Yesterday, the Track the Truth website posted new material about the ongoing struggle between the Rochester Coalition and the DM & E's attempt to secure a $2.3 billion FRA loan to expand and upgrade its track:
The Rochester Coalition today released a report it filed with the Federal Railroad Administration (FRA) on Friday detailing the coalition's numerous attempts to discuss mitigation with the Dakota, Minnesota and Eastern Railroad (DM&E). The report contradicts DM&E's claims that Rochester has refused to discuss mitigation and calls into question whether the railroad's misrepresentations violate federal standards for receiving government loans.
DM&E has requested a $2.3 billion taxpayer-financed loan to expand and upgrade its railroad in order to haul coal from Wyoming's Powder River Basin (PRB) to distribution points in the Upper Midwest and East. The project could result in 34 or more mile-long trains passing through Rochester every day, carrying coal and hazardous materials just a few hundred feet from Mayo Clinic at speeds up to 50 miles per hour.
The report provides the FRA with additional evidence supporting an Aug. 25 Rochester Coalition filing that argued, "DM&E has consistently failed to meet the standard for honesty, integrity, and candor required for public officials to rely on its representations, and, therefore, has failed on a key qualification to receive an RRIF loan, and has failed to provide adequate assurance that the taxpayers' massive investment is protected and the loan will be repaid."
"To the best of our knowledge, DM&E has provided no information to challenge the factual basis of our conclusion," said Stephen Ryan, Manatt, Phelps & Phillips LLP and legal counsel for the Rochester Coalition. "To the contrary, the DM&E continues to make completely false statements in an attempt to secure the largest loan to a private company in U.S. history."
The filing focuses on the latest example of the DM&E's misrepresentation, a statement Kevin Schieffer, president and CEO of DM&E, submitted to the FRA Sept. 22, 2006: "… One of the ironies to Rochester's opposition is that it will be the least impacted city on our entire route in terms of traffic, and can be most easily mitigated if Rochester was willing to discuss mitigation. To date they have refused." (Schieffer letter at 6, emphasis in the original).
The coalition leaders wrote that, "While Mr. Schieffer has previously made such untrue statements to the public, this is the clearest action on his part of making a knowingly false statement on this issue as part of the loan application process."
The coalition's submission provides detailed reviews of the six meetings between the coalition and Schieffer where mitigation was discussed, the exchange of letters concerning the substance of mitigation options being discussed, and the public statements Schieffer made concerning the negotiations, including the formal offer where Schieffer "rejected mitigation measures to address one of Rochester's and Mayo's primary concerns — a 'catastrophic hazardous materials spill.'" [there's more]
Meanwhile, DM & E president Kevin Schieffer visited New Ulm yesterday, dropping by the office of the New Ulm Journal before an appearance at the local Turner Hall, where the Farmers Co-op of Hanska was holding its annual meeting.
Schieffer repeated his claims to the newspaper:
Schieffer said the railroad has agreements with 55 of 56 cities on the rail line and that Rochester leaders have refused to have public dialogue about project mitigation issues.
Funny thing about that "55 of 56 cities" claim: on November 7, voters in Brookings, South Dakota, rejected the agreement their local government had signed with Schieffer. The South Falls Argus Leader reported on November 9:
Brookings voters rejected a community partnership agreement with the Dakota, Minnesota & Eastern Railroad on Tuesday, making it and Rochester, Minn., the only two cities on the line without a deal.
The agreement failed 56 percent to 44 percent.
But beyond cementing a good-faith relationship between the company and the city, such an agreement isn't necessary for the project to move ahead, officials said.The rejected agreement will have little effect on the railroad's $6 billion expansion project, said Kevin Schieffer, chief executive officer of DM&E.
"We're not going to try to seek another agreement," Schieffer said. "We are open to discussions if Brookings wants them, but we're not going to try to chase anything down. Our position doesn't change because of this vote. We are going to develop this project responsibly no matter what."In March, the Brookings City Council voted 6-1 to approve the arrangement. Opponents then gathered enough signatures to refer the issue to a public vote. The agreement included stipulations that DM&E would improve warning devices at several intersections, upgrade fencing and have a whistle-free quite zone. It also changed the funding structure so that DM&E would pay 10 percent while the rest would be paid through federal loans.
Schieffer said the vote Tuesday doesn't change what they consider a good working relationship with community leaders.
Opponents of the agreement intend to continue working with the city council and congressional delegation to negotiate a better plan with the DM&E, said Bob Burns, an opponent and professor at South Dakota State University. If no agreement can be made, Burns said the DM&E must still follow regulations stipulated by the Surface Transportation Board.
Interesting. It looks as if Schieffer likes to use the agreements for public relations purporses, but when local people reject them, he'll claim he doesn't need them--though still using the pre-referendum numbers of agreements two weeks later in New Ulm.
Schieffer finesses the notion of negotiation as well in the New Ulm Journal article:
“I’ve got a lot of respect for the Mayo Clinic, but they won’t discuss the issue with us. If they have a case, they should debate it with us. They’ve delayed us for eight years,” said Schieffer, a former attorney himself.
