#dm&e

[cloudedjudgementzine]

[politicalsmokeout]

Freight train, gone again

My Sunday story (and the reason I've posted lightly the past two weeks) took an in-depth look at issues surrounding Canadian Pacific Railway and the track it owns in South Dakota, formerly part of the Dakota, Minnesota & Eastern railroad.

Read it here.

There's two big, connected issues here: one is whether Canadian Pacific spent the money on track upgrades that it promised (or allegedly promised — many facts are disputed) when it bought the DM&E. The other is, regardless of the upgrades, what will happen to South Dakota users of the railroad once DM&E sells off the stretch of track west of Tracy, Minn.

The article had some disagreement on that point. State officials, many shippers and former DM&E president Kevin Schieffer thought the sale would likely be bad news, cutting South Dakota shippers off from national markets, harming competition and leaving shippers dependent on Canadian Pacific without any benefits from being part of the international company's network. On the other hand, several different experts I talked to said the railroad probably had nothing to worry about — railroads sell or spin-off parts of their track all the time, and after those deals, things usually get better, not worse, for shippers.

Here's the side-article focusing on that debate.

Which side is right may depend on who ends up buying the DM&E line. If a company buys it in good faith, with the intention of operating it as a short-line railroad, the positive scenario could be likely. Despite some maintenance issues on the line, it has a fair amount of traffic and could make money — especially, as experts told me, since small railroads are often more efficient and pay better attention to customers than giant railroads.

On the other hand, what many see as the nightmare scenario for South Dakota is if the BNSF railroad buys the DM&E track. BNSF owns the other major railroad through South Dakota, running from the southeastern part of the state to Aberdeen and then northwest into North Dakota. If BNSF owned the DM&E, too, then competition would disappear and the company could raise its prices without fear of losing much business — as long as the cost was less than shipping goods by truck, farmers and factory owners would have to pay.

Potentially even worse, some fear that purchase could spell the end of the track between Pierre and Rapid City. That line is in terrible condition and needs hundreds of millions of dollars of improvements. It still operates because it ships an assortment of goods, including cement, bentonite clay and grain. But BNSF owns other railroad tracks in Wyoming, where some of that comes from, and could decide it's cheaper to ship those goods west, or along its Nebraska lines, than across South Dakota — and abandon the track west of Pierre.

Gov. Dennis Daugaard's top priority for determining whether to support a sale is "the long-term viability of the lines west of Pierre." (His other considerations are "competitive options for all our shippers," "ability to provide high level of service" and "long term commitment to service in South Dakota.") So depending on who the line is sold to — and Canadian Pacific is down to a few finalists and could announce a sale in the coming months — you could see Dennis Daugaard go to war in Washington over against not one but two railroad giants.