(The following editorial appeared on the Star-Tribune website on September 1, 2009.)
CASPER, Wyo. — The new owners of the Dakota, Minnesota and Eastern Railroad have taken the right action by dropping its ill-advised condemnation lawsuit against 19 landowners in northeast Wyoming.
Nearly 15 years ago, DM&E announced plans to expand into Wyoming and become the third hauler of Powder River Basin coal to Eastern and Southern markets. The latest price tag for the project was estimated at about $6 billion.
But this expansion project has been on shaky ground since the beginning. The railroad had problems attracting private investors, and a $2.3 billion federal loan was rejected in 2007 by the Federal Railroad Administration. Given today’s economy, putting the project on hold now makes perfect sense.
DM&E officials filed the condemnation lawsuit in June 2007, just three days before a new Wyoming law took effect that allows property owners to sue for legal costs if projects fail the court test for eminent domain. The law requires more advance notice of intent to develop, and gives property owners the right to use “comparable sales” to figure fair market value for their land.
DM&E said those new laws threatened its then-existing construction schedule and financing alternatives.
Unbelievably, the railroad then announced that it was still willing to negotiate with the landowners for easements, placing the latter at a tremendous disadvantage. The lawsuit essentially notified the landowners that if they didn’t like the railroad’s offer, the company would just take the easements anyway.
“I believe the DM&E spent more on litigation than it offered for right of way in Wyoming,” Randall T. Cox, an attorney for several of the landowners, told the Star-Tribune. “DM&E would never consider increasing its offers of money. This was the most spectacularly unsuccessful right-of-way negotiating strategy that I have ever witnessed.” It was doomed from the start, with the decision to sue.
Now, Canadian Pacific, which acquired DM&E last year, said current regulatory and economic conditions for the Wyoming project are not good. “With delays now occasioned by external circumstances,” the railroad said, there is no need to engage in further litigation.
Still, the railroad stressed that the Powder River Basin expansion project hasn’t been killed. If the regulatory climate becomes more favorable, financing becomes available and land rights can be acquired, DM&E could still move forward.
If that happens, there would be some pluses for Wyoming, which would benefit by adding jobs and possibly increasing tax revenue from more coal production. Theoretically, more competition to transport coal should also result in lower prices and better service for Wyoming shippers.
But the railroad should treat landowners fairly and engage in real negotiations for easements, not use heavy-handed tactics such as eminent domain. A project also should have solid financial banking before eminent domain is pursued, which wasn’t the case with the DM&E expansion.
In order for eminent domain to be granted, a company must prove a project will result in the greatest public benefit, with the least private injury. Given what’s at stake for landowners, that should be a high bar to attain.
The government shouldn’t help private companies enhance their profits by taking other people’s property without fair compensation.