(The Rapid City Journal posted the following Associated Press article by Carson Walker on its website on September 10.)
SIOUX FALLS, S.D. — The recent blackout in the Midwest and Northeast likely improved the chances of the Dakota, Minnesota & Eastern Railroad succeeding with a plan to expand and improve its line, company President Kevin Schieffer said.
The power outage “moved us closer to a couple of thousand jobs in South Dakota and our service region,” he said.
“The more attention there is to the underlying fundamentals of the whole electricity power issue, the better it is for us. And the two places that can make this happen at the end of the day are Washington and-or Wall Street. And we’re pursuing it on both ends.”
The Sioux Falls-based railroad wants to invest an estimated $2 billion to upgrade 600 miles of track and add another 280 miles of rail so it can haul low-sulfur coal from Wyoming’s Powder River Basin to Minnesota.
Bill Vantuono, editor of Railway Age Magazine in New York, said the blackout probably did have a positive effect, at least in perception.
U.S. coal reserves are expected to last at least 150 years and the Western coal that DM&E wants to haul produces less pollution than Eastern coal, which makes it a cost-effective fuel for utilities, he said.
“So in terms of the market, there’s market potential there for DM&E,” Vantuono said.
Schieffer said the company has raised and spent about $40 million to get the regulatory approval needed. He won’t say if it’s taking longer than expected to raise the full amount.
“I plan for the best case scenario and as the calendar moves we make adjustments,” Schieffer said.
Besides the increased demand for reliable energy, the financial markets also seem to be improving, he said.
But because of the physical and financial size of the project and how long it would take to build, there aren’t a lot of potential investors to court, Schieffer said.
“There’s only a few players out there that would be real players in this project. The magnitude of it is such that I’m not running around to audiences of hundreds,” he said.
The financial package would include one or more equity investors, as well as bonds and debt, Schieffer said.
Several communities, environmental groups, landowners and the Mayo Clinic filed a legal challenge of the project, saying the federal Surface Transportation Board didn’t sufficiently assess concerns such as noise, pollution and traffic.
But more opponents are becoming supporters as they realize the economic impact of the project, Schieffer said.
“I think as a state, this thing presents us a historic opportunity. This is much bigger than, ?Is it good for DM&E?’ It’s not just a railroad issue. It’s a much broader project with ramifications throughout the state. And it’s going to be a state and regional decision: ?Do we want this thing to happen or not?’ And if collectively the political wherewithal is there for it to happen, that’s going to be a huge advantage and it can make it happen.”
Schieffer challenged political leaders to “adopt this as a project.”
Sen. Tim Johnson, D-S.D., said it does have economic development possibilities.
But “there are several hurdles the proposed railroad must still clear, including potential litigation, before we can begin looking at legislative action,” he said in a written statement.
Sen. Tom Daschle, D-S.D., said he has talked with the DM&E about the expansion and would like to see it succeed.
“This project would provide important benefits to many South Dakota communities and industries,” Daschle said in a written statement. “Ultimately, however, we must not lose sight of the fact that this project must make sense economically to private industry.”
Vantuono said one concept that could help pay for it is called a public-private partnership. It’s being used in Chicago, where representatives from railroads, the city and state of Illinois put together a plan to improve rail infrastructure, which is awaiting federal help, he said.
Another idea before Congress would allow the federal government to issue $50 billion in federal tax credit bonds to finance rail projects, Vantuono said.
“The private investors would get tax credits for buying these bonds,” he said. “So big projects like this (DM&E) where there’s a definite demonstrable public benefit would be attractive for concepts like this.”
Though Schieffer offered no schedule on when expansion work might officially begin, the DM&E has started to use heavy-duty rails on routine improvements.
Crews are laying the first seven miles of heavier-grade track near Tracy, Minn., and plan to put down as much as 100 miles next year, he said.
“This will be the brand new big steel that we don’t have elsewhere on this railroad. And it’s the kind of steel that will go into the PRB (Powder River Basin) project,” Schieffer said. “It’s work we’re doing whether the PRB happens or not.”