The DM&E rail project, the largest economic project to come to South Dakota in over a century, has been denied its request for a loan. Here is an early report from the Argus Leader:
Saying it posed too high a risk to taxpayers, a government agency has denied a $2.3 billion federal loan for the Sioux Falls-based Dakota, Minnesota and Eastern Railroad.
In a decision released today, Federal Railroad Administrator Joseph Boardman said there is too high a risk concerning the railroad’s ability to repay the loan.
DM&E president Kevin Schieffer said the company is reviewing the decision and that it is too soon to say whether the decision permanently dooms the project.
“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,” Schieffer said.
The DM&E is seeking to rebuild its rail line and extend it 280 miles to Wyoming's Powder River Basin coal mines. The plan is expected to cost $6 billion.
Asked whether the decision dooms the project, Schieffer said, “I think it’s premature for anybody to rush to judgment on it one way or the other.”
He said it’s too early to speculate and that “there’s nobody pulling up stakes this afternoon.”
The DM&E has been awaiting word from the Federal Railroad Administration as to whether it would approve the $2.3 billion loan.
In a statement accompanying the agency's decision, Boardman said he was concerned by several factors, including:
§ The DM&E’s current highly leveraged financial position;
§ The size of the loan relative to the limited scale of existing DM&E operations;
§ 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.
Boardman also cited concerns that the DM&E's application did not sufficiently address how the railroad would handle potential cost overruns and schedule delays with the Powder River Basin construction project.
Officials in Rochester, Minn. had strongly opposed the expansion, which would have gone through the southwestern Minnesota city. The plan, they said, would threaten patients and employees at Rochester's renown Mayo Clinic.
Minnesota Gov. Tim Pawlenty, a Republican, called the decision “really good news.”
“We wanted to find a compromise between some real concerns of the Mayo Clinic and the Rochester community, and the DM&E, and that wasn’t achieved, so I’m glad the loan was denied,” Pawlenty said in an Associated Press report.
UPDATE: Rep. Herseth and Sen. Thune express their disappointment in the decision, with Thune remarking that Tom Daschle and Bill Janklow's "efforts were not helpful." Remember that they once supported the DM&E project before they opposed it:
Thune said the South Dakota congressional delegation saw the project "as an opportunity that only comes around once in a lifetime" for small agricultural communities that could benefit.
"This is a major setback for our agriculture, ethanol, and energy industries and small towns struggling to survive," he said.
Thune criticized intense lobbying efforts from the Mayo Clinic.
"Simply put, there was a huge amount of money spent to sabotage this project by powerful special interests and their hired guns," he said. "This is a case of special interests beating the little guy."
The Mayo clinic spent more than $200,000 lobbying Congress and the federal government on the issue, according to federal lobbying records.
"Our interest has always been in protecting the safety of our patients, the safety of our staff, and the safety of the community," Dr. Glenn Forbes, CEO of the Rochester clinic, said in a statement.
The hospital had some unlikely South Dakota allies _ former South Dakota Gov. and former U.S. Rep. Bill Janklow, a Republican, who advised project opponents, and former Senate Democratic Leader Tom Daschle, who sits on the Mayo Clinic's board. Daschle, who was defeated by Thune in 2004, has said he supported the clinic's position.
"Clearly their efforts were not helpful," Thune said.
South Dakota Rep. Stephanie Herseth, a Democrat, also expressed disappointment in the decision and said it could affect electricity rates if railroad capacity does not open up.
UPDATE: SDWC comments: "This is bad news for South Dakota. That's $2.3 billion worth of infrastructure enhancement and economic development that we are not going to see."
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