A federal panel is reviewing the credit worthiness of the Dakota, Minnesota and Eastern Railroad as it seeks a $2.3 billion taxpayer-funded loan and may make a preliminary ruling in as little as week, according to Congressman Tim Walz of Mankato.

The U.S. Department of Transportation’s Credit Council could deal a blow to the loan application’s prospects if it comes to a negative finding on the DM&E’s financial strength or places extremely stringent conditions on the loan. The loan is believed to be crucial to the Sioux Falls-based railroad’s plan to extend its line into the coal fields of Wyoming and run up to 34 mile-long coal trains through Mankato each day on their way to eastern and Midwestern markets.

“The whole thing could be moot if they’re deemed unworthy,” Walz said of the Credit Council’s ruling.

The council is made up of several administrators from the transportation department, including Under Secretary Jeffrey Shane. Sen. Norm Coleman said he will be meeting with Shane today as part of continuing negotiations aimed at addressing concerns in Minnesota about the DM&E project.

“I’m still working with the department,” Coleman said in a conference call with reporters Thursday. “Let’s see what they have.”

Coleman wouldn’t go into any detail about what’s being discussed, but his primary concern and the primary concern of other Minnesota lawmakers has been the DM&E project’s impact on Rochester and the Mayo Clinic.

“These negotiations have been confidential,” Coleman said.

Coleman and Walz also met this week in Coleman’s office.

“DM&E was at the center of our conversation,” Coleman said.

The DOT’s Credit Council is expected to meet again in a week and could make a determination then, according to Meredith Salsbery, communications director for Walz. The council’s ruling could range from simply recommending the loan be granted, recommending that it be rejected or recommending the loan with conditions.

The loan application, if it doesn’t suffer an outright rejection by the Credit Council, would then go to the Office of Management and Budget which would set the terms of any loan. After that, the head of the Federal Railroad Administration — a division of the Department of Transportation — would need to sign off on the loan. Finally, Transportation Secretary Mary Peters would review it.

Officially, members of Congress aren’t entitled to direct input on the review of loan applications to the Federal Railroad Administration. That doesn’t mean that Walz, Coleman and Sen. Amy Klobuchar aren’t trying to influence the conditions and terms placed on the loan at any step of the approval process.

“Sen. Coleman and Rep. Walz and I are continuing to work to make sure these trains don’t go through the heart of Rochester,” Klobuchar said this week.

The loan request is controversial not only because of opposition in Rochester, Mankato and some other places along the 900-mile route but also because it would constitute the largest federal loan to a private business in American history. In addition, the loan was made possible when South Dakota Sen. John Thune, a former DM&E lobbyist, quietly added a little-noticed provision to a federal transportation bill making the loan possible.

But Walz said the issue is now receiving much closer examination in Washington, D.C. The DOT has asked the DM&E to get a credit rating by Standard and Poors, and DOT officials have sought the opinion of a private financial analyst.