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New Railroad May Cross Midwest
Executive Thinks He Can Build the Line, Despite Opposition

By Rob Hotakainen
Minneapolis Star Tribune
Sunday, July 30, 2006; A14

DUBUQUE, Iowa -- On a hot June morning, Kevin Schieffer issued a warning as a pack of big birds flew in to perch on a newly rebuilt stretch of railroad next to the Mississippi River.

"Better be careful, guys," said the railroad executive, surveying the new tracks in his company's high-rail pickup. "We don't slow down too much for buzzards."

The vehicle braked slightly, and the birds flew away.

Bigger obstacles aren't moving quite as easily for Schieffer, who's trying over the objections of the Mayo Clinic, Sen. Mark Dayton (D-Minn.) and others to close the deal on a years-long quest to build a 1,000-mile Midwestern railroad line. To pull it off, Schieffer is trying to persuade the Federal Railroad Administration to give him a $2.5 billion loan for the project, among the largest in history.

If it succeeds, it could be a boon to farmers -- and Schieffer.

The project would cut transportation costs for coal, corn and ethanol, and would make Schieffer what Fortune magazine calls "America's first self-made railroad baron since the days of Teddy Roosevelt."

It also would prevail over the protests of people who consider Schieffer a master manipulator of political connections and someone whose dealing can't be trusted.

Schieffer, 48, has been patient. He is now president and chief executive of the Dakota, Minnesota and Eastern (DM&E) Railroad, based in Sioux Falls, S.D., but the rail line has been on his mind since he was a 25-year-old junior staff member on Capitol Hill.

He has attended at least a thousand public meetings and conferred with hundreds of landowners and city officials.

On this day, Schieffer is pitching once again, boarding his chartered plane in Sioux Falls well before sunrise. He met with employees and inspected new track at a quick stop in Dubuque and then flew to La Crosse, Wis., for a speech.

"There hasn't been a railroad built in this country in over a hundred years," he told an audience at the annual meeting of the Dairyland Power Cooperative.

Schieffer's biggest roadblock may be the Mayo, which with the help of Dayton and some famous South Dakotans, is trying to block the plan to run coal trains through Rochester, Minn. But Schieffer said he won't bow to Mayo's pressure.

"It's all about political swag. . . . If I start bending to that, this whole thing is going to unravel up and down the line," he said.

Schieffer, a former U.S. attorney from South Dakota and chief of staff to former senator Larry Pressler (R), recalled receiving the call in 1983, when an executive from the Chicago North Western railroad phoned Pressler's office with news that the company planned to go to the Interstate Commerce Commission to request an abandonment.

"I didn't know too much about anything. I had about 5,000 questions."

After doing some research, Schieffer persuaded his boss to oppose the plan to abandon the line, and the ICC agreed. It was the beginning of DM&E, created in 1986 to serve shippers in southern Minnesota and South Dakota. In 2002, DM&E was joined by the Iowa, Chicago & Eastern, and the combined railroads have more than 2,500 miles of track and about 1,000 employees.

Schieffer, a divorced father of a 16-year-old daughter, was the ninth in a family of 12 children, born in a Nebraska farmhouse without plumbing. He grew up milking cows and got to know South Dakota well because his family's farm was on the Nebraska-South Dakota border. "If we went to the big city, it was Yankton."

In 1991, at Pressler's urging, President George H.W. Bush appointed Schieffer U.S. attorney. In 1993, President Bill Clinton named a successor, and Schieffer went to work in private practice and eventually began representing DM&E, which led to his current job.

Schieffer said his new railroad line would allow the Midwest to tap "the holy grail of the energy world," tons of coal buried in Wyoming's Powder River Basin. Schieffer thinks he could haul the coal all the way to the Mississippi River -- if he first can get the money to build 260 miles of track in South Dakota and Wyoming and then patch up a few hundred miles of track that extend east through South Dakota and Minnesota.

The Federal Railroad Administration is expected to make a decision soon. Schieffer hopes to begin construction next year and have the new line up and running in 2009.

Schieffer called his project the perfect hat trick: hauling corn to the ethanol plants, bringing in the coal to fire them, leaving with the ethanol.

Over the years, he has created his share of enemies, but even some of his most severe critics say his smarts, political connections and dogged persistence have put him in a position to hold sway.

Dayton, one of Schieffer's biggest critics, said Schieffer is out to "ram it right down" the throats of opponents in Rochester.

"It's just incredible arrogance," Dayton said.

Schieffer said he has negotiated agreements with 70 of the 110 landowners on the rail line. Paul Jensen, a rancher in Wasta, S.D., called him "a spinmaster" and said that nearly 90 percent of landowners oppose the project.

"He's talking about using eminent domain out here and just wiping out 110 or 120 farms and ranches out here," Jensen said.

Schieffer received help from an old friend, someone he admired as a South Dakota basketball legend years ago: Sen. John Thune (R), who defeated Senate Majority Leader Thomas A. Daschle (D) in 2004.

Despite opposition from the White House, Thune helped persuade Congress last year to increase the amount of the program from $3.5 billion to $35 billion. Thune, who received campaign contributions from Schieffer and who earned $220,000 as DM&E's chief lobbyist in the 18 months before joining the Senate, is promoting the project to lure jobs. The law would allow Schieffer to put down no collateral and to make no payments for up to six years. Dayton and other critics fear that taxpayers would be on the hook if the project were to fail.

Schieffer said he has more supporters than opponents. He was warmly welcomed by the Dairyland audience in La Crosse. William Berg, the head of Dairyland, told the crowd that the DM&E project would open up competition "and help drive a stake into the heart of the current abusive pricing tactics" in the railroad industry.

Schieffer told the co-op members that big projects are always controversial and that his is no exception, but he said there's a children's book that he relates to a lot.

It's called "The Little Engine That Could."

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