The Dakota, Minnesota & Eastern Railroad is pursuing a federal loan to cover the cost of a $2.5 billion, 280-mile expansion that would send coal trains through Mankato.

DM&E President Kevin Schieffer and U.S. Sen. John Thune, R-S.D., were set to make an announcement today to discuss the loans. The Argus Leader of Sioux Falls reported that the money is from a program that Thune had amended to suit the railroad’s needs.

“He (Thune) knew what we were trying to do and spotted the opportunity,” DM&E president Kevin Schieffer said of Thune.

Mankato City Manager Pat Hentges said he hasn’t spoken with DM&E for two years.

But he said that while he wasn’t surprised by the announcement, he was skeptical that DM&E could levy billions of dollars from the federal government.

Hentges said the city has no formal agreement with the railroad concerning a favored path. Two such plans have been forwarded — one that would use existing Union Pacific rail lines near downtown and another that would skirt the city’s southern edge.

Blue Earth County Commissioner Katy Wortel was skeptical, too, adding that DM&E still has “a ways to go.”

Wortel, who has opposed the line extension in past years, said she was “categorically against energy derived from coal” but not against all railroads.

She added that she was not speaking for the county board.

The company aims to tap into coal in Wyoming’s Powder River Basin. A new line would ease the eastward transportation of coal.

Barring any changes in a final report, it appears as if the federal body charged with enforcing interstate rail law is satisfied with the railroad’s plan.

The Surface Transportation Board released a preliminary report in April that said no further restrictions need to be imposed on the DM&E to alleviate noise, pollution or other potential problems. That report was in response to a 2003 ruling by the 8th U.S. Circuit Court of Appeals that directed the STB to take a closer look at a few more environmental concerns.

Schieffer said that he hopes for construction of the massive project to begin next May, pending the resolution of other regulatory issues. He estimated that the entire project would take three years to complete.

The Federal Railroad Administration has 90 days to act on the loan application once it is complete.