FRA Certification Helpline: (216) 694-0240

(The Associated Press circulated the following article on February 27.)

WASHINGTON — The Federal Railroad Administration has denied a $2.3 billion federal loan for the Dakota, Minnesota and Eastern Railroad’s planned coal train project.

The DM&E wanted to add track to the Powder River Basin coal fields in Wyoming and upgrade its existing line in South Dakota and Minnesota. The $6 billion project would involve building about 280 miles of new track and upgrading 600 miles of existing track so trains could haul coal for power plants.

The Mayo Clinic and the city of Rochester, Minn., strongly opposed the project, arguing the increased high-speed train traffic through the city could threaten the safety of patients at the clinic, which lies a few hundred yards from the tracks.

Federal Railroad Administra-tor Joseph H. Boardman said in his decision that “there remained too high a risk” that the railroad could not repay the massive loan.

Department of Transportation spokesman Brian Trumail said there would be no appeal process.

Company reviewing decision

DM&E president Kevin Schieffer said the company is reviewing the decision and that it is too soon to say whether it dooms the project.

“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,” he said. “We will continue to develop the project and we obviously wouldn’t be doing that if we didn’t think it would be able to happen.”

He declined to say what the company will do next. In the past, he has said DM&E could look for private investors or even go public.

The Sioux Falls, S.D.-based railroad says it could haul 100 million tons of coal a year from Wyoming to eastern power plants.

A statement released by the Federal Railroad Administration said Boardman was concerned by several factors, “including the DM&E’s current highly leveraged financial position, the size of the loan relative to the limited scale of existing DM&E operations, and the possibility that the railroad may not be able to ship the projected amounts of coal needed to generate enough revenue to pay back the loan.”

Minnesota Gov. Tim Pawlenty, a Republican, called the decision “really 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,” he said.

An American Association of Railroads spokesman has said it would be the largest new rail construction in the United States since well before World War II.

The DM&E also wants to carry coal across Iowa, Missouri and Illinois on its sister line, the Iowa, Chicago and Eastern railroad. The federal loan would have covered only a little more than one-third of the total cost.

The loan would come from a little-used program that Sen. John Thune, R-S.D., had amended to be tailored to the DM&E’s needs. Thune was a lobbyist for the railroad before his election to the Senate.

In a statement Monday, Thune said the South Dakota congressional delegation saw the project “as an opportunity that only comes around once in a lifetime” for small agricultural communities that could benefit.

“This is a major setback for our agriculture, ethanol, and energy industries and small towns struggling to survive,” he said.

Thune criticized intense lobbying efforts from the Mayo Clinic.

“Simply put, there was a huge amount of money spent to sabotage this project by powerful special interests and their hired guns,” he said. “This is a case of special interests beating the little guy.”

The Mayo clinic spent more than $200,000 lobbying Congress and the federal government on the issue.

Minnesota Sens. Norm Coleman, a Republican, and Amy Klobuchar, a Democrat, praised the decision.

Coleman said he applauded the Department of Transportation “for the effort that they made to really look at this, and do the right thing, protect the interests of American taxpayers.”

A taxpayer group opposed to the loan also lauded the administration’s denial.

“Today’s announcement marks a huge victory in the battle against wasteful spending,” said Tom Schatz, president of The Council for Citizens Against Government Waste.