Is a Pork Barrel Project Worth the Destruction?

Rochester, Minnesota is not the only city, along the Dakota, Minnesota and Eastern (DM&E) railroad corridor, that has concerns regarding the proposed $2.5 billion dollar federally subsidized loan to the DM&E . There are other cities and towns that have reservations about the loan but lack the resources to respond accordingly. There are other coalitions, alliances, and organizations, spanning three states, such as the Cowboy and Indian Alliance, Mid States Coalition for Progress and neighborhood organizations, all expressing dismay and concern about the magnitude of the proposed loan on such a risky project.

The Eastside Pioneers Neighborhood Association (ESPNA) is just one of the many organizations that are asking the Federal government to scrutinize the details and events surrounding the proposed loan. Like others along the DM&E railroad corridor spanning Wyoming, South Dakota and Minnesota we are afraid that the DM&E coal train expansion project will rob us of our safety, homes, properties, savings, livelihoods as well as our urban and rural environments. The concerns are many and right now they are focusing on the Federal government’s proposed $ 2.5 billion dollar subsidized loan to a business that couldn’t even gain private funding for their coal train expansion project. Many are wondering if a pork barrel funded project might push what once was a promising railroad out of business and at the same time leave a trail of irreparable destruction to the cities, neighborhoods, farms, ranches and the environment in its wake.

The DM&E has asserted from the beginning that the market will decide whether or not this project will be built. Yet, when the DM&E was unable to attract private investors, a milestone red flag for any other project, they chose to ignore the dictates of the marketplace and decided to seek a federal subsidy instead to resuscitate a dead project.

Private investors are not willing to invest in the coal train expansion project because they realize that the DM&E’s hope for survival hangs on their ability to compete successfully against two railroad giants, that also happen to be the major coal shippers in the Powder River Basin, the Burlington Northern (BN) and the Union Pacific (UP). Both the BN and UP have very deep pockets and huge supporting infrastructures. The odds for survival are against the DM&E, they are a small, financially troubled, 2nd class, single track, short-line railroad. Their 280 mile extension takes them nowhere, they do not have trackage rights into the Powder River Basin coal fields, their competitors, the BN and UP own it all. Furthermore both the BN and UP have long term shipping contracts with most of the major utility companies, thereby leaving the DM&E with a smaller, less lucrative share of the coal hauling market. The DM&E must either enter the Powder River Basin coal market on a large scale ( a costly and perhaps risky move) or accept a cost disadvantage and consequently lower profitability. Trying to overcome the disadvantages of small size by entering on a large scale at the beginning can result in long-term overcapacity problems for the DM&E, until sales volumes build up. But if the struggling DM&E ever showed up on the BN or UP’s radar screen all these companies would have to do is launch strong defensive measures( price cuts, increased advertising and sales promotions) on their coal, agricultural commodities, etc., to maintain their positions and it would very likely drive the DM&E into some hard times (bankruptcy, business closure, etc..).

Granting the DM&E railroad a $ 2.5 billion dollar federally subsidized loan would be the height of fiscal irresponsibility that would more than likely lead to a default on the loan. The bottom line is, the DM&E coal train expansion project is a bad investment, that will open up a Pandora’s box of woes for the cities, towns and rural areas currently serviced by the DM&E railroad corridor.

There’s more realistic, less grandiose solutions to the DM&E railroad’s business problems, such as working on cooperative, innovative ventures with the first class railroads to better service their customers needs.

Michael J. LaPlante
President
Eastside Pioneers Neighborhood Association
1143 3 ½ St. SE
Rochester, MN 55904
(507) 282-2667
mlaplante@aol.com