US$100 million.[16][17]

Further legal actions

After a period of public comment that lasted until March 16, 2001, and further review by the STB, the final EIS was issued on November 19, 2001. In this approval, the STB agreed with DM&E that no new bypasses around cities would be required even though the cities of Rochester, Minnesota, Brookings and Pierre, South Dakota, had requested them. In 2003, a ruling by the United States Court of Appeals for the Eighth Circuit ordered the STB to re-examine potential environmental issues around Rochester. The STB's preliminary report, released in early 2005, noted that no additional steps were needed by the railroad to alleviate noise and vibration caused by the projected increase in train traffic.[18][19]

The court upheld the STB's approval with stipulations for the new line's environmental impact, including the projected increase in the frequency of train horn soundings along the line. From the court's ruling, the STB issued a Supplemental Environmental Impact Statement which set forth mitigation strategies for the railroad. On February 15, 2006, the STB announced its final approval of the railroad's 1998 application.[20][21]

Funding

With the final EIS in place and approval from the STB, DM&E had the authority to undertake the expansion as proposed, but needed financing. On February 26, 2007, the FRA rejected a proposed $2.3 billion loan to DM&E.[23][24] In announcing the decision, Administrator Joseph H. Boardman noted that the project proposal met many federal requirements for the loan but cited concerns that the railroad might not be able to handle cost overruns during construction or to repay the loan after construction was completed.[23][25]

Acquisition by Canadian Pacific

On September 4, 2007, Canadian Pacific (CP) announced it was acquiring the DM&E from its owners, London-based Electra Private Equity, for US$1.48 billion, and future payments of over $1.0 billion contingent on commencement of construction on the Powder River extension and specified volumes of coal shipments from the Powder River basin.[28] The transaction included the ICE and other affiliated companies.[29] The merger was an "end-to-end" consolidation; the lines had interchanged at three points, including the Winona, Minnesota, connection between the DM&E's main line across southern Minnesota and CP's Chicago main.[30] Kevin Schieffer, then-president of the DM&E, called CP the DM&E's "natural partner" and the transaction a "natural fit".

The acquisition gave CP access to shipments of agricultural products and ethanol in addition to coal from the Wyoming coal fields. CP stated its intention to the purchase to gain access to the Powder River and ship coal to Midwestern and Eastern utilities. The transaction required the approval of the Surface Transportation Board, which was expected to take a year.[31] Securities analysts said that competing railroads for Powder River coal, the Union Pacific and BNSF, could challenge the acquisition and delay STB approval, but were unlikely to have prevented it.[32][33] Until approval, the DM&E continued to operate as a separate entity.[34]

On October 4, 2007, CP announced that it had completed the financial transactions to acquire the DM&E and its subsidiaries. Control of DM&E was placed into a voting trust to remain in effect until the STB issued its decision on the acquisition. Richard Hamlin was appointed its trustee. CP planned to integrate DM&E's operations once it received STB approval.[35] CP expected STB approval of the purchase in October 2008.[36] The STB announced its approval of the purchase plan on September 30, 2008, with no further conditions. CP assumed control of DM&E and IC&E on October 30, 2008, the effective date of the purchase.[4][5][37]

railroad name	Dakota, Minnesota and Eastern Railroad
marks	DME
locale	Iowa, Illinois, Minnesota, Nebraska, South Dakota and Wyoming; United States
start year	1986
end year	2008
successor line	Canadian Pacific Railway, Rapid City, Pierre and Eastern Railroad
hq city	CPKC Plaza Minneapolis, Minnesota

Dakota, Minnesota and Eastern Railroad

1986–1996: Startup and initial expansion

1997–2006: plans for expansion into the Powder River Basin

Expansion plans

Initial approval

Further legal actions

Funding

2002–2007: consolidation with IC&E

Acquisition by Canadian Pacific

Western Minnesota and South Dakota divisions to RCPE

Subdivisions

Canadian Pacific

Former DM&E to RCPE

Rolling stock

Company officers

External links

References