Kiger's Notebook

CP Railway: Cut spending by 5%, still $100 M for DM&E fixes

Here's a missive from our neighbors to the north.  Dakota, Minnesota & Eastern Railroad Corp.'s new owner says it needs to cut 5% in capital spending in 2009. It still has $100 million  budget for DM&E upgrades.

Here's some from Bloomberg's railroad man in Toronto, Hugo Miller:

The reduction of C$200 million ($162 million) will push next year's budget to as low as 

C$800 million, based on projected expenditures that include DM&E, Chief Financial Officer Kathryn McQuade said today on a conference call.
``I do not think it would be prudent'' to forecast earnings because of North American economic weakness, fuel-price volatility and the value of the Canadian dollar, she told investors. Profit next year may be C$4.74 a share, based on the average of 20 analysts' estimates compiled by Bloomberg.
Canada's second-largest railroad is reining in spending after posting a 21 percent drop in quarterly profit last month. Canadian Pacific has been hurt by the economic slump in the U.S., where it gets a fifth of revenue, as builders and lumber companies pare shipments.

-------------

Here's  something from a story by Brent Jang, transportation report @ The Globe and Mail newspaper in Toronto:

-------------

In an internal memo to staff, CPR chief executive officer Fred Green 
named Vernon Graham as DM&E president, replacing Kevin Schieffer, who 
resigned last month.

"There are significant opportunities to reinforce the DM&E's 
profitability by leveraging our information and operating systems, 
our purchasing power and our safety practices," Mr. Green 
said. "There is considerable work ahead."
------
CPR placed DM&E into an independent voting trust in October, 2007, 
after it bought the regional railway for $1.5-billion (U.S.) from a 
group of private equity firms. DM&E, which began operating as a 
separate entity within CPR two weeks ago, sought in the past to 
embark on a massive Wyoming venture to haul thermal coal, which is 
used to fuel plants that generate electricity.

Mr. Graham, CPR's engineering vice-president in charge of transition 
plans for DM&E, will be based in Minneapolis, a key CPR hub in the 
U.S. Midwest, although an office is being maintained in DM&E's South 
Dakota headquarters in Sioux Falls. Mr. Graham reports to Kathryn 
McQuade, CPR executive vice-president and chief financial officer.

Calgary-based CPR has made no decision on whether to proceed with the 
coal expansion route, but analysts say the railway will need to find 
partners to help finance the $6-billion required in capital spending, 
including installing and rebuilding tracks from Wyoming's Powder 
River coal basin to DM&E's South Dakota lines.

--------
It could take five to 10 years before CPR makes a decision on the 
Powder River project, assuming it is able to win over critics such as 
the Mayo Clinic in Rochester, Minn., where civic leaders are opposed 
to increased freight traffic on tracks near the renowned hospital.

DM&E telephone survey?

Anybody else out there getting survey calls about the DM&E railroad and its impact on Rochester?

Here's some from a note I got from a reader today:

Just something I found kind of interesting. I got a call last night from a survey outfit--KMG?--all about how I felt about DM&E and the impact I felt it might have on Rochester's quality of life.

The uptake is that I got the impression that the survey was commissioned by CP and they're looking for ways to spin the results. It didn't quite qualify as a push-poll, but close. The questions were phrased just curiously enough to feel like they wanted the answers to lean in DM&E's favor.

Questions like, "Do you agree with the statement, 'I trust DM&E's new owner, Canadian-Pacific, to work with the community to address safety concerns more than I did the previous owner.'?"

They also asked about my level of concern (major, minor, not at all) that more high-speed trains will adversely affect the effort to revitalize the downtown business district. But that last part was asked after already asking my level of concern for serious accidents and the impeding of emergency vehicles, making my concern for the business district seem minor in comparison.

I'm interested to hear if anybody else has had a call like this and if they remember the survey company name.

Could be interesting following the recent story about Mayo Clinic mulling a bypass again.

Mayo Clinic eyes DM&E bypass again

In case you haven't see the print edition yet today, here's an interesting (to me at least) re-appearanace of an old issue. Matt Stolle did a great job rounding this up.

