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2/21/2007



Rail News: Rail Industry Trends

Congressional bill, lawsuit latest attempts to stall DM&E's federal loan application



Before the Federal Railroad Administration (FRA) issues a ruling within the next two months on the Dakota, Minnesota & Eastern Railroad Corp.’s application for a $2.3 billion federal loan, opponents of the railroad’s proposed $6 billion Power River Basin project are trying to block the loan.

Last week, Sens. Norm Coleman (R-Minn.) and Amy Klobuchar (D-Minn.) introduced legislation on Capitol Hill that would prevent the U.S. Department of Transportation (USDOT) from making any loan of $1 billion or more without congressional approval. The U.S. transportation secretary would be required to notify Congress of large loan requests, in which case a joint resolution for approval would be referred to the House Committee on Transportation and Infrastructure, and the Senate Committee on Commerce, Science and Transportation. The committees would be required to report on the resolution within 15 days.

The bill would prevent the USDOT from providing the $2.3 billion loan to the DM&E, even if the FRA approves the Railroad Rehabilitation and Improvement Financing Program application, unless the House and Senate pass a joint resolution approving the project, the senators said.

“We believe that transportation loans of this magnitude should be voted on by Congress,” said Coleman in a prepared statement.

Meanwhile, long-time project opponents the Mayo Clinic and city of Rochester, Minn., yesterday filed a lawsuit in the U.S. District Court for the District of Columbia seeking public disclosure of the DM&E’s financial records and more information about the railroad’s ownership.

The DM&E has “refused to reveal any information about its financial condition and ability to repay its requested $2.3 billion government loan,” officials of the clinic and city — which comprise the Rochester Coalition — said.

For more than 10 months, the coalition has sought to obtain the DM&E’s financial records and other documents from the FRA under the Freedom of Information Act, officials said. The coalition has asked the court to order the FRA to promptly comply.

“It is time for our government to require some public disclosure if the DM&E wants the public’s money,” said coalition legal counsel Stephen Ryan in a prepared statement.

The DM&E has not been secretive about its financial condition, but no company discloses information that competitors or opponents could use to undermine that company’s business, railroad officials said.

However, United Transportation Union (UTU) officials also question the DM&E’s financial condition and whether the railroad could repay the loan. In a statement released earlier this month, UTU International President Paul Thompson called on the USDOT’s Credit Council to deny the loan application.

“If the DM&E were credit worthy, it would be able to obtain a loan in the private sector,” Thompson said. “In fact, the railroad poses a substantial credit risk.”

The DM&E plans to build a 262.3-mile line through western South Dakota and eastern Wyoming, and upgrade 600 track miles in South Dakota and Minnesota to access the PRB. On Jan. 31, the FRA announced the project met federal environmental review requirements, starting a “90-day clock” during which time the agency must render a decision on the loan application.


Contact Progressive Railroading editorial staff.

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