(The Associated Press circulated the following article on July 15.)
HURON, S.D. — The Dakota, Minnesota and Eastern Railroad’s coal train project will require at least $3.5 billion in private funding on top of a $2.5 billion Federal Railroad Administration loan the company seeks, DM&E President Kevin Schieffer says.
“The project will attract and has attracted a huge amount of private financing,” Schieffer told the Plainsman of Huron. He did not disclose the source of the money.
The Sioux Falls-based railroad is waiting for word from the FRA on the loan.
Major construction could start next year, he said. Rebuilding the existing track in South Dakota and Minnesota and building 262 miles of new track to the coal fields in eastern Wyoming’s Powder River Basin would take three construction seasons, Schieffer said.
“We’re still on that track. I don’t see any insurmountable obstacle to achieving that. Everything in the industry makes it more compelling for this to happen,” Schieffer said.
The project could cost $6 billion to $7.1 billion, Schieffer said. The DM&E estimates it will need $2.4 billion to rebuild its own track. Another $3.5 billion or so would be needed to buy locomotives, rails cars and other equipment, and to fix up track not owned by the DM&E.
A $100 million operations center would be built in Huron, creating up to 500 permanent jobs, officials have said. Huron would be the “heartbeat of the operation,” Schieffer said.
According to the company, proposed costs include:
— $500 million to $1 billion for non-DM&E track work.
— $1.1 billion to $1.5 billion of capital for locomotives.
— $1.3 billion to $2 billion for rail cars and other rolling stock.
— $100 million to $200 million for miscellaneous items.
The DM&E will become the nation’s sixth Class I railroad when the project is completed, Schieffer said.
The railroad is applying for the loan through the FRA’s Rail Rehabilitation and Improvement Financing program.
In May, a group of business and government leaders from Rochester, Minn., questioned the railroad’s ability to repay the low-interest government loan.
The group, which includes the city of Rochester and the Mayo Clinic, objected to the expansion because it would mean more trains running through the city and close to the clinic. The group said the project has many financial uncertainties and raised questions as to whether the DM&E can repay the loan.
One analysis, disputed by the railroad, said the loan would leave the DM&E with long-term debt 23 times greater than its current equity value of $111 million.