Mayo Clinic has hired an engineering firm to investigate what long has been considered a dead issue: The possibility of a bypass route around Rochester for coal-bearing trains heading to markets east.

The news came to light in a debate Thursday when one of the participants, congressional Republican nominee Brian Davis, revealed that Mayo has hired a railroad engineering firm to evaluate the possibility of a bypass route.

Davis, a Mayo Clinic physician who is challenging Democratic Rep. Tim Walz for his congressional seat, said he was told of the development in a teleconference held in late August with two Mayo officials who gave him permission to disclose the development should the occasion arise.

Davis declined to name the two Mayo officials in a later interview, but said one was in Washington and the other was a Mayo legal adviser. The briefing was provided to Davis, because of his status as a congressional candidate.

The chances of a bypass have long been considered a dead issue. In 2002, Federal Surface Transportation Board declined to order Dakota, Minnesota & Eastern Railroad to build a bypass around Rochester.

At the time, DM&E was pushing expansion plans that called for running scores of trains carrying low-sulfur coal from Wyoming’s Powder River Basin through the heart of Rochester -- a prospect Mayo warned threatened the clinic and its patients.

In September, Canadian Pacific agreed to buy DM&E, a year after the Federal Railroad Administration rejected the South Dakota-based railroad’s request for a $2.3 billion loan.

Chris Gade, a Mayo spokesman, said the clinic hired a firm to look at the possibilities “for in-city mitigation, along with other options, including outside the city.” Gade said. “There’s a whole range of options that are being explored.”

Gade added that Canadian Pacific was aware of the engineering study, but he did not know the railroad’s attitude toward it. Canadian Pacific did not return calls seeking comment Friday.

Schieffer chugs away from DM&E

So would this be called a Golden Caboose?

The top executive and architect of the pending expansion of the Dakota Minnesota & Eastern Railroad has left the company, leaving management to its new owner.

Kevin Schieffer no longer is with DM&E, the Canadian Pacific Railway announced late Tuesday. Schieffer broke with the railroad “to pursue other opportunities,” about 31⁄2 weeks before CP will acquire the smaller railroad, based in Sioux Falls, S.D.

Formal approval from the U.S. Surface Transportation Board for Canadian Pacific’s purchase of control of DM&E came on Sept. 30. The actual acquisition occurs on Oct. 30.

“We view it (Schieffer’s departure) as appropriate, given our experience in the past,” said Chris Gade, a spokesman for Mayo Clinic and for the Rochester Coalition, which has battled with Schieffer for years over DM&E’s plans in the Rochester area.

Representatives from Mayo and the coalition have spoken with Canadian Pacific officials. “We look forward and continue to have dialogue with the Canadian Pacific,” Gade said.

Mayo Clinic + Huge coal company

Here's an interesting piece from my old stomping grounds – Gillette, Wyo.

Coal companies in the Powder River Basin (Of DM&E fame) are looking for best healthcare for workers. That means the world's top coal producer is forgoing send its workers to the local hospital for treatment and are sending them to Mayo Clinic and elsewhere.

Gillette has a hospital is partially public owned through the county. That means the doctors salaries are public information, which made us newspaper employees popular there. heh.

Anyway, here's some from the Bloomberg news story:

Ken Ferguson, 54, maintains the bulldozers and heavy trucks that haul coal at the Belle Ayr mine near Gillette, Wyoming. In return, his employer, Foundation Coal Holdings Inc., provides his family with the best medical care it can buy.

Ferguson's wife, Shanna, had her colon removed last year because of chronic inflammatory disease. Foundation sent her 700 miles away to the top-ranked Mayo Clinic in Rochester, Minnesota. The company covered the $85,000 bill for the operation and follow-up reconstructive surgery and even paid for Ken's motel.

-----
The coal producer says it has found an unconventional way to cut health costs: Seek out the nation's best care and give workers incentives to use it. About two-thirds of operations have proven to be cheaper at better-rated hospitals out of state. Even when the price was higher, the Linthicum Heights, Maryland-based company saved money by reducing misdiagnoses, complications and repeat procedures.

