The federal government killed a $2.3 billion railway loan after opponents attacked Sen. John Thune (R-S.D.), because he was the railway's lobbyist before winning election and backing legislation favoring the loan to his former client.

The privately held Dakota, Minnesota & Eastern Railroad wanted the money for an 860-mile Midwestern rail-line renovation and expansion project. The Federal Railroad Administration said its denial was based on financial factors. But project backers and detractors said the loan sank after opponents, led by the Mayo Clinic, based in Rochester, Minn., ginned up congressional heat on the agency. The key to that was Thune's role: The Republican did nothing illegal, but his seamless transition from the railway's lobbyist to its Senate champion handed ammunition to opponents and their own lobbyists.

"The legislation that I introduced . . . had been introduced in three previous congresses," Thune said yesterday. Mayo, he said, "had their lobbyists come in and tell me to my face that they were going to go after me."

His previous work for DM&E, as the company is known, "gave them something to attack."

Mayo Clinic chief executive Glenn Forbes disputes that. "Our real interest is in serving patients," he said. "This project put us definitely in a corner with no interest on anybody else's side to understand our concerns. So yes, we certainly confronted the issue."

The local battle over the rail line has raged for nearly a decade. A Mayo-led coalition of opponents says the project would bring increased rail traffic, which could endanger the safety of clinic patients, staff and the Rochester community.

DM&E chief executive Kevin Schieffer and project backers say the line is vital for the region's corn and coal industries. The track running through Rochester was there before Mayo was, Schieffer said, and renovating it would enhance its safety. Schieffer vows to pursue the project, which has surmounted several court and regulatory challenges over the years.

Chris Gade, spokesman for both Mayo and the opponent group known as the Rochester Coalition, said that before the rail-line project gained traction, Mayo had never hired Washington-based lobbyists.

Thune's role in the railroad project was a topic during November elections, and after Democrats won a majority, opposition gathered steam on the Hill.

Thune worked as a DM&E lobbyist for two years, earning more than $200,000 from the company, before winning his Senate seat in 2004. In 2005, he helped write legislation expanding a federal railroad loan pool from $3.5 billion to $35 billion. DM&E was not mentioned in the legislation, but the expanded funding enabled it to apply for $2.3 billion, about one-third of the project's $6 billion price tag.

While DM&E applied for the loan about one year ago, last month the process entered a 90-day period during which the railroads agency must approve or reject it. Opponents and their lobbyists went into high gear. The loan, one PR firm's e-mail read, "is a deal being done in near complete secrecy -- the loan was inserted into the Transportation Appropriations Bill by former DM&E lobbyist turned Senator John Thune, who was paid $160,000 by DM&E the year he ran for the Senate."

Opponents drummed up opposition from a bipartisan group of three dozen legislators, 18 of whom wrote Transportation Secretary Mary Peters questioning the loan. "Asking the taxpayers to fund one of the largest government-funded loans to a private business in our country's history is unjustified, particularly given the lack of transparency," the letter read.

Rep. Tim Walz (D-Minn.), whose opposition to the project helped him win his seat in November, sponsored legislation to assert congressional oversight of the loan. "It's just appalling to me how it was done," he said. "I want to see rail expanded, too, but I want it done correctly. It's about the system and the transparency of government."

On Monday, the railroads administration sent a letter to Schieffer denying the loan. "I read a lot of things for the first time in the official denial letter," he said. "The list is long and deep with supporters, and we are committed to doing everything we can to see it through."

Mayo's Forbes vowed further challenges: "Our commitment would be unwavering," he said.

Looking back, Thune has no regrets, except: "The railroad probably could have done a lot better job on the PR front."