Sen. Dayton D-MN's staff is saying that the $2.5 billion low interest loan program proposed by Sen. Thune R-SD for the Dakota, Minnesota, and Eastern Railroad's expansion into the coal fields of Wyoming would be the largest loan ever made to a single private entity. It would dwarf even the loans to the aviation industry after Sept. 11th.
In the 19 months prior to becoming a Senator, Thune received $220,000 as a lobbyist for the DM&E. For eight long years the DM&E has been unsuccessful in obtaining private financing for the largest railroad expansion in 100 years. In November 2005, Sen. Thune announced that in the last moments of the 2005 transportation bill that he and Sen. Trent Lott slipped 35 billion dollars for railroad loans in the budget.
People need to tell their representatives in Congress that the FRA loan to the DM&E is cronyism and should be taken out of the budget or not approved by the FRA or we'll all be sitting on a railroad in South Dakota.
More shenanigans after the fold.
As part of the loan language written by Thune, the FRA (Federal Railroad Administration) will have only 90 days for an up or down approval of the loan. In the mid -nineties the railroad likely only had assets of 50-60 million. If DM&E defaults on the $2.5 billion loan, the FRA will end up with the railroad. Dayton opposes the loan because there is no significant mitigation for his state when up to 40 coal trains/per day travel through the downtown`s of southern Minnesota to the coal`s likely destination, Chicago. Rochester, home of the Mayo clinic, has estimates of billions lost in it's local economy due to the coal trains.
To get its' initial go ahead for planning the expansion in 1998 from the Surface Transportation Board, the DME's lawyers had harsh criticism for critics of DM&E's economic viability.
From a Rapid City Journal article by Dan Daly in 1998:
"Along the way, DM&E takes a few shots at the coalition (DM&E opponents). DM&E attorneys wrote about the "misplaced arguments by the coalition that DM&E's financial condition and the project's economics are so dismal there is no chance of DM&E ever obtaining the financing necessary for construction (an argument the coalition does not believe since it otherwise would not believe, since it otherwise would find it unicorn to oppose DM&E's application)"
In fact, DM&E argued, the railroad's financial problems should not be among the board's considerations. If the project is doomed to failure, the financial markets won't make the billion-dollar investment.
The board has less capacity than the market to evaluate the degree of risk of project failure and should not take on the role suggested by the coalition."DM&E wrote."
In 1998, DM&E got approval to go ahead based on the fact that private markets would fund this project. This is not the case. The DM&E argued that the federal regulatory boards did not need to take a close look at this project because the financial markets would decide it's merits, and the STB agreed. It was a bait and switch by the DM&E.