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USDA says DME rail project would slash farm subsidies

USDA says DM&E rail project would slash farm subsidies

Eds: Adds project opponent comments.

By CARSON WALKER

Associated Press Writer

SIOUX FALLS, S.D. (AP) — The Dakota, Minnesota & Eastern Railroad expansion could save federal taxpayers $240 million a year in reduced corn subsidy payments, according to a report released Thursday.

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The U.S. Department of Agriculture document, entitled "Benefits from the DM&E Rail Expansion," says the added rail capacity would also cut farm program payments for soybeans, wheat and other grains.

Rail competition lowers shipping rates, which increases profits to farmers, the report states.

"The presence of effective rail-to-rail, rail-to-barge or rail-to-truck competition is necessary to stimulate lower rail rates for shippers. When effective competition is present, rail rates are much lower. Generally, savings from lower transportation costs go directly to agricultural producers," it says.

U.S. Sen. John Thune, R-S.D., said it confirms the scope of the project.

"We’ve said all along the economic benefits to South Dakota would be enormous, in terms of the jobs it would create. What this illustrates, too, is its importance to the ag economy," he said in a telephone interview.

If the estimated $6 billion expansion project goes through, the DM&E would become only the seventh large-scale Class 1 railroad in the country.

The plan is to upgrade its 600-mile line through Minnesota, South Dakota and Wyoming and add 260 miles of new track to Wyoming’s Powder River Basin so it can transport clean-burning coal to power plants to the east, using several dozen trains a day.

Transporting corn-based ethanol and other agricultural products also is part of the plan.

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The federal government’s Surface Transportation Board approved the proposal in February.

The Federal Railroad Administration has accepted public comments on the DM&E’s application for a $2.3 billion loan. Next it will review the comments and issue a decision on the environmental aspects of the project. It then has 90 days to approve or deny the loan.

Though the project has opponents along the line, its main critics are in Rochester, Minn., because of concerns over the impact of trains on the Mayo Clinic.

"You see an awful lot of ’coulds’ and an awful lot of ’possiblys.’ It’s a speculative report," said Lee Aase, a Mayo Clinic spokesman.

Nor does it factor in health and safety issues or the harm to communities, he said.

Tim Walz, a Democrat from Mankato, Minn., who is challenging Republican 1st District Rep. Gil Gutknecht, said he agrees increased rail competition helps agriculture.

But politics could have influenced the favorable USDA report, farm payments are already declining because of value-added agriculture and the Office of Management and Budget criticized the expansion, he said.

"You’ve got competing agency reports," Walz said. "This is what happens when you have a broken government."

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He and Aase also questioned why the expansion needs a federal loan if its benefits are so great.

Thune lobbied for the DM&E before being elected to the Senate in 2004 and legislatively helped increase the amount of money the government is authorized to loan for the project.

"It’s a loan. It will be paid back," he said.

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