Sen. Thune Earmark and DM&E Rail Loan - Rejected

Today, the Federal Railroad Administration rejected the Dakota, Mining & Eastern (DM&E) loan application.

Why does TCS care? For two main reasons. One, it was a loan for $2.3 billion which far outstripped the largest loan the rail improvement loan program had ever given before (which coincidentally was $233M to DM&E back in 2003) and was as the FRA put it - an unacceptable risk to taxpayers.

The second is that this project was the direct result of an earmark that Sen. Thune (R-SD) inserted into the 2005 transportation bill. If you recall, that was the same bill that spawned the Bridge to Nowhere - strike two (actually strike three if you count the other bridge to nowhere, the Knik Arm bridge in Alaska). Sen. Thune's earmark expanded the loan program's total loan portfolio cap by a factor of 10 - from $3.5B to $35B. In between Congressional jobs Sen. Thune was a lobbyist working for DM&E.  Remember, Rep. Thune lost to Sen. Tim Johnson in 2002, then became Lobbyist Thune, before becoming Sen. Thune in 2004 after beating Sen. Daschle.

This is a double win. Taxpayers are not being forced to underwrite a risky $2.3B loan and this decision proves that earmarking doesn't always pay. Now we need to reduce that cap before more loan applications come in.

An interesting factoid: the program was created in TEA-21 (the 1998 transportation bill) and in the history of the loan program 15 loans have been executed for a total of $557M. In fact if you leave out the 2003 DM&E loan ($233M) and a 2002 Amtrak loan ($100M) the program has loaned a total of $224M and the average loan was only $17.1M. This DM&E loan request was out of this universe.

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