Railroad puts brakes on DM&E expansion plan
Here's some from a good piece by my colleague Mike Klein. It looks like the more-than-a-decade battle to keep the DM&E from running more coal through Rochester may have come to an end with a whimper rather than a bang.
Of course, now that silca sand and fraccing is hot, that might become the new coal and be a future reason to ramp up. Life on the rails is unpredictable.
Canadian Pacific is dropping plans to extend its rail network into the Powder River Basin, abruptly ending Rochester's decades-long fight to stop the increased coal train traffic through town planned as part of that $6 billion plan.
The railroad's announcement this morning will likely be followed by more news, as new CEO Hunter Harrison will be meeting with executives Tuesday to announce plans moving forward, spokesman Ed Greenberg said. The railroad has been reviewing its entire network, he said.
When CP acquired the Dakota Minnesota & Eastern railroad in 2007 for $1.48 billion, it also acquired the option to build a 260-mile extension of its network into coal mines in the Powder River Basin in Wyoming. Now Canadian Pacific will take a fourth quarter charge of approximately $180 million on its books, on its option to build there.
"It is CP’s intention to defer indefinitely plans to extend its rail network into the PRB coal mines based on continued deterioration in the market for domestic thermal coal, including a sharp deterioration in 2012," the company said.
The low price and increased availability of natural gas has cut into coal usage in recent years.
"We believe it is a prudent decision to defer the network into the Powder River Basin when you consider the long-term prospects of coal," said Canadian Pacific spokesman Ed Greenberg.
Olmsted County Commissioner Ken Brown said the announcement is a "good deal" for Rochester, but he cautioned that Canadian Pacific is trying to sell those tracks, and a new buyer could proceed with the Powder River Basin plan.
"In the future, who knows what could happen," said Brown, who serves on the Rochester Coalition opposing the increased rail traffic. "It could be a long time before anything could happen. It looks like it's not something to worry about imminently. In the future, if they sell it, maybe it will be, but that's down the road."
Right now, Canadian Pacific moves about about two to four trains every 24 hours through the Rochester area with "mixed freight," mainly steel and grain.
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 Mayo Clinic, the city of Rochester, Olmsted County and the Rochester Area Chamber of Commerce teamed up to form the Rochester Coalition to oppose the bypass.