In November 2005, Sen. Thune R-SD proudly announced to the state that in the last moments of the 2005 transportation bill, he and Sen. Lott R-MISS inserted a 35 billion low interest railroad loan program to benefit the state's Dakota Minnesota and Eastern Railroad's expansion into the coal fields of Wyoming. In the last eight years, the project has been unable to attract private financing because of several problems: the plan to construct 600 miles of new track through essentially virgin grassland, no market being named, and extensive litigation brought by many parties. In the 19 months prior to being a Senator, Thune was on the DM&E payroll as a lobbyist to a tune of $220,000. The CEO of DME is also the former chief of staff to former Sen. Larry Pressler R-SD.
St. Paul Pioneer Press business writer Edward Lotterman picks up on the issues this raises in his article "Railroad loan challenges Republican identity"
http://www.twincities.com./...
Mr. Lotterman has several interesting paragraphs:
"A federal loan of this sort constitutes a public subsidy for a private project. The below-market interest rate constitutes one element of subsidy; the second is the government's assumption of risk rejected by private capital markets. Most economists - especially free-market ones - condemn such subsidized loans as harmful to society."
"A republican-controlled Congress, however, approved the project. This presents a more fundamental issue. What does the Republican Party stand for - free markets and economic efficiency or simply doling out public funds to favored friends and donors?"
"The DM&E case is just one manifestation of a larger fight developing within the party between those like Sen. Chuck Hagel of Nebraska and Sen. Lindsey Graham of South Carolina, both of whom stand on party principles, and the Tom Delays and Dennis Hasterts, whose objective seems to involve giving friends access to the public trough."
Though the total loan package inserted by Thune is $35B, DM&E's application will be for $2.5B. Originally before Thune and Lott's work, the total loan package was $1-3B. There is speculation the large sum is to either appease other coal hauling railroads or for them to buy pieces of a dismantled Amtrak.The DM&E expansion is considered the largest railroad expansion in 100 years. Disseperate groups have filed lawsuits against the federal governments' environmental analysis: western ranchers and Indian tribes, the Mayo Clinic, the Sierra Club of SD, the City of Rochester, MN, and enviromental and neighborhood groups. The FRA will be reviewing DM&E's loan application in the next few months.