If approval is obtained for the three-year project, claimed to be biggest US railroad project in a century, the DM&E could begin laying rail by as early as May.
The Federal Railroad Administration has 90 days to decide whether to approve the loan once the application is filed. The agency’s loan rules were amended this year as part of a new $US286 billion transportation Bill.
"It is not something that costs the Federal Government money and it's not something that puts the Federal Government at risk,” DM&E chief executive Kevin Schieffer said.
“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."
Plans include rebuilding DM&E's 970 kilometres of track through South Dakota and Minnesota, upgrading about 320km on sister line the Iowa Chicago & Eastern Railroad, and building 450km of new line into the Powder River Basin coal fields.
The expansion would allow the line to haul 100 million tons of coal a year from Wyoming to eastern power plants.
Rail companies servicing Powder River Basin coal producers – Union Pacific Corp. and Burlington Northern Santa Fe – have struggled to provide enough capacity to meet growing demand and are still recovering from two major derailments this year.
The project faces some opposition from landowners, environmental groups and towns that don’t want to see rail lines go through. But according to Schieffer, if the loan is approved the project would help rail service and congestion issues across the country.
The project would proceed in several stages, including the $US1.4 billion reconstruction of the existing line and the $US1.1 billion building of new rail.