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Canadian Pacific, state at odds over DM&E deal

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news Mitchell, 57301
Mitchell South Dakota 120 South Lawler 57301

SIOUX FALLS (AP) — Canadian Pacific Railway Ltd. and the state of South Dakota are at odds over whether the railroad has met its obligation to invest $300 million in upgrades as part of the 2007 purchase of the Dakota, Minnesota & Eastern Railroad.

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South Dakota Gov. Dennis Daugaard earlier this month asked the federal Surface Transportation Board to look into whether Canadian Pacific has lived up to its promises as it seeks a buyer for the former DM&E line west of Tracy, Minn.

Canadian Pacific spokesman Ed Greenberg said that the company sent a comprehensive response to the board that shows it has invested substantially more than the $300 million in improvement and replacement capital it outlined to the agency.

"In fact, from 2008 through July 2013, CP has invested more than $400 million to improve the safety and efficiency of the former DM&E network," Greenberg said Thursday. "CP believes we have met our commitment to the STB."

But Matt Konenkamp, a policy adviser in the governor's office, said the figures are misleading.

Konenkamp said DM&E was already planning to spend $172 million on track and bridge upgrades, and the $300 million was supposed to be above and beyond the amount. Canadian Pacific also seems to be counting separate upgrades around Rochester, Minn., and improvements required by the Iowa Department of Transportation in that state, he said.

"Because the brief is redacted, it's hard to know just exactly whether this money was spent and where it was spent," Konenkamp said.

Greenberg said Canadian Pacific's response to the federal board addresses each of the concerns raised by the state's petition.

Canadian Pacific in 2007 bought 2,500 miles of track and equipment from South Dakota-based DM&E and its subsidiaries for $1.5 billion.

In December, Canadian Pacific announced that it was looking into the possibility of selling 660 miles of track in South Dakota, Minnesota, Wyoming and Nebraska. The announcement came a day after the company said it was mothballing plans to extend its DM&E network into the Powder River Basin to ship Wyoming coal to power plants in other states because of weakening demand for coal.

The railroad did not directly link the two decisions.

Daugaard said that before DM&E was sold, the line provided shipping service to critical transportation hubs including Minneapolis, Chicago and Kansas City.

Konenkamp said one portion of the track that needs work is the Pierre to Rapid City portion, on which trains can't travel above 10 mph.

"Very little work, as near as we can tell, has been done on that section of the line," he said. "It causes problems for logistics and costs, and things along those lines."

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