HURON, S.D. — A series of lawsuits and a troubled financial market is delaying the start of the Dakota, Minnesota and Eastern Railroad’s $2 billion improvement and expansion project, said Kevin Schieffer, DM&E president and CEO in an interview with the Huron Plainsman.
“It is hard to guess when we will get this project underway,” Schieffer told the Plainsman Wednesday. “I always deal with best case scenarios. Six months ago, the best case scenario was getting construction started next year. But I have a hard time making a predication with the financial markets where they are at and with this lawsuit (DM&E’s eminent domain lawsuit against the state of South Dakota) still unresolved. I think I will have a better sense when that is resolved, but we are continuing on with it and remain focused.”
When the Surface Transportation Board’s decision in late January gave DM&E final approval to build and operate a rail line into Wyoming’s Powder River Basin, the nation’s largest deposit of low-sulfur coal, opponents to the project attempted to block it by filing lawsuits challenging the STB’s decision.
The project, the largest rail-building effort in the country in decades, would involve building about 280 miles of new track and upgrading 600 miles of existing track. That project also includes plans to build a $100 million operation center in Huron that could employ as many as 500 people.
Schieffer said there have been four briefs filed challenging the STB’s decision. Those who have filed challenges are the Mid-States Coalition, Mayo Clinic, the City of Rochester, and the County of Olmstead.
“They have filed all of their briefs and I have read them all carefully and I’m in the process of responding to those,” he said. “I see nothing in those briefs that gives me a great deal of concern.”
DM&E officials were hoping to begin work on the DM&E improvement and expansion project early next year, but Schieffer said that will be tough at this stage in the process.
He said the combination of those challenges to the DM&E project, the lawsuit filed earlier this year by the railroad challenging the constitutionality of the state’s eminent domain law and tough economic conditions that are impacting the nation’s financial markets are contributing to DM&E’s ability to get the project started by early next year.
“The melt down in the financial markets has not been a particularly positive development, but I don’t see that as a long-term problem,” Schieffer said. “The lawsuits from the project’s opponents are not going to effect the timing of anything. There was a schedule set on that six months ago and it hasn’t changed.”
He said it was common knowledge that the STB’s decision was going to be challenged in the courts, but until those briefs were filed, DM&E didn’t know what the opponent’s arguments were going to be.
“I have seen their arguments and I’m not impressed,” Schieffer said. “With the eminent domain case, we are still waiting for a decision from the court. The trial is completed and I’m very optimistic with what the final result will be. But we are still waiting on the judge’s final decision.”
The state’s eminent domain law was passed by the South Dakota Legislature in 1999, which gave the governor additional power in eminent domain cases.
“That is very frustrating when you are trying to invest $1 billion in your own state and then having to sue your own state to do it,” he said.
He said the law creates uncertainty among investors of the project.
Schieffer said he is hopeful that the judge will render his decision in the very near future.
“It will make going into the financial markets a lot easier,” he said. “But the tragedy here is that the financial markets for this kind of project was in a lot better shape a year or two years ago than it is now. Timing is everything. Now we are in a very rotten financial market as every one knows. I don’t think it is a killer, but it is a time factor problem.”
Schieffer said while markets are starting to look better, there are a lot of people counting on the project.
“I go to bed every night thinking about that, but we are not letting up,” he said.
Schieffer said the fundamental idea of the project to create an alternative route for the Wyoming low-sulfur coal remains strong among eastern power plants because of environmental concerns.
He said the acquisition by DM&E of the I&M Rail Link is working out well. Earlier this year, DM&E bought the I&M Rail Link in an effort to develop more market independence and better competitive options for their customers. It gives the railroad direct access for the first time to important grain processors in Iowa and beyond and for the first time direct access to the major rail gateways of Chicago, the Twin Cities, and Kansas City.”
Schieffer said the acquisition is a big plus for agriculture in the state.
But the ongoing battle to get the Powder River project underway is still an on-going concern.
“I don’t want anybody left with the impression that things are letting up,” he said. “We are moving forward. Whatever comes in front of us we tackle it and deal with it. You have to stay with it and keep slugging away.”