(The following story by Jeffrey Pieters appeared on the Rochester Post-Bulletin website on February 1.)
ROCHESTER, Minn. — The railroad across Rochester might get new owners this year, but local leaders’ fears regarding increased train traffic haven’t changed.
Those fears are outlined in an argument the Rochester Coalition — an association including Mayo Clinic, the Rochester Area Chamber of Commerce, and the city and Olmsted County governments — will file today with the federal Surface Transportation Board.
On one hand, Mayo Clinic is encouraging federal approval of the Canadian Pacific Railway’s $1.48-billion bid to buy the Dakota, Minnesota & Eastern Railroad, said Mayo CEO Dr. Glenn Forbes. He and other local leaders said they believe the Canadian company is a better operator than DM&E.
“We’re supportive of the acquisition,” Forbes said. “We’ve always been supportive of anything that really eventually achieves the goals of safety for our patients and staff.”
But then there are fears that transcend the matter of an ownership change.
For one thing, rising quantities of hazardous-materials cargo, including ethanol, make it potentially a much more dangerous event should a train ever derail near Mayo’s campus in downtown Rochester.
Ethanol, especially, is an increasingly important cargo for DM&E. In just the last five years, the railroad increased its carloads of ethanol more than 30-fold, to 17,000 carloads per year, with those shipments tripling in just the last year alone, according to a combination of industry and media reports.
Based on those reports, ethanol accounted for an estimated 80 percent of all of DM&E’s net new traffic last year. Further increases may be expected in the years to come, according to a variety of sources and conventional wisdom concerning future growth in the ethanol industry.
Compounding the risk from hazardous materials is the assessment — stated in this case by the local officials but similarly described on past occasions by DM&E executives themselves — that the Rochester portion of DM&E’s line is “aged and dangerous.”
Replacing that track would probably lower the risk of a derailment, but while DM&E has, since 2003, replaced some 250 miles of its line with continuous-welded rail, none of that has been in Rochester.
Canadian Pacific has pledged $300 million to rebuild deteriorated parts of DM&E’s line, but Rochester officials have no assurances that any of the improvements would be local.
Also, it appears $300 million would not be enough to make all of the improvements the line requires. According to the Rochester Coalition, DM&E estimated in 1998 that it would cost nearly $876 million to rebuild its then-598-mile main line.
DM&E spokesman Jafar Karim declined to comment for this story. A Canadian Pacific spokesman did not return phone calls.
Rochester’s history of conflict with DM&E dates to 1998, when the railroad announced its plans to extend its line 260 miles west to coal fields in Wyoming’s Powder River Basin. The coal-line plan alarmed Rochester-area officials because of the likelihood it would bring increased and heavier, faster traffic through the city.
The plan won federal regulatory approval despite legal opposition that wound its way to the Eighth Circuit U.S. Court of Appeals twice. It appeared, though, that DM&E might not have the financial wherewithal to complete the $2.5-billion expansion until Sept. 5, when Canadian Pacific announced its plans to buy the railroad.
(Canadian Pacific says, however, that it has not decided yet whether the Powder River Basin line will ever be built. Local officials consider that a gambit for C.P. to ease its way through the regulatory process, and assert that DM&E’s legislative efforts to favorably rewrite eminent domain law in South Dakota better indicate the two railroads’ motives.)
Canadian Pacific’s purchase offer included a $1.48-billion base price that is potentially enriched by $1.05-billion in incentives and Canadian Pacific’s assumption of $250 million of DM&E’s debt. In total, the value of the transaction may wind up being about $2.7 billion.
The Surface Transportation Board is scheduled to release a decision by Sept. 30 whether to authorize the purchase.
Monday is the deadline for involved parties to submit their first comments regarding the proposed transaction. It is also the deadline for Canadian Pacific to submit its proposed Safety Integration Plan. Given Rochester’s concern for operational safety, local officials said, they should be given a chance to view C.P.’s safety proposal and comment on it, as well.