If the Dakota, Minnesota and Eastern Railroad's application for a $2.5 billion federal loan for a three-year coal train project is approved and shareholders go along, "we could be laying track next year," Kevin Schieffer, DM&E president, said Saturday.

The Federal Railroad Administration has 90 days to decide whether to approve the loan once the application is filed.

Plans include rebuilding the DM&E's 600 miles of track through South Dakota and Minnesota; upgrading about 250 miles on its sister line, the Iowa Chicago & Eastern Railroad; upgrading 150 miles of track from Wall to Colony, Wyo.; and building 280 miles of new line into Wyoming's Powder River Basin coal fields.

The Sioux Falls-based railroad says it could haul 100 million tons of coal a year from Wyoming to eastern power plants.

The loan would come from a little-used program that Sen. John Thune, R-S.D., had amended to be tailored to the railroads' needs.

"This is a loan. It isn't a government subsidy," Schieffer told reporters.

"It is not something that costs the federal government money and it's not something that puts the federal government at risk. We have to put up collateral for it, and the collateral has to meet the loan amount. And if it doesn't meet the loan amount, then we have to come up with a credit risk premium, which is basically, you're buying insurance to make sure it's repaid."

And if the railroad's business plan doesn't look like it will work, the shareholders won't approve it, he said.

The loan would use the federal government's credit, said Schieffer. "But if you fail on that, you lose your railroad."

Thune stressed there would be no risk to taxpayers and said the coal train project will help meet an "enormous" national need for energy. The nation's energy policy mentions the Powder River Basin, saying there's a need to eliminate bottlenecks in the coal transportation system, according to Thune.

He also said the secretary of the Air Force told him the Defense Department is looking at the liquefaction of coal and the possibilities it could become a fuel for vehicles.

"There's so much promise if we can make this project become a reality," Thune said.

The direct benefit will be thousands of jobs and the investment in the economy, Thune said. But it also would ease capacity problems, fulfill a need in the national transportation system, drive down ag shipping rates and help provide low-cost energy, he said.

The project would bring several thousand construction jobs to the affected states and add about 2,000 permanent DM&E jobs, Schieffer said.

It faces opposition from environmental groups, some ranchers and American Indians in western South Dakota and several cities that would see train traffic increase.

"I don't think this changes the universe," Jim Margadant, chairman of the South Dakota chapter of the Sierra Club, told the Argus Leader. "The fact the railroad is applying for financing is not going to stop the objections people have already registered to it."

Problems can be worked out, Schieffer said. Fifty-four of the 56 communities along the main route "strongly support this project" because they know the economic development it can create, he said.

Brookings, Pierre and Rochester, Minn., all fought unsuccessfully to force the DM&E to build new bypasses around those communities rather than use the existing rail right-of-way through town.

The DM&E had gone to court over a 1999 state law restricting railroads' use of eminent domain, which is the legal process of forcing unwilling people to sell their land.

In 2002, U.S. District Judge Lawrence Piersol sided with the railroad on most of the issues. Piersol ruled that state government cannot require railroads that use eminent domain to prove they have sufficient financing to complete projects. Nor can the state make railroads provide complete building plans before even asking to use eminent domain, the judge ruled. He also tossed out a provision that allowed railroads to use eminent domain only when projects benefit South Dakota shippers.

Some technical details remain to be cleared up in that case, Schieffer said Saturday. "All the things that would have presented a serious threat to the project are resolved, and resolved quite well, meaning we won," he said.

Asked whether he thinks the DM&E would have to resort to eminent domain, Schieffer said, "I don't think so. We have a lot of landowners who are very anxious for this project.

"There are still issues out there, but there's a lot of support out there for it, too."

Thune said the DM&E has dealt with legal and regulatory issues for eight years. "They're close to reaching, I think, the end of the line where that's concerned," he said.