The DM&E, which was denied a $2.3 billion federal loan yesterday, has been a Republican railroad from its outset.
It had its origins when the old Chicago & Northwestern was in its death throes. Its current president Kevin V. Schieffer (1996–present) served as counsel for Senator Larry Pressler starting in 1982. Schieffer began working with DM&E business in 1983 when he worked to prevent the abandonment of C&NW branch lines that would eventually form the beginnings of DM&E. He initiated the negotiations in 1985 that led to DM&E's creation. He was promoted to Chief of Staff for Senator Pressler in 1987, a position he held until 1991 when George Bush the elder appointed Schieffer to be U.S. Attorney for South Dakota. In 1993, Schieffer left his U.S. Attorney post to become the legal counsel for DM&E. In that capacity for the railroad, he oversaw its recapitalization in 1994 and the acquisition of C&NW's Colony line. He held this position until he was unanimously elected president of the railroad on November 7, 1996.
In 1997, DM&E announced its plans to expand its lines into the Powder River Basin of Wyoming to be the third carrier that hauls coal from that Basin to electrical generating plants in the east. Burlington Northern Santa Fe and Union Pacific already have lines pulling coal trains from that area.
Those two railroads have remained fairly silent, but not totally mute, on the DM&E. Both think they can haul the coal trains east using the lines they have and without a major expenditure on laying new track. Their opposition to the DM&E plan has not been widely reflected in the media, but it is no secret among people who track the goings-on in railroad headquarters. Their opposition was just one factor among many factions that had come out more openly against the DM&E.
Here are the factors working against the $2 billion loan.
- When railroads were dismantled in the late 1970s and early 1980s, the consensus among communities along rail lines and rail companies was that any new construction of rail lines should avoid crossing highways without underpasses or overpasses and they should not be routed through communities to disrupt traffic and tranquility. DM&E plans showed no attempt to avoid those safety and community concerns.
- The opposition to DM&E routing plans by the Mayo Clinic in Rochester, Minn., were reflective of objections voiced, but ignored, all along the proposed route. Many communities wanted any new tracks to by-pass the communities in ways that would permit unobstructed traffic flows on streets and highways.
- The financial structure and abilities of the DM&E to pay off its federal loan have been questioned by many from the start. This month a coalition of communities sued to obtain the financial records of the railroad.
- A bill was introduced in Congress by a bipartisan group of Minnesota legislators, including Republican Senator Norm Coleman, and with the sanction of the Republican governor, to require that any rail loan over $1 billion be submitted to Congress for review and approval.
- The nation's largest rail union, the United Transportation Union, came out against the loan on the basis of the railroad's saftey record and shaky financial structure.
- Energy and environmental groups pointed out that building a railroad to haul coal was a dubious prospect when there is a growing consensus that new electrical generating stations should be run on renewable and clean-burning fuels with more attention devoted to a technology that can use wind power. Advocates of more nuclear energy also opposed the DM&E plan.
Sen. John Thune led the federal efforts in obtaining the$2.3 billion loan by getting Congress to increase the limits on such loans. However, the Federal Railroad Administration denied the loan on the basis of having doubt whether the railroad had the resources and a projected future that would enable paying back the loan. Safety and noise issues also played a prominent role.
But the real power behind the denial came from other railroads who want to expand their own businesses.
The big question is whether new electrical generating stations burn coal or the cleaner, renewable sources of energy.