Controversial DM&E Rail Expansion Proposal Prompts Nation's Top Transportation Official to Visit Rochester

New U.S. Secretary of Transportation Mary Peters, the nation's top transportation official, traveled to Rochester today in response to a growing controversy over the Dakota, Minnesota & Eastern Railroad's (DM&E) proposed rail expansion project and its request for an unprecedented $2.3 billion government loan. Peters met with officials from the Rochester Coalition to hear concerns about the project, which could result in more than 34 mile-long, high-speed trains traveling through downtown Rochester every day, carrying coal and hazardous materials just a few hundred feet from the Mayo Clinic, through the heart of downtown Rochester.

DM&E has the worst safety record in its class of railroad and an accident rate 7.5 times the industry average. Two weeks ago a DM&E derailment outside of New Ulm, Minn., spilled more than 30,000 gallons of ethanol and forced the evacuation of several homes. That same accident in Rochester could have resulted in the need to evacuate a significant portion of the city -- including Mayo Clinic.

In addition to safety concerns, DM&E's $2.3 billion taxpayer-backed loan, the largest loan in U.S. history to a private company, has caught the attention of the nation's leading taxpayer groups, which have joined the Rochester Coalition in calling for the loan to be rejected. Despite the unprecedented use of tax dollars, the DM&E proposal has not been subject to Congressional oversight or a single public hearing. DM&E's entire proposal is being kept confidential and so are the company's investors.

"We thank Secretary Peters for coming to Rochester to see first-hand the threat the DM&E proposal, as it currently stands, poses to our community, the state of Minnesota and the U.S. taxpayer," said Chris Gade, spokesperson for the Rochester Coalition. "The direct involvement of the nation's top transportation official is very encouraging and a sign that this project may get the level of scrutiny it deserves. The people of Rochester and all U.S. taxpayers deserve no less."

While insisting the best mitigation for Rochester is for the loan to be rejected, members of the Rochester Coalition expressed to Peters a willingness to discuss other solutions provided they reflect good public policy, meet the needs of Rochester and Mayo Clinic, and are made a condition of the loan.

"Until Rochester is adequately protected, we will adamantly oppose the loan," added Gade. "If the railroad is looking for the taxpayers to fund its expansion, it should be bending over backwards to ensure those very same taxpayers are adequately protected from disaster and are fully informed about its financing plan and ownership."

The coalition also presented Peters with a new report analyzing DM&E's safety performance on new tracks. The report contradicts the railroad's contention that new tracks will result in a safer railroad.

The key findings of the report, based on an analysis of Federal Railroad Administration (FRA) records, include:

Derailment numbers on new and improved track

* 2004: 3 out of 37 (8 percent)

* 2005: 12 of 28 (42 percent)

* 2006: 8 of 17 (six month) (47 percent)

DM&E's worst accident in its history took place on new tracks in 2004 when 14 rail cars derailed in Balaton, Minn., spilling 60,000 gallons of flammable fuel and forcing the evacuation of local residents. DM&E had just replaced the tracks using an earlier $233 million federal loan.

Minnesota Gov. Tim Pawlenty, Sen. Norm Coleman (R-MN) and Congressman- elect Tim Walz (D-MN) also attended the meeting. Coleman recently announced, "If there isn't a plan, then I'll do everything in my prerogatives as senator to stop this project, either through the appropriation process or the legislation process." Walz was a vocal critic of the DM&E loan during his campaign and lists protecting Rochester and Mayo Clinic among his top priorities in Congress.

Background

The Dakota, Minnesota and Eastern Railroad (DM&E) is seeking the largest federal loan to a private company in American history -- a $2.3 billion subsidy from U.S. taxpayers to finance a major rail expansion project through the Midwest. The loan far exceeds the famous Chrysler bailout, which was debated vigorously in the halls of Congress and by the American people. The proposed $2.3 billion taxpayer loan to DM&E has not been subject to a single minute of debate in Congress, and the public has been barred from examining details of the loan application and the company's finances.

According to the New York Times ("Lobbyist Turns Senator But Twists Same Arms," Feb. 28, 2006), DM&E's loan was made possible in 2005 when Sen. John Thune, a former DM&E lobbyist, championed legislation to increase the Federal Railroad Administration's loan program from $3.5 billion to $35 billion and modified the loan criteria to benefit his former employer.

A recent poll, conducted by KRC Research, showed that a majority of registered voters in Minnesota's First Congressional District and more than two-thirds of Rochester residents oppose the DM&E's request for the $2.3 billion federal loan. The same poll conducted statewide in South Dakota found a plurality of residents also opposes the railroad's loan request.

The Rochester Coalition represents the city of Rochester, Minn., Olmsted County, the Rochester Area Chamber of Commerce and Mayo Clinic. The coalition opposes DM&E's $2.3 billion federal loan and the railroad's efforts to expand its rail line through Rochester. DM&E, which according to government statistics has the worst safety record in its class, currently operates three to four slow-moving trains carrying mostly grain products each day through Rochester. The federal loan would enable DM&E to haul as many as 34 mile-long trains each day through the heart of Rochester at high speed, carrying coal and unspecified amounts of hazardous materials a few hundred yards from Mayo Clinic, Rochester Methodist Hospital, several nursing homes and other health- care facilities. The project threatens Mayo Clinic patients, many of whom are critically ill and unable to evacuate in the event of a DM&E derailment involving hazardous materials.