Health-care costs for an average employee at Foundation's two Wyoming mines have dropped about 5 percent a year since the program took full effect in 2005, while U.S. spending rose about 7 percent annually. As Foundation's Wyoming workforce grew, its total medical bills remained steady at about $5.5 million a year.

-----

Peabody Energy Corp., which is based in St. Louis and is the world's largest coal producer, has joined Foundation in offering the benefits program. The company has signed up the workers at its surface-mining operations in Wyoming's Powder River Basin.

-----
Robert Morasko, chief executive officer of the Campbell County Memorial Hospital in Gillette, said the facility provided excellent care to its patients at low prices.

``There's no question our prices are competitive,'' he said. ``The coal companies do use us for a lot of surgeries. There are some isolated cases where they don't.''

S.D. judge ruling = delay for DM&E

Here's an interesting tidbit from South Dakota:

Former South Dakota Supreme Court Chief Justice Robert Miller is questioning the legality of a 2008 state law aimed at speeding up the eminent domain process.

At a hearing this week, Miller agreed with landowners who want more time to prepare for a hearing on the Dakota, Minnesota and Eastern Railroad's application to condemn land for its proposed $6 billion coal train and rail renovation project.

Miller is the hearing officer in the DM&E application. His ruling delays a Sept. 22 state Transportation Commission hearing on the matter.

The railroad applied to use eminent domain for its project. The 2008 Legislature passed a law saying the process must be completed within 90 days from application.

Miller says he doesn't intend to "fully or blindly comply with or enforce the 90-day limitation" because he considers it unconstitutional.

DM&E President Kevin Schieffer says the decision is disappointing and is another delay.

DM&E + union + 3 years = tentative deal

It sounds like DM&E and the United Transportation Union are almost on the track these days.

Here's a snippet from Progressive Railroading.com:

After more than three years of negotiations and mediation, the Dakota, Minnesota & Eastern Railroad Corp. (DM&E) and United Transportation Union (UTU) have reached a tentative agreement.

The pact calls for wage increases and bonuses, according to the union.

"Our main objective was a quality of life provision for road crews, which we achieved," said UTU Assistant President Arty Martin in a prepared statement.

The DM&E and IC&E operate a network totaling 2,500 miles of track in eight upper Midwest states.

Anti-rail group + Mayo Clinic = new statement

The trains of contention are still passing in the night, though they are coming through the station less often.

Here's a few cars from a Rochester Coalition and Mayo Clinic engine that rolled through this morning:

On behalf of the Rochester Coalition, Mayo Clinic today presented federal regulators with new evidence that suggests Rochester will become a high-speed rail corridor for coal and hazardous material shipments soon after the Canadian Pacific Railway's acquisition of the Dakota, Minnesota & Eastern Railroad (DM&E) is approved. The evidence contradicts previous assertions made by the DM&E and Canadian Pacific used to justify their position that the U.S. Surface Transportation Board should deny mitigation for Rochester and Mayo Clinic.

Evidence in the public record now suggests that a substantial number of carloads of ethanol will move through Rochester on their way to Chicago after the Canadian Pacific gains control of the DM&E. Recent sworn testimony offered by DM&E executives in a separate legal matter also suggests that the DM&E, now
owned by the Canadian Pacific but not directly under its control, is actively moving forward with a plan to expand into Wyoming's Powder River Basin, but the Canadian Pacific claims no such decision has been reached.

----------
In its filed rebuttal papers, the Mayo Clinic stated that "Evidence classified as 'highly confidential' in the Canadian Pacific's April 18 filing to the STB makes it clear that its prior representations are not consistent
with its current non-public, sealed representations regarding the nature and extent of the transportation of hazardous materials through Rochester."

DM&E wants Rochester e-mails

Here's an interesting development in the DM&E vs Rochester/ Mayo Clinic legal case:

Rochester opponents of the Dakota, Minnesota & Eastern Railroad coal train expansion have secretly instructed Wyoming landowners how to drag out DM&E's good faith efforts to acquire land, according to a motion filed by the railroad.

