(The following article by Mark Fischenich was posted on the Free Press of Mankato website on December 21.)
MANKATO, Minn. — The massive DM&E Railroad expansion — a project that alarmed many Mankato residents eight years ago with its prospects for dozens of mile-long coal trains rumbling through the city each day — appeared to be losing steam.
The project was clearing regulatory hurdles and court challenges, but there was no indication anyone wanted to invest the $2.5 billion in construction funds needed by the Dakota, Minnesota and Eastern Railroad. As the years passed, opponents began to hope the controversial expansion might never be built.
“This has been on the back burner for a couple of years now because the DM&E has been unable to get the private financing to go forward,” said Jim Gelbmann, state director for U.S. Sen. Mark Dayton, D-Minn.
Then earlier this year, U.S. Sen. John Thune, R-S.D. — fresh off a $220,000 lobbying job with the railroad — slipped through Congress a piece of legislation that could provide the DM&E with the $2.5 billion through a low-interest federal loan.
And it could happen in the next few months, thanks to provisions Thune added virtually unnoticed into a $286 billion transportation bill last summer.
“Private markets no longer seem to be the obstacle they once were … ” Gelbmann said.
Officials with the Federal Railroad Administration, which will decide without public input whether to issue the loan to the DM&E, already are studying the railroad’s plans to expand into the coal-rich Powder River Basin of Wyoming.
“We have to make sure traffic will be there to make sure the loan is repayable and the engineering can carry it,” said Joe Pomponio, director of the Office of Freight Programs for the Federal Railroad Administration. ” … We have to satisfy ourselves that it’s going to be a viable project.”
Thune spurred requirements that give DM&E an advantage in the loan application process. Provisions were added to the loan program requiring the FRA to give priority to projects like the DM&E’s that “alleviate rail capacity problems.”
Coal mines in the Powder River Basin and the electrical utilities that buy the coal have been complaining that the two railroads providing service to the mines — the Union Pacific and the Burlington Northern and Santa Fe — have been unable to keep up with the growing demand for Wyoming coal.
Thune also added a deadline for the FRA to study loan applications. Once the DM&E gets final federal approval to build and an environmental study is completed, the FRA must decide within 90 days whether to issue the loan.
The DM&E proposal, if it goes forward, would be the largest American railroad construction project in more than a century. It would transform the DM&E from a Class II railroad that runs a handful of trains through Mankato each day into a major hauler serving as a rolling coal pipeline to power plants in Midwest states.
And, in the eyes of local opponents, it would change Mankato from a relatively quiet town to one with as many as 13,000 coal trains passing through annually.
DM&E President Kevin Schieffer announced plans last month to apply for the federal money. Schieffer said he hoped to have the loan quickly approved and construction started next spring.
Thune, a registered lobbyist for the DM&E as recently as 13 months ago, tweaked a federal transportation bill this summer to make sure more than enough money would be available for the loan.
The FRA’s loan program is now awash in funding. Thune worked to expand the FRA’s loan authority from $3.5 billion to $35 billion.
Thune’s efforts were key in making the DM&E’s needs fit into what was previously a relatively small loan program. Loans currently issued through the Railroad Rehabilitation and Improvement Financing program average $42.3 million. The DM&E needed about 60 times that amount.
Thune, who participated in the DM&E’s November announcement of the loan application, received an estimated $220,000 in lobbying fees from the DM&E in fewer than 19 months of work as the railroad’s chief lobbyist in Washington, D.C., according to records filed with the Secretary of the Senate. Of the total, $160,000 came in the first 11 months of 2004 when Thune was busy with his campaign to defeat Democratic Sen. Tom Daschle.
Along with the direct payments to Thune, DM&E officials gave Thune’s campaign for Senate $12,250 in donations, according to campaign finance reports compiled by the Center for Responsive Politics. Schieffer alone gave $4,000 — the maximum amount allowed by law.
The lobbying relationship ended about three weeks after Thune upset Daschle in last year’s general election.
Rep. Gil Gutknecht, R-Rochester, and a spokesman for Dayton were hesitant to comment on whether it was a conflict of interest for Thune to move so quickly from the DM&E payroll to working on legislation that is potentially helpful to the company.
“We should let the public decide for themselves how they view that,” said Gelbmann, Dayton’s aide.
Thune was unavailable for comment, but his communications director, Kyle Downey, said the senator’s efforts were motivated completely by the benefits the DM&E expansion will bring to the people of South Dakota and the United States.
“Senator Thune is proud of his work while working in both the public and private sectors to improve South Dakota’s rail system,” Downey said.
The project will create more than 3,000 construction jobs lasting up to three years along with more than 2,000 ongoing jobs over the length of the route, Downey said. It also will provide better rail service to existing DM&E customers and supply low-sulfur coal to help keep electricity affordable.