(Reuters circulated the following article on February 26.)
WASHINGTON — The U.S. government denied a $2.3 billion loan to the Dakota, Minnesota & Eastern (DM&E) freight railroad on Monday, saying it posed an unacceptably high risk to taxpayers.
The railroad, a private company, hoped to combine the low interest federal loan with private financing for a $6 billion project to extend its operations to the coal fields of Wyoming’s Powder River Basin.
Officials at DM&E could not immediately be reached for comment.
Joseph Boardman, the administrator of the Federal Railroad Administration, said in a statement the funding proposal met some of the government’s criteria for approval but there remained too many questions about the company’s ability to repay such a huge loan.
Boardman is concerned about the railroad’s “highly leveraged financial position,” the size of the loan, and the possibility that the company would not be able to generate enough revenue to pay off the debt.
DM&E, based in Sioux Falls, South Dakota, hoped to finance construction of a 280-mile line to the Powder River Basin coal mines and reconstruct about 600 miles of existing track in South Dakota and Minnesota.
The proposal was opposed by the city of Rochester, Minnesota — which sits on the DM&E line — and the Mayo Clinic in that city. They said coal train traffic posed safety and environmental concerns.
Power utilities supported the project as a much-needed source of additional coal from the Powder River Basin. The area is currently served by Union Pacific Corp. and Burlington Northern Santa Fe Corp.