(Reuters circulated the following article by Nick Carey on February 1.)
CHICAGO — U.S. railroad Dakota, Minnesota & Eastern’s top executive said on Thursday it is seeking private funding for a project to haul Powder River Basin coal now that a ruling on a $2.3 billion federal loan is imminent.
Speaking after a Federal Railroad Administration statement late Wednesday that the project had met federal environmental requirements, DM&E holding company Cedar American Rail Holdings Inc.’s Chief Executive Kevin Schieffer told Reuters the company has engaged Citigroup and Merrill Lynch to seek additional funds for the $6 billion project.
“The FRA’s announcement has given us enough confidence that we formally launched private financing efforts today,” he said.
The U.S. rail regulator has started what it described as a “90-day clock” within which period it must decide on DM&E’s loan request to upgrade 2,500 miles (4,002 kms) of track and lay 262 miles (422 kms) of track into the coal-rich basin in Wyoming.
“This is not a final decision, but it is a positive sign for us,” Schieffer said.
The proposed project has met with opposition from the Mayo Clinic and its home town of Rochester, Minnesota, which sits on the DM&E line. They say increased coal train traffic raises safety and environmental concerns, but the DM&E says those concerns are unfounded.
The project’s supporters, which include power utilities, say it will provide a much-needed additional source of coal from the Powder River Basin, which is currently served by the two largest U.S. railroads, Union Pacific Corp. and Burlington Northern Santa Fe Corp.
Powder River Basin coal is cheaper to mine than coal further east as it lies close to the surface. It is also lower in sulfur, making it popular with power companies.
The U.S. rail regulator said in its release that if the Sioux Falls, South Dakota-based railroad’s low-interest loan is approved DM&E will have to make additional safety improvements at 10 rail crossings and use locomotives on western stretches of its network that meet the toughest federal emissions.
The crossing upgrades would be needed to handle additional traffic if the project goes ahead, the FRA said.