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DM&E builds railroad empire while it awaits court approval
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Kevin Schieffer is building one of the largest railroad expansion projects since the Civil War. (Cara Hetland)
The future of the largest railroad expansion plan since the Civil War goes before a Federal Appeals court. The Dakota, Minnesota and Eastern Railroad's $2 billion project includes hundreds of miles of new and rehabilitated track. It's all part of a plan to haul coal from Wyoming's Powder River Basin through South Dakota and Minnesota. The federal government has endorsed the expansion. But that approval faces a challenge from a handful of communities and environmental groups. They argue the project should not proceed in its current form. While the company waits for the courts to settle the future of the plan, the company is moving forward building an empire of its own.

Sioux Falls, S.D. — Right now, Kevin Schieffer can't spend a penny improving any of the Dakota Minnesota and Eastern rail lines. The court challenge prevents that. So, the $2 billion expansion project is on hold. Instead the President and CEO of the midwest's newest railroad company concentrates on creating a new corporate empire.

Cedar American Rail Holdings is the parent company of the DM&E and Iowa, Chicago and Eastern railroads. The two merged a year and a half ago. Now, there's a new corporate headquarters in Sioux Falls. Ladders and drop clothes still line the hallways because artists have just painted ceiling murals. The artwork traces the train route from Wyoming through the Black Hills across the prairies to Chicago and the Twin Cities. Schieffer says the company has tripled in size.

"We are now as a combined system the 8th largest railroad in the country," says Schieffer.

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Image Ceiling murals show the DM&E train route from Wyoming to Chicago.

Schieffer's staff went from 300 to more than a thousand. And he's working to 'meet' all of those employees. His computer screen-saver runs a looped program that flashes the names and faces of all the company's workers. It's projected on a television-like screen in front of his desk. No matter which way he turns he sees people's faces.

"Employees are the heart and soul of this company," says Schieffer. "I spend a lot of time on people issues. They will make or break a company especially a railroad so yes, I keep their pictures flashing at me prominently. It motivates me."

Schieffer is already busy with the day to day operations of running a railroad but he's confident the expansion will go through. The project calls for 250 miles of new rail and upgrades through South Dakota and Minnesota. Many speculate the expansion is a make or break component to the existance of DM&E. Not so, says Hal Miller, managing editor of "Trains" magazine. Miller says DM&E is a strong regional railroad with great customer service and a good reputation for doing what it does best.

"Hauling a lot of grain and general merchandise. They seem to be in it for the long haul," says Miller. "Not a company that is going to make a few years of profit and get out of the business. They reinvest money in their infrastructure the rolling stock. They seem to want to be there for a long time," he says.

Miller says DM&E is using the legal delays to its benefit. The merger with the IC&E railroad, once based in Iowa, builds a stronger company and gives them direct access to markets in Chicago and Kansas City. CEO Kevin Schieffer is also using the time to raise money. He'll need $2 billion dollars for the project. Schieffer says more importantly he needs political clout.

"You need a strong political champion at the end of the day on some of these projects of this magnitude. This legal challenge isn't the only thing out there," says Schieffer. "There are other challenges before us. I feel good about them. But we need political support. We need someone who feels comfortable enough with the project to make it their own."

Political support for or against the project is vital at this point. DM&E just announced former South Dakota Congressman John Thune will lobby for the railroad in Washington. The Republican representative served six years in Congress before losing a bid last year for a U.S. Senate seat. Thune is said to have valuable connections with the Bush administration.

"Trains" magazine managing editor Hal Miller, says DM&E has moved to a new level. It will soon compete with larger railroads that already have significant political clout. Permitting and other regulatory issues could make or break the project. That battle won't be in the courts, but rather behind closed doors.

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