The Rochester Coalition this week, however, sent a letter to Federal Railroad Administration Administrator Joseph H. Boardman, accusing Schieffer of lying when he said the Rochester coalition has refused to discuss mitigation. It says that after an April 13 meeting this year, Schieffer and coalition leaders traded mitigation proposals. When he stated on Sept. 22 that Rochester refused to discuss mitigation, he was being dishonest. The coalition says it is the latest dishonesty in DM&E’s project proposal.
Schieffer, on Tuesday, said “Rochester’s idea of mitigation is to run the traffic somewhere else. They are not interested in any other ideas. To me, that’s not discussion.”
Meanwhile, back in Rochester, the Post Bulletin reported a few more developments in the saga of DM & E. Over the weekend, it reported that a railroad industry newsletter published an article noting that the Union Pacific would have first rights to purchase the DM & E if it went up for sale.
Yesterday, it reported on a dust-up over the original story:
The top official at the Dakota, Minnesota & Eastern Railroad says he did not — and would not — confirm a Washington, D.C., newsletter’s report regarding a sale agreement between his company and the Union Pacific Railroad, as reported in the Post-Bulletin on Saturday.
Union Pacific, meanwhile, did confirm the existence of the agreement, which gives UP right of “first refusal” to purchase DM&E, should DM&E ever be put up for sale.
Both railroads’ spokesmen responded to the Post-Bulletin’s request for information after the newspaper’s Weekend publication deadline on Friday.
The Post-Bulletin story summarized a report from the current edition of “Association Highlights,” a newsletter of the Association of Transportation Law Professionals.
In that issue, newsletter editor Frank Wilner reported on the “secret” agreement between the two railroads, dating back more than a decade.
Wilner, who met DM&E President and CEO Kevin Schieffer at a Thursday meeting of the Western Coal Transportation League, said he received confirmation of the report’s accuracy from Schieffer.
However, Schieffer said he did not speak to Wilner on the matter. In an e-mail responding to questions on Monday morning, Wilner said he took as confirmation a comment Schieffer made to an audience at the Transportation League meeting.
Schieffer’s comment, Wilner said, “was along the lines that if he sold DM&E to Union Pacific, he would be banished to some island.”
The Post-Bulletin tried independently to verify Wilner’s newsletter report with calls to Schieffer and his office on Thursday and Friday, but those calls were not returned in time to be reflected in the story published in the Weekend edition.
In an e-mail dated Sunday, Schieffer said, “We do not engage in public discussions about commercial contracts, and we certainly would not for those that contain standard commercial confidentiality provisions.”
“I was asked about his (Wilner’s) article later in the meeting, and said we could not confirm and would not discuss (it),” Schieffer wrote.
Rather, he wrote, he “explained that Mr. Wilner’s scenario of the loan being handed off to UP was impractical because in the first instance I didn’t think it could get regulatory approval and second because even if somehow it magically could, the FRA (Federal Railroad Administration) has the ability to recall any loan on a change of control if it feels it would be bad policy.”
Schieffer’s last statement refers to a $2.3 billion federal loan DM&E is seeking to help finance an estimated $6 billion upgrade and expansion plan the railroad first proposed in 1998.
The plan calls for DM&E to extend its line into Wyoming coal country while upgrading the rest of the mainline as a matter of general maintenance and to prepare it for handling increased and heavier coal-train traffic.
DM&E was formed in 1986 from the former Chicago & North Western. Wilner’s report was that DM&E and Union Pacific entered into their agreement as a condition of UP selling its ownership share in the C&NW around the time DM&E was formed.
UP spokesman James Barnes, in an e-mail, said the agreement dates to 1993 and “assured C&NW would have an avenue to collect the significant financial concessions given to the DM&E and that the owners could not sell the company and not reimburse the C&NW.
“Provisions like these are common in railroad sale agreements,” Barnes wrote. “This could not be exercised without Surface Transportation Board authorization.”
Okay then, Kevin.
On his Government Center blog, reporter Jeff Pieters recaps elements of the story:
After hearing from all the sides, here's my best effort to sort truth from fiction.
- TRUE: DM&E and Union Pacific have a "first refusal" sale agreement.
- FALSE, BUT DISPUTED: DM&E President and CEO Kevin Schieffer (or "Chief Schieff") confirmed the existence of the agreement at Thursday's meeting of the Western Coal Transportation League.
- SPECULATIVE, BUT PROBABLY TRUE: Schieffer would never speak to any outside individual or group concerning specifics of a confidential commercial agreement.
- QUESTIONABLY RELEVANT, BUT INTERESTING: If Schieffer were to oversee a sale of DM&E to Union Pacific, he would "be banished to some island."
Confused?. . .
Pieters has published both articles at GC, along with pdfs of the email exchanges.
Meanwhile, former DM & E lobbyist and current U.S. Senator John Thune was awarded the "Porker of the Month" award from Citizens Against Government Waste.
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