The civil action in federal court in Wyoming accuses Rochester Coalition consultants of "coordinating efforts with a minority of the landowners along the railroad route ... to misrepresent DM&E's dealings with landowners generally," it states.

The allegation stems from e-mails sent by opponents but not disclosed to the Sioux Falls-based railroad as part of the discovery process in a federal lawsuit over DM&E's condemnation proceedings against about 20 Wyoming landowners.

DM&E wants a judge to order the violators to divulge electronic communications that should have been shared, allow computer experts to check the hard drives of those involved and impose sanctions.

Defendants include 400 acres in Campbell and Weston counties in Wyoming, Lenard Seeley, Teresa Seeley, Jeffery Seeley, Denise Seeley and Bank of the West on behalf of Harry Walter Keeline The Third trust, 170 acres in Weston County, Bryan Stroh and First National Bank.

DM&E President Kevin Schieffer said the e-mails show that some of the opposition to the project isn't coming independently from a few Wyoming landowners but rather from a well-financed Minnesota organization.

"It's being orchestrated by a paid consulting effort by the Rochester group, which obviously has nothing to do with anything in Wyoming, other than its desire to kill the project that's good for South Dakota," he said.
--------
A spokesman for the Minnesota opponents sent the following statement to The AP:

"The Rochester Coalition is not a party to the Wyoming litigation. We sympathize with the landowners who have to go up against a railroad that has admitted under oath it is spending ($3.5 million to $4 million) a month to advance their plans to take their land.

"It's disappointing to see the DM&E going to these types of tactics to distract attention from their own tactics to acquire with no regard for those impacted."

DM&E bill in S.D. = Schieffer vs Janklow

Here's some from an interesting AP story about the DM&E Railroad, eminent domain and South Dakota politics:

A South Dakota Senate committee has approved a bill aimed at speeding up state hearings on the Dakota, Minnesota & Eastern Railroad's application to acquire land by condemnation for its planned $6 billion expansion project.

The Transportation Committee voted 6-2 on Thursday to endorse the measure, but opponents said the bill could hurt landowners who believe DM&E is treating them unfairly.

DM&E President Kevin Schieffer said the railroad applied more than a year ago for state approval to use eminent domain to acquire land from people who are unwilling to sell. Opponents have been using delaying tactics to postpone a hearing, he said.

"We're not trying to change the rules of the game. We're just trying to get to the game, as opposed to the delay," Schieffer said.

But former Gov. and U.S. Rep. Bill Janklow, a lawyer representing landowners, said DM&E was responsible for much of the delay in holding a state hearing on its application for authority to use eminent domain. He said there is no need to change the law to speed up the process.

"They're changing the rules in the middle of the game. That's wrong. They're rigging it," Janklow said.

DM&E wants to rebuild 600 miles of existing track across South Dakota and Minnesota and add 260 miles of new track around the southern end of the Black Hills to reach coal fields in Wyoming. The Powder River Basin project would haul low-sulfur coal eastward to power plants.

DM&E, which was recently purchased by Canadian Pacific Railway, has said it already has negotiated deals to acquire land along the expansion route from some ranchers in southwestern South Dakota, but the railroad needs legal authority to use eminent domain to acquire land from those unwilling to sell.

A 1999 state law, passed at Janklow's urging when he was governor, provides that a railroad can use eminent domain if it can show a project is a public use consistent with public necessity. A key element is whether a railroad can show it has already negotiated in good faith to acquire land with the use of eminent domain.

In an eminent domain case, a court would decide what compensation a landowner would get.

------------------
State Transportation Secretary Darin Bergquist testified in favor of the bill, saying the state Transportation Commission has been frustrated by delays in the DM&E case. "The commission has been struggling with this and working on the pending matter for 16 months and is yet to hear a minute of testimony."

Janklow said the bill is not needed because the railroad's new owner, Canadian Pacific, has said it will not decide for a year or two whether to pursue the expansion project into the Wyoming coal fields.

Schieffer said the delay in the hearing on the eminent domain request is similar to other delays sought by project opponents during other proceedings since the project was started more than a decade ago.

"The name of the game here is kill it by delay," Schieffer said. "This is one piece of a bigger puzzle."