The City Council initially reached a tentative agreement with the DM&E whereby the railroad would make as much as $25 million in improvements to the corridor to improve traffic safety and reduce noise impacts. The council later rescinded the agreement, hoping its opposition to the project would undermine the railroad’s chances of gaining federal approval.
The railroad was also exploring a southern bypass around Mankato that would have the coal trains running adjacent to Skyline, Mount Kato and subdivisions near County Road 90 — going so far as obtaining soil borings along the bypass route in 2006.
The prospects of the project moving to the construction phase appeared almost inevitable by 2006 when it passed federal environmental reviews, leaving only financing as a remaining obstacle for the $2.5 billion expansion.
DM&E appeared to solve that final challenge when Sen. John Thune, R-S.D., who had been paid $220,000 as a DM&E lobbyist just before his election to the Senate, quietly slipped through Congress a piece of legislation that could provide the railroad with the entire $2.5 billion through a low-interest federal loan.
Gov. Mark Dayton, then a U.S. Senator, called the loan provision “outrageous” when it was first reported weeks after its passage as a small add-on to a thick transportation bill. Dayton also called the DM&E a “fly-by-night operation with good political connections.”
Opposition to the DM&E loan, which at the time would have been the largest loan to a private company in the nation’s history, grew to include both environmental and taxpayer-watchdog groups. In 2007, the Department of Transportation’s Credit Council rejected the loan, saying essentially that it wasn’t confident the DM&E could pay back American taxpayers if it fell short of its coal-hauling goals.