DME said denial of $2.3 billion federal loan would not stop it

Post-Bulletin, Rochester MN and news services

SIOUX FALLS, S.D. — Even after Dakota, Minnesota & Eastern Railway failed to get a $2.3 billion federal loan to rebuild existing track and add new line to Wyoming’s Powder River Basin coal mines, company officials said the expansion would go ahead.

Private investors were stepping forward and the railroad expected to begin construction next year on about 200 miles of new rail line, chief executive officer Kevin Schieffer said in June.

The work that went into project design and securing contractors’ bids is now being presented to private investors, and the amount of private capital available has substantially increased in the past three years, he said.

The project faced opposition from the city of Rochester and Mayo Clinic, which argued that the additional high-speed trains could threaten the safety of patients at the clinic situated a few hundred yards from the track.


The Federal Railroad Administration denied the $2.3 billion loan on grounds of creditworthiness. The decision ended the DM&E’s loan request. There is no appeal process.

Federal Railroad Administration Administrator Joseph H. Boardman said in a written release that the DM&E proposal met some of the statutory requirements of the loan program, called the Railroad Rehabilitation and Improvement Financing program.

However, in the Federal Railroad Administration’s assessment, Boardman said, there remained too high a risk concerning the railroad’s ability to repay the loan. Concerns included the DM&E’s current levels of debt, the size of the loan request relative to existing DM&E operations, and the possibility that the railroad might not see enough added business to repay the loan.

In addition, Boardman cited concerns that the application did not sufficiently address how DM&E would handle potential construction cost overruns or work delays.

The $6 billion Powder River Basin project would rebuild 600 miles of track across South Dakota and Minnesota and add 260 miles of new track around the southern end of the Black Hills to reach Wyoming’s Powder River Basin. It would haul low-sulfur coal eastward to power plants.

Schieffer said the coal train expansion was conceived as a way to develop sufficient traffic for the DM&E to pay for rebuilding its decrepit line. Since then, the DM&E acquired a sister line to the east, the Iowa, Chicago & Eastern, and the combined line has become the largest Class II carrier in the U.S.

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