Western Railroad Discussion > Argus Media article on DM&E PRB project

This week's Argus Media's "Rail Business" (www.argusmediagroup.com - subscription only) had an interesting article quoting JP Morgan's analyst Tom Wadewitz's report on the DM&E's Powder River Basin project. A couple of points:

They see a greater than 50% chance the loan will be approved.

Total tonnage captured by DME would be 57 million tons a year, with traffic going to 101 power plants either directly served by DME/ICE/Shortline or in a reasonable area of NS, CSXT, CP, and CN. Market share for PRB coal would increase in the area from @35% to @40%, and DME would get 30% of the total market.

The DME could take 23 million tons a year from BNSF resulting in a loss of $274 million in revenue.
UP would lose 34 million tons a year and see a revenue decrease of $410 million. In addition, the remainder of UP/BNSF tonnage would come under increasing rate pressure reducing rates approximately 15%.


DME is saying they would plan to route only an average of 1.5 trains a day (15% of total) through Rochester, MN.

There were some quotes, notably from Entergy's Bill Mohl, that they won't sign any transportation contracts with DME given the current regulatory uncertainty. Loan approval is likely to have conditions for utility commitments before the loan can actually be drawn.

This report is supposed to be posted on the FRA electronic docket at http://dms.dot.gov docket 26099

I found a blog entry today that carries more detail on this proposal. The link is:

http://www.captainsquartersblog.com/mt/archives/008548.php#comments

Just clipping one paragraph here:

"Supporters of this loan argue that DM&E represents a strategic interest for American energy policy, as they service Wyoming coal fields. However, other railroads also service the same fields, and they do it more efficiently and more safely. In fact, DM&E has the worst safety record among the 43 large-scale rail carriers in the US. The other two railroads that service the coal fields will be put at a competitive disadvantage by the government bailout of DM&E, which promises to subsidize failure rather than allow the market to work properly."

I'm not too familiar with all this, but I ran across the post while reading the blog, and thought I'd pass it on.

There are some very well reasoned, informed, and intelligent criticisms of the DME PRB project (user "Run8" often posts regarding them), however none of these are to be found in this blog, which appears to just trot out the most hysterical and least educated screeds from the Mayo Clinic.