Analysis: Appeals Court ruling only a minor set-back for DM&E opponents
by Leigh Pomeroy
The PR machine representing those supporting the DM&E Railroad's proposed expansion into Wyoming's Powder River Basin is running full-bore today after the U.S. Court of Appeals for the Eighth Circuit ruled in favor of the project yesterday.
The effort is admirable, but the ruling sort of like a dictatorial military regime winning a minor battle against a popular uprising. It will only be key to bringing the uprising under control if the regime can get help from a more powerful outside force — i.e., collateral-free subsidized federal loan dollars — necessary to put down the insurgency. And even that won't assure a victory.
The DM&E is facing many fronts of opposition along its proposed route for hauling coal from Wyoming to Illinois. The big goon behind its thrust — the "enforcer", if you will — is an antiquated code of federal laws giving railroads government-like rights to push development and expansion. And until the election this past November, that goon seemed unstoppable.
But things in Washington change, and the DM&E regime's chief ambassador, Sen. John Thune of South Dakota, suddenly found himself in a less powerful position among the gods of Capitol Hill. Now other powerbroker-gods like Rep. Jim Oberstar and Sen. Norm Coleman of Minnesota, and novice gods like Sen. Amy Klobuchar and Rep. Tim Walz of Minnesota, may have something to say about whether that outside force comes to the aid of the regime or not.
The truth is that no one, not even the Mayo Clinic, which brought the suit, expected the Appeals Court to rule against the DM&E. The suit, however, did accomplish its lesser goal of delaying the project while other insurgents along the route regrouped and strengthened their battle plans.
The conflict over the DM&E expansion will not be decided based on its merits. Instead, its outcome depends solely on old-fashioned, long-proven strategies for winning wars: which side has the most forces aligned behind it, which has the most endurance, which has the most resources, and which has the popular support.
One thing about the battle is absolutely certain, though. The DM&E would never have come this far without a strong generalissimo by the name of Kevin Schieffer. Had the DM&E been run by a more milquetoast leader, the expansion project would have been abandoned long ago based on the opposition and its own dubious merits.
But Schieffer is a bulldog, a man who came from a poor background whose strength of personality drove him to get to the top, first as a congressional aide and powerbroker, then as an ambitious Washington insider recruited to run a struggling railroad spinoff, and finally as a would-be railroad magnate himself. Indeed, it's an age-old scenario that has been repeated in politics and business around the world for centuries.
One thing that is common among all those who deal with Schieffer — be they supporters or proponents of the project, lovers or haters of the man — is their respect for his tenacity. Many would acknowledge that he is a larger than life character, the kind that Shakespeare might write about, a man whose chief strengths are intelligence, cunning and self-assurance, but one who also has a possible tragic flaw of overwhelming ego.
Yet no man, despite personal power and personal connections, can overcome a broad-based enemy allied against him. There are many forces opposing the DM&E expansion all along the route, from ranchers and Indian tribes in Wyoming and South Dakota; to residents of Pierre and Brookings, South Dakota; to opponents in Mankato and Blue Earth County, Minnesota; to the Mayo Clinic, the City of Rochester, Olmsted County and the Rochester Area Chamber of Commerce; and finally to residents and particularly students in Winona, Minnesota.
Individually, only the coalition of the Mayo Clinic, the City of Rochester, Olmsted County and the Rochester Chamber of Commerce appears to have the strength, unity and financial wherewithal to oppose Schieffer, Thune and their goon — the ancient pro-railroad federal laws. But taken together the opposition forms a potent though incohesive insurgency against the railroad's plans.
Schieffer knows this, which is why he's been trying to knock them off one by one, acquiescing to Pierre on a bypass around the city, and looking for a way to route the coal trains south of Rochester and Winona along the old IC&E tracks through Iowa, which the DM&E purchased in 2003 with the help of an earlier federal loan.
