Dakota, Minnesota and Eastern Railroad

The Dakota, Minnesota and Eastern Railroad reporting mark is a Class II railroad subsidiary of the Canadian Pacific Railway operating across South Dakota and southern Minnesota in the northern plains of the United States. Portions of the railroad also extend into Wyoming, Nebraska and Iowa.

DM&E began operations on September 5, 1986, over tracks that were spun off from the Chicago and North Western Transportation Company in South Dakota and Minnesota. Much of the negotiations were handled by the office of Senator Larry Pressler and his legal counsel Kevin V. Schieffer. After a successful decade of growth for DM&E, Schieffer succeeded J. C. McIntyre as president of the railroad on November 7, 1996. In 1997 DM&E announced plans to build into Wyoming's Powder River Basin to become the third railroad (after BNSF Railway and Union Pacific Railroad) to tap into the region's rich coal deposits. The Surface Transportation Board (STB) released the final Environmental Impact Statement (EIS) on November 19, 2001; with the final EIS in place and approval from the STB, the railroad has federal authority to construct the project.

DM&E purchased the assets of I&M Rail Link railroad in 2002, renaming it Iowa, Chicago and Eastern Railroad and combining its management and dispatching duties with those of DM&E under the holding company Cedar American Rail Holdings. Schieffer served as president and CEO of Cedar as well as serving as president of DM&E. The combined system directly connects Chicago, Illinois through Iowa to Kansas City, Missouri, Minneapolis-St. Paul and continues as far west as Rapid City, South Dakota. Smaller branches extend into portions of Wisconsin, Wyoming and Nebraska.

In September 2007 it was announced that Canadian Pacific Railway (CP) would acquire the DM&E upon approval by the Surface Transportation Board of the US Department of Transportation. The STB announced its approval of the purchase plan on September 30, 2008, with the official last day of operations for DM&E scheduled for October 30, 2008. The merger is complete as of October 31, 2008.

History
In the early 1980s, Chicago and North Western Railway (CNW) announced plans to abandon a section of railroad through Minnesota and South Dakota that dates to 1859. Due to pressure from customers and Senator Larry Pressler from South Dakota, a deal was reached and announced on April 24, 1986, creating the Dakota, Minnesota and Eastern Railroad out of sections of CNW from Winona, Minnesota, to Rapid City, South Dakota. This deal also included buildings, rolling stock]and locomotives, mostly rebuilt EMD SD9s, from the CNW. DM&E began operations on this track on September 5, 1986. The railroad was expanded in 1995 when it acquired additional former CNW branch lines from Rapid City, South Dakota, to Colony, Wyoming, and Crawford, Nebraska.

From startup to the railroad's ten-year anniversary in 1996, DM&E hauled nearly 500,000 carloads of freight, which includes 700 million bushels of grain. DM&E celebrated the anniversary with picnics and employee appreciation events and excursions in Waseca, Minnesota, and Pierre, South Dakota.

At the end of 1996, Kevin V. Schieffer, whom former President of the United States George H. W. Bush had appointed as US Attorney for South Dakota in 1991, became president of DM&E on November 7, 1996. Schieffer was no newcomer to the railroad, however, as he had first become involved with DM&E in 1983 when he worked to prevent the abandonment of the former CNW lines that eventually formed the first sections of DM&E's mainline. Maintaining the status quo on DM&E was not the fate that he had in mind for the railroad as he took the reins.

Expansion plans
In 1997, DM&E announced plans to expand into the Powder River Basin (PRB) in Wyoming and start providing 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 Chicago and North Western Railway (CNW) built into the area by 1984 (a project that was completed by CNW's successor Union Pacific Railroad). 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 (452 km) of new track, upgrading 598 miles (962 km) of existing track (including all of the railroad's track in Minnesota), new interchange connections in Owatonna, Minnesota and Mankato, Minnesota, and three new classification yard. The plan would be the largest new railroad construction in the United States since the completion of Milwaukee Road's Pacific extension to Seattle, Washington, in 1909.

Initial approval and lawsuits
The STB approved the application on December 10 of that year 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. 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 a lawsuit to force the railroad to build a bypass around the city. The bypass was estimated to cost around $100 million.

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 final approval, the STB agreed with DM&E that no new bypasses around cities would be required even though the cities of Rochester, Minnesota, Brookings, South Dakota 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.

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 prepared a Supplemental Environmental Impact Statement which sets forth mitigation strategies for the railroad. On February 15, 2006, the United States Surface Transportation Board (STB) announced its final approval of the railroad's 1998 application. The STB's approval is expected to be finalized after a 30-day waiting period.

In April 2004, DM&E was awarded the power of eminent domain in South Dakota by the United States Court of Appeals for the Eighth Circuit in Pierre, South Dakota. The ruling overturned part of South Dakota legislation passed in 1999 (two years after the railroad first announced its intentions to expand) that would have impaired railroad operations and construction in the state. This decision restores the legal process by which the railroad can effectively force landowners along the proposed new route to sell their land to the railroad.

Funding
With the final EIS in place and approval from the STB, DM&E is legally able to undertake the expansion as proposed. On February 26, 2007, the FRA rejected the proposed $2.3 billion loan to DM&E. 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 such a hefty amount after construction is completed. Canadian Pacific Railway's acquisition of the DM&E to date has not resulted in the ability to raise the capital needed for the project.

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