Railroad Merger Ltr Surf. TransCity Manager's Office
50 West 13th Street
Dubuque, Iowa 52001-4864
(319) 589-4110
(319) 589-4149 FAX
April 26, 2002
Linda Morgan and Wayne Burkes
Surface Transportation Board
1201 Constitution Avenue N.W.
Washington, D.C. 20423i
Dear Ms. Morgan and Mr. Burkes:
On February 21, 2001, the Dakota Minnesota and Eastern Railroad (DME) announced
its intended acquisition of I & M Rail Link (IMRL). While we recognize that no
application has yet been filed with the Surface Transportation Board (STB), we are
concerned that the applicant may request the transaction be considered "exempt" as
defined in 49 CFR 1180.2. We wish to go on record that the proposed transaction, if or
when an application is filed, should be give due consideration as a "minor" transaction, if
not a "significant" transaction, as defined in 49 CFR 1180.2. The transaction will
certainly be of regional aod national transportation importance and have significant
impacts on communities and shippers.
With a significant or minor transaction designation, STB could provide all interested
parties ample time to comment and participate in the proceedings. Ample time would
not be available in an exempt proceeding. It should be noted that Iowa remains neutral
on the transaction at this time. We are neither for nor against this transaction since
there is little information urrently available. Our concern is that the appropriate
regulatory process be used.
The proposed transaction outlined by press announcements, indicates that the Iowa
Chicago and Eastern Railroad Corporation (lC&E), a subsidiary of American Rail
Holdings, Inc., which is a wholly owned subsidiary of the DME, will acquire the assets of
the IMRL. While this transaction is a bit convoluted and may on the surface look like a
non-carrier acquisition of railroad assets, it is, in fact, the acquisition of the IMRL by the
DME, as both will be under the same management control. We feel that an application
filed with STB relative to the proposed transaction should not be considered exempt for
any of the seven categories outlined in 49 CFR 1180.2(d). We also feel this transaction
is merely a benign non-railroad company acquiring rail assets with no market impacts,
operations changes, or environmenta effects.
Service People Integrity Responsibility Innovation Teamwork
Our concerns on the regulatory process stem from the fact that there are a number of
unanswered questions related to the proposed transaction, and an exempt process
would not provide ample opportunity for the City of Dubuque, local shippers, and others
to respond or comment. As you may know, both railroads currently operate in Iowa,
with IMRL running the entire length of our riverfront. Nearly 60 percent of the IMRL
operations and operating revenues are in Iowa. It is expected the acquisition of the
IMRL by the DME would have a significant effect on rail service in Iowa, on shippers
they serve, and on communities in Dubuque they traverse.
Following are some of our concerns and questions about the proposed transaction we
hope to have answered or addressed in a full STB process.
Financial viability - The proposed purchase by a small short line railroad with marginal
operating profits of a larger regional carrier with no operating profits does not appear to
make for a viable combination. While the DME may have a successful future with or
without the development (if Powder River coal traffic, combining with the IMRL may not
generate significantly increased revenues or reduce costs sufficiently to offset current
operating losses for the IMRL. This is important since, without having a reasonable
expectation of success for this merger, there is the potential for more consolidations or
re-organizations in the future (i.e. downstream impacts), which could have more and
broader impacts on service and competitiveness.
We believe there are a number of questions and issues concerning the financial viability
and future stability of the proposed merger. These issues need to be answered through
the STB process. Having an exempt process for this transaction will not provide
sufficient review of these questions.
Environmental/communlty impacts - The IMRL, particularly as it traverses northeast
Iowa and the Mississippi River Corridor, could pose some environmental and
community impacts when or if there is significant traffic increases, particularly if the
expected coal traffic is to be routed over the IMRL If the DME has expectations to
provide significant upgrade to the infrastructure of the IMRL (with potential capacity
improvements), what are the potential environmental and community impacts, if any?
And what mitigation may be needed?
The DME provided an Enironmental Impact Analysis for the entire DME route in its
application to STB for the powder River Basin project. The IMRL routes were not
considered in that application and environmental analysis. Under the proposed merger,
will the DME provide a similar effort relative to potential traffic increases to IMRL routing
and to the communities affected? Would this type of analysis be needed?
Again, these and other questions related to environmental community concerns need to
be raised through the STB process, and the exempt applications process would be
insufficient to address these issues.
Impacts on shippers- The direct impact of this proposed merger to Dubuque is
unknown at this time. Without a full STB process, understanding of the impacts to
shippers Dubuque and Iowa will not be fully understood. The majority of shippers on
the IMRL in Iowa are grain shippers and they currently have all the access and service
that would be provided under the proposed merger. It does not appear the DME route
will provide any significantly new destinations or markets for Iowa grain shippers:
However, the benefits may be more indirect through improved operations and grain
market competition. A fulI understanding of these impacts and the market implications
can only be gained through a full STB process.
In conclusion, the City of Dubuque supports the STB in its regulatory role. Trying to
balance the needs of the rail industry for timely decisions and ensuring appropriate
opportunities are provided to those affected by industry actions is difficult and important.
In the case of this proposed action, we ask that the balance be met through a full STB
process and not through the expedited process of exemption.
If you have any questions please contact me at (563) 589-4110 or e-mail
ctymqr@cityofdubuque.org.
Sincerely
Michael C. Van Milligen
City Manager
/ksf
Cc:Mayor Terry Duggan
Dubuque City Council
Barry Lindahl, Corporation Counsel
Mike Koch, Public Works Director
Cindy Steinhauser Asst. City Manager
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