Yet with each new DM&E tactic comes more opposition. For example, this month the BNSF Railroad filed a comprehensive report detailing potential problems posed by the proposed the IC&E route for the coal traffic.
How long Schieffer will remain upbeat and undaunted is anyone's guess. No doubt he and his supporters feel buoyed by the Appeals Court decision. But he is no dummy and realizes this is not the real victory. Were there still a Republican Congress the real victory would be an FRA decision to grant the railroad the $2.3 billion loan it is requesting. But Congress is now in other hands, many of whom are questioning the porkbarrel legislation authorizing the loan, while others, particularly Coleman, Klobuchar and Walz, are very serious about protecting the rights of the Mayo Clinic and its allies.
If the FRA authorizes the loan in the next month, which it may very well do, Generalissimo Schieffer and his supporters will hail it as the end of the rebellion. But as long as the Mayo Clinic and its allies in Rochester and the various opposition groups elsewhere in Minnesota, South Dakota and Wyoming keep up their guerrilla attacks, he war is far from over.
Ultimately, it will be forces greater than either the DM&E or its opponents who will decide. Like with so many skirmishes around the world, those forces reside in Washington, DC. Capitol Hill will be the final arbiter of this war, and unless like a magician the Generalissimo can pull a rabbit out of his hat, he may have to settle for less than what he originally set out to accomplish.
The PR machine representing those supporting the DM&E Railroad's proposed expansion into Wyoming's Powder River Basin is running full-bore today after the U.S. Court of Appeals for the Eighth Circuit ruled in favor of the project yesterday.
The effort is admirable, but the ruling sort of like a dictatorial military regime winning a minor battle against a popular uprising. It will only be key to bringing the uprising under control if the regime can get help from a more powerful outside force — i.e., collateral-free subsidized federal loan dollars — necessary to put down the insurgency. And even that won't assure a victory.
The DM&E is facing many fronts of opposition along its proposed route for hauling coal from Wyoming to Illinois. The big goon behind its thrust — the "enforcer", if you will — is an antiquated code of federal laws giving railroads government-like rights to push development and expansion. And until the election this past November, that goon seemed unstoppable.
But things in Washington change, and the DM&E regime's chief ambassador, Sen. John Thune of South Dakota, suddenly found himself in a less powerful position among the gods of Capitol Hill. Now other powerbroker-gods like Rep. Jim Oberstar and Sen. Norm Coleman of Minnesota, and novice gods like Sen. Amy Klobuchar and Rep. Tim Walz of Minnesota, may have something to say about whether that outside force comes to the aid of the regime or not.
The truth is that no one, not even the Mayo Clinic, which brought the suit, expected the Appeals Court to rule against the DM&E. The suit, however, did accomplish its lesser goal of delaying the project while other insurgents along the route regrouped and strengthened their battle plans.
The conflict over the DM&E expansion will not be decided based on its merits. Instead, its outcome depends solely on old-fashioned, long-proven strategies for winning wars: which side has the most forces aligned behind it, which has the most endurance, which has the most resources, and which has the popular support.
One thing about the battle is absolutely certain, though. The DM&E would never have come this far without a strong generalissimo by the name of Kevin Schieffer. Had the DM&E been run by a more milquetoast leader, the expansion project would have been abandoned long ago based on the opposition and its own dubious merits.
But Schieffer is a bulldog, a man who came from a poor background whose strength of personality drove him to get to the top, first as a congressional aide and powerbroker, then as an ambitious Washington insider recruited to run a struggling railroad spinoff, and finally as a would-be railroad magnate himself. Indeed, it's an age-old scenario that has been repeated in politics and business around the world for centuries.
One thing that is common among all those who deal with Schieffer — be they supporters or proponents of the project, lovers or haters of the man — is their respect for his tenacity. Many would acknowledge that he is a larger than life character, the kind that Shakespeare might write about, a man whose chief strengths are intelligence, cunning and self-assurance, but one who also has a possible tragic flaw of overwhelming ego.
