It is this demand for coal throughout the industrial Midwest that prompted the Dakota, Minnesota & Eastern Railroad to propose a $1.4 billion expansion project to haul low-sulfur coal from the Powder River Basin.

Most of the coal mined in the basin is hauled by the

Machines called drag lines, such as this one at Black Thunder Mine, can claw away hundreds of tons of dirt in one scoop to expose coal veins that are up to 70 feet thick. Once the viens are exposed, explosives are used to blast it from the earth. Black Thunder is the largest of more than a dozen mines in Wyoming's Powder River Basin.

nation's two largest transcontinental railroads, the Burlington Northern Santa Fe and the Union Pacific. But the DM&E believes it will attract Midwestern power customers, who now get much of their fuel from eastern mines, by bringing them cheaper Powder River coal.

Former U.S. Sen. Larry Pressler of South Dakota, who was instrumental in keeping what is now the DM&E line from being abandoned in the mid-1980s, says the line is needed to bring down transportation costs, not only for coal but for other products, through increased competition.

"Even 35 percent of what you pay for toothpaste is transportation cost," Pressler said. "We need heavy rail in the Upper Midwest." Coal right now is running about $22 a ton, he said, and $18 of that is for transportation.

The DM&E projects it would bring 40 million tons of coal to power plants in the nation's midsection in the first year, and 100 million tons annually after that.

DM&E President Kevin Schieffer won't reveal who the railroad's customers or investors might be, saying he doesn't want to tip his hand to competitors. But he says owners of the 14-year-old railroad wouldn't have proposed the project if they hadn't been certain it was going to pay them dividends.

"We are fortunate that this project was really launched by our future customers, who said, 'Build it and we will come', " Schieffer said.

Still, the railroad's chief executive seemed to demonstrate some anxiety about financing in a letter he sent in December to South Dakota Gov. Bill Janklow, who has questioned and criticized various actions by Schieffer and the railroad during the past year. Janklow also spearheaded legislation last spring that requires the railroad to get state approval before using eminent domain procedures to take over privately owned land for the railroad.

"It is not a personal issue," Schieffer wrote in response to an earlier letter from Janklow. "It is not a political issue. It is very simply that no one is going to invest $1 billion-plus in a project in an uncertain and unstable business environment. The financial community needs certainty and stability. We must give it to them, or we will not have a project."

Meanwhile, L.B. Foster Co., a publicly held, Pittsburgh-based company that controls 16 percent of the common stock in DM&E, so far has shown no indications that it is worried about its investment.

"Although the market value of the DM&E is not readily determinable," Foster said in its 1998 annual report, "management believes that this investment, regardless of DM&E's Powder River Basin project, is worth significantly more than its historical cost. If the project proves to be viable, management believes that the value of the company's investment in the DM&E could increase financially."

For their part, the companies that supply coal from the Powder River Basin have been mostly neutral on the DM&E proposal.

"It really wouldn't open up that much of a market base for us," said Paul Lange, general manager of the Black Thunder mine, owned by the St. Louis-based Arch Coal Co. "But what it could do is make the coal in the basin more competitive."