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The stunning news Monday afternoon that the Federal Railroad Administration had rejected the South Dakota-based railroad’s $2.3 billion loan request was cheered in Rochester, which with Olmsted County and Mayo has waged an epic battle against the project for nearly a decade.

There’s no appeals process for the loan, which means the DM&E will have to find its own financing for the project.

Rochester Mayor Ardell Brede said, "Obviously, it’s good news for Rochester, and even on a bigger scale, good news for the taxpayers." But he warned, "I don’t think we can just sit back and say, ‘That’s over. Next.’"

The loan request was rejected because DM&E presented "too high a risk" for repayment, according to Federal Railroad Administrator Joseph Boardman. The FRA statement also raised questions about "DM&E’s 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."

Gov. Tim Pawlenty applauded the federal action, saying, "The concerns of Rochester and the Mayo Clinic needed to be addressed before the project moved forward," he said. "Those concerns weren’t addressed. So, this decision is appropriate."

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While DM&E President Kevin Schieffer said it’s too soon to say whether the loan rejection is the end of the road for the project, he acknowledged it’s a major setback. "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."

Rochester, Olmsted County, Mayo and the Rochester Area Chamber of Commerce created a group called the Rochester Coalition to fight the project, saying it would create safety and health issues for residents as well as Mayo patients. The DM&E route runs through the center of Rochester, just a few blocks from the clinic.

"Our interest has always been in protecting the safety of our patients, the safety of our staff, and the safety of the community," said Glenn Forbes, chief executive officer of Mayo Clinic in Rochester.

Chamber President John Wade says the federal loan rejection "lifts a cloud" from over Rochester and makes it even less likely that private interests will finance the project, which has been described as the largest railroad construction project in a century.

"If the government believes this loan cannot be repaid, I find it really hard to believe that somebody in the private sector will take on the loan, take on this kind of risk," Wade said.

— From staff reports

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