(The following article by Melanie Brandert was posted on the Sioux Falls Argus Leader website on February 27.)
SIOUX FALLS, S.D. — Dakota Minnesota & Eastern Railroad is headed back to the drawing board after a government agency on Monday denied it a $2.3 billion federal loan for its proposed Powder River Basin project.
Federal Railroad Administrator Joseph Boardman said the loan posed too high a risk for taxpayers. He questioned DM&E’s ability to repay the money.
Kevin Schieffer, president and CEO of the Sioux Falls-based railroad, said the company is reviewing the decision and that it is too soon to say whether the project is doomed.
“It’s obviously a disappointment, but not the first we’ve had in the last nine years, and I’m sure it’s not the last,” Schieffer said.
The decision was hailed by some who think the expansion would cause safety issues in communities. Others said the project would do nothing but benefit the communities it serves. The project received the bulk of opposition from Minnesota officials, who feared the trains could endanger patients at the Mayo Clinic.
The DM&E is seeking to rebuild its rail line and extend it 280 miles to Wyoming’s Powder River Basin coal mines with a projected cost of $6 billion.
DM&E executives now must look at new options, such as resubmitting a loan application on a smaller project. The Federal Railroad Administration’s decision cannot be appealed.
“There’s nobody pulling up stakes this afternoon,” Schieffer said.
Boardman cited concerns about the railroad’s highly leveraged financial position, the loan’s size compared to DM&E’s limited scale of existing operations, and the possibility the DM&E might not be able to ship the coal needed to generate enough money for repayment.
‘A lot of misinformation’
Rochester, Minn., officials strongly opposed the project, saying the plan would threaten Mayo Clinic patients and employees.
“Our interest has always been in protecting the safety of our patients, the safety of our staff and the safety of the community,” said Dr. Glenn Forbes, Mayo Clinic Rochester chief executive officer.
Minnesota Gov. Tim Pawlenty, a Republican, called the decision good news.
“We wanted to find a compromise between some real concerns of the Mayo Clinic and the Rochester community, and the DM&E, and that wasn’t achieved, so I’m glad the loan was denied,” Pawlenty said in an Associated Press report.
Sen. John Thune, R-S.D., said the loan application would not have advanced this far without backing.
“It seems to me we were moving forward. We were going to get a favorable decision,” he said. “Somewhere in the last couple weeks, something happened to derail it.”
Thune said a lot of lobbying money was paid to consulting firms, and other interests were working on the issue.
“A lot of misinformation was being put out,” Thune said.
He criticized former longtime Sen. Tom Daschle and former U.S. Rep. and Gov. Bill Janklow.
“Clearly, their efforts were not helpful,” Thune said.
Daschle did not respond to questions e-mailed to him Monday night.
Rep. Stephanie Herseth, D-S.D., said she was disappointed the Federal Railroad Administration failed to recognize the loan’s potential to help alleviate the serious and harmful shortage of rail infrastructure in the country.
“With this decision, we have missed a unique opportunity to invest in increased rail competition that would benefit South Dakota’s rural economy.”
Gov. Mike Rounds, who was in Washington, D.C., for a governor’s conference, could not be reached for comment Monday night.
Effect on grain, employment
Lisa Richardson, South Dakota Corn Growers Association executive director, called the decision devastating. The effect would include lower grain prices, more bottlenecks for shipping grain and ethanol and fewer jobs in cities such as Huron, where a rail car maintenance facility was planned.
“Every part of our economy lost money today,” she said.
Al Heuton, Brookings Economic Development Corp. director, said he didn’t know why the federal agency would deny the loan. But his organization’s concern is if the decision will affect rail access.
“We have businesses that need rail transportation service, and it’s our hope to see that continue,” he said.
Brookings Deputy Mayor Tim Reed said city officials had safety concerns about the project.
“While it was good for South Dakota, it was not necessarily going to help the Brookings economy,” Reed said. “It does lessen the burden we’ll have to worry about with safety mitigation.”
Opponent Bob Burns, who has lived in Brookings for almost 37 years, said the FRA made a good decision based on fiscal responsibility. He also questioned DM&E’s attempt to reduce its coal trains and still repay the loan.
“It was the kind of inconsistencies that caused Federal Railroad (Administration) to open its eyes and look at the loan,” Burns said.
Supporter Harvey Wollman, former governor and state senator from Hitchcock, said he always thought it was important to rebuild railroad lines in the state and have a modern, safe railroad.
“We’re not going to roll over and die,” he said. “We’re going to keep this effort alive as long as I’m alive.”