Yet no man, despite personal power and personal connections, can overcome a broad-based enemy allied against him. There are many forces opposing the DM&E expansion all along the route, from ranchers and Indian tribes in Wyoming and South Dakota; to residents of Pierre and Brookings, South Dakota; to opponents in Mankato and Blue Earth County, Minnesota; to the Mayo Clinic, the City of Rochester, Olmsted County and the Rochester Area Chamber of Commerce; and finally to residents and particularly students in Winona, Minnesota.
Individually, only the coalition of the Mayo Clinic, the City of Rochester, Olmsted County and the Rochester Chamber of Commerce appears to have the strength, unity and financial wherewithal to oppose Schieffer, Thune and their goon — the ancient pro-railroad federal laws. But taken together the opposition forms a potent though incohesive insurgency against the railroad's plans.
Schieffer knows this, which is why he's been trying to knock them off one by one, acquiescing to Pierre on a bypass around the city, and looking for a way to route the coal trains south of Rochester and Winona along the old IC&E tracks through Iowa, which the DM&E purchased in 2003 with the help of an earlier federal loan.
Yet with each new DM&E tactic comes more opposition. For example, this month the BNSF Railroad filed a comprehensive report detailing potential problems posed by the proposed the IC&E route for the coal traffic.
How long Schieffer will remain upbeat and undaunted is anyone's guess. No doubt he and his supporters feel buoyed by the Appeals Court decision. But he is no dummy and realizes this is not the real victory. Were there still a Republican Congress the real victory would be an FRA decision to grant the railroad the $2.3 billion loan it is requesting. But Congress is now in other hands, many of whom are questioning the porkbarrel legislation authorizing the loan, while others, particularly Coleman, Klobuchar and Walz, are very serious about protecting the rights of the Mayo Clinic and its allies.
If the FRA authorizes the loan in the next month, which it may very well do, Generalissimo Schieffer and his supporters will hail it as the end of the rebellion. But as long as the Mayo Clinic and its allies in Rochester and the various opposition groups elsewhere in Minnesota, South Dakota and Wyoming keep up their guerrilla attacks, he war is far from over.
Ultimately, it will be forces greater than either the DM&E or its opponents who will decide. Like with so many skirmishes around the world, those forces reside in Washington, DC. Capitol Hill will be the final arbiter of this war, and unless like a magician the Generalissimo can pull a rabbit out of his hat, he may have to settle for less than what he originally set out to accomplish.
Labels: DM and E
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3 Comments:
What anti-DM&E Rochester/Mayo coalitions don't realize is that the FRA loan is the best situation for Rochester/Mayo. If DM&E were sold to, say, Union Pacific or Canadian Pacific, they would upgrade the track and ship coal along the DM&E route without having to agree to mitigation concerns along the route. UP or CP would tell Mayo 'go jump in the Zumborta River' because they have deeper pockets that DM&E and companies like UP have a long track record of trouncing competition and pass-through communities - which Rochester happens to be not being a gateway as Winona, Waseca and Owatonna are (a gateway is a city with connections to other railroads. Rochester has no such connections).
The FRA loan process is not antiquated, by the way. It was introduced in 1976 in the Railroad Revitalization and Rehab Act as a way to help railroads compete with government funded infrastructure of highways, airports and inland waterways (locks/dams/dredging, etc). The 2005 Transportation Bill increased the FRA loan pool from $3.5 billion to $35 billion, an increase which has been sought by the rail industry since 1998.
And DM&E did not receive a federal loan to purchase IMRL - Iowa and MIssouri Rail Link (now known as the IC&E). FRA loans are strictly confined to infrastructure and cannot be used to purchase other roads.
The appeals court ruling validates the fact that the claims made by Rochester/Mayo, the Sierra Club and anti-DM&E coalitions, et al, are baseless and the DM&E has met all federal requirements laid out for the upgrade.
