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(The following article by Dan Daly was posted on the Rapid City Journal website on September 6.)

RAPID CITY, S.D. — As the war of words between Dakota, Minnesota & Eastern Railroad and the Mayo Clinic reaches a fever pitch, DM&E is apparently taking early steps in the land acquisition process.

Some landowners along the new line’s proposed route through western South Dakota and eastern Wyoming have been receiving letters from DM&E’s land agents.

Dale Molitor, who ranches near Smithwick, said he received letters seeking access to his ranch for survey crews. The letter offered him $200 for access. “My letters are in the garbage can,” he said.

Molitor is among the ranchers who have been fighting the railroad for nine years.

In 1997, DM&E announced plans to upgrade 600 miles of existing track and extend the line 260 miles west to the coal fields in Wyoming’s Powder River Basin.

The railroad wants to build south from its existing line at Wall and head through the Cheyenne River Valley south of the Black Hills and across to Wyoming.

Nine years ago, the project was pitched as a $1 billion project. Since then, costs have risen dramatically. DM&E has applied for a $2.3 billion loan, and company officials say the entire project, including trains and other equipment, could be $6 billion.

Much of the recent attention has been on the eastern end of the line. The Mayo Clinic is leading the Rochester Coalition, a group based in Rochester, Minn., in a well-financed legal and public relations campaign to stop the project from coming through Rochester, where the Mayo is located.

And a number of issues remain — the biggest is the loan application. The Federal Railroad Administration must decide whether to grant the loan.

In one letter to land owners, DM&E’s agent tells them that DM&E has “enough certainty” to start the land acquisition process. A landowner advisory group formed several years ago, but it’s unclear if it remains active.

Nancy Darnell, who ranches with her husband, Donley Darnell, near Newcastle, said it’s much too soon to talk about land acquisition. The Darnells belong to the Midwest Coalition for Progress, an opposition group. And the railroad would cross their land.

“I think they’re trying to rush people with this letter,” she said in a recent interview.

Jaf Karim, spokesman for DM&E said this week that he believes that the railroad has “good working relations with a majority of the landowners.”

Darnell said the Midstates coalition surveyed the estimated 120 landowners who would be affected and found that only 14 to 16 are working with the railroad.

If the project is approved and financed, DM&E would have the power of eminent domain to condemn and acquire right-of-way — in most cases a 100-foot strip — from landowners along the route.

Dale Molitor and his wife, Chris, have been talking for years about building a new house. But those plans are on hold pending the outcome of the DM&E rail project.

If the project is approved, railroad lines would flank both sides of their ranch — the old line on one side and the new coal line on the other.

“I don’t think I want to live between two tracks,” he said.

Meanwhile, DM&E asked for and received federal Surface Transportation Board permission to create a new subsidiary named Wyoming Dakota Railroad Properties.

According to an STB document, DM&E officials believe that using a separate subsidiary to build and operate the new line would, “facilitate financing of the construction project and also insulate DM&E shareholders from the risks associated with the project.”

Kevin Schieffer, president of DM&E, said the separate subsidiary will give the company greater flexibility in financing new construction without affecting the existing railroad’s finances.

“We have to attract a lot of private financing regardless of the outcome of the roughly $2 billion FRA loan,” Schieffer said shortly after the STB approved the plan. “Yesterday’s victory will expand the universe of investors and will provide more flexibility in structuring some of that $4 billion in private capital investment.”

The Mayo Clinic decried the new subsidiary as a DM&E “financial shell game.”

“The DM&E has created a new wholly-owned subsidiary and has been given permission to substitute this newly formed company whose assets, if any, are unknown, to building a railroad using government money,” Lee Aase of the Mayo Clinic said.

Mayo Clinic argued that a new subsidiary raises questions about whether WDR would have to comply with all of the environmental requirements for upgrading existing track. Those requirements were among the 147 conditions that federal regulators placed on the project.