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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