A new DM&E will be to the benefit of all of Minnesota. I would be happy to send you a rebuttal editorial to the 12/21/2006 St Paul Pioneer Press, should you want to read in more detail why DM&E should both receive its loan and why the expansion is necessary.
Mr. Dempsey's comments can be found on his blog at Yahoo 360º.
Leigh
Hey, thanks for posting on my Yahoo! 360 blog! What you read was only my opinion which is based on my years of working in the utility business as well as my own personal research in to the railroad industry. I do not have any facts on DM&E future business (neither does Bearing Point, by the way), but I can conjecture about what it might be due to my extensive knowledge of the utility industry.
In my opinion, DM&E can't comment publicly on its future business on an upgraded track due to the sensitivity of its competition. I am making an educated leap-of-faith guess that since the entire project is due for completion in 2009, DM&E 'most likely' has secured the necessary private investment, even though they haven't divulged any of that publicly...and rightly so. Union Pacific is keeping a very close eye on DM&E. UP has 'right of first refusal' on DM&E because of UPs 1995 purchase of C&NW so if DM&E goes up for sale, UP gets first crack. DM&E is in the best position to haul coal from PRB to the Mississippi because they own the shortest route, which is why I think DM&E can ship coal at a cheaper price than UP/BNSF and why I believe the $4 billion investment will become public after DM&E builds to the PRB (I think several utilities/coal plants will come forth ponying up the capital). I have read the Bearing Point analysis and, in my opinion, was written specifically for the purpose of aiding the Mayo/Rochester case in denying the DM&E loan request. I believe that if DM&E can secure as few as 5 coal contracts in the next 10 years, DM&E will easily average profits exceeding $100 million/year - enough to pay back the loan. Notwithstanding the increased ethanol shipping DM&E hopes to capture, as well. But, I just don't think DM&E can officially comment as I conjecture. I believe that in doing so would seriously damage their competitive position and that of their probably investors.
We can argue about the FRA loan program and whether or not that amounts to pork. I do not think that it does because one function of government is to ensure reliable inter-state commerce. The Medicare give away? Now, that was pork. Not, the DM&E loan. As I mentioned in my blog, government provides infrastructure for air/road/waterway shipping and charges so little for their use this puts railroads at a competitive disadvantage by having to maintain their own infrastructure - or at least not on the same scale as its competitors. But, smaller roads such as DM&E that serve primarily farmers can't grow, even if they want to. Their customers don't have the capital to fund the expansion. But, DM&E has done a tremendous job where C&NW never thought possible. System-wide, DM&E is up to 25 mph track in only 20 years time.
As far as our national railroad policy, I don't disagree that it needs to change as the business evolves, but the Stagger's Act of 1980 and the RRR Act of 1976 have done a lot of good. Unfortunately, when the STB replaced the ICC in 1995, they rubber stamped every mega-merger that came down the pike - in hindsight, incorrectly doing so. UP should never have been allowed to absorb C&NW. BN should never have been allowed to absorb ATSF. There are others. But, we are where we are and UP and BNSF can't keep up - their networks are just too big. There is a growing vacuum in the midwest and only DM&E can reliably fill the void. Another mega-merger (e.g. UP/DME) will only create further problems as UP will almost certainly scale back service on the DM&E route, except for coal. Leaving farmers to have to get their products to market on the trucking industry - do we really want to add tens of thousands more trucks on our roads every year? Can the trucking industry meet that demand? What if they can't?
True, Congress can rescind the 2005 Transportation Bill funding and the Bush Admin would sign, for sure. But, as of January 2007 with where we are in the entire process, the best possible solution to all parties is to have DM&E receive its loan, build its new lines, upgrade its existing track, be bound by all stringent mitigation requirements put on it by the FRA, pay landowners for its eminent domain land, improve its safety, keep UP from buying DM&E and allow DM&E to haul coal from PRB. Further delays only make the costs to all of us go higher.
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