South Dakota might sell more of its state-owned rail lines

Capitol News Bureau
KELO Train Railway

PIERRE, S.D. (KELO) — The South Dakota Railroad Board decided Wednesday to move forward with possibly selling various state-owned lines.

State government originally purchased hundreds of miles of tracks nearly four decades ago, in an attempt to preserve some service in South Dakota after the Milwaukee Road bankruptcy.

Several board members wondered Wednesday, because of the wet spring that has temporarily shut down several lines, whether this year is the best time to put the tracks out for bids.

“I don’t believe at this stage of the game we’re going to get the best bang for the taxpayers,” Greg Carmon, a board member from Brandon, said.

Steve Scharnweber, a board member from Pierre, agreed. “It is a buyer’s market now, not a seller’s,” Scharnweber said. 

Gary Doering, a board member from Cavour, also sounded less than enthusiastic.

“But I guess we owe it to the taxpayers to do it,” Doering said. 

State Transportation Secretary Darin Bergquist and Deputy Secretary Joel Jundt presented the plan.

Bergquist said the Mitchell-Rapid City line likely would draw the most interest. The Dakota Southern railroad currently operates on it as far west as Presho.

The Sioux Valley line, on which the Dakota and Iowa railroad runs, also could be attractive, as could the eastern end of the Napa-Platte line.

Bergquist gave several reasons for considering potential sales. He said the government shouldn’t be operating businesses that are better run by private interests, state ownership is “squashing” further development in some instances, and state government doesn’t see taxpayer funds remaining sufficient to maintain the tracks at current levels.

Jundt said Bill Janklow, who was serving his first term as governor when state government did the Milwaukee Road deal, had planned to turn the lines back to the private side.

This wouldn’t be the first time that a state-owned line was sold.

The company that now is Burlington Northern Santa Fe agreed in 1982 to purchase the former Milwaukee Road east-west line that carries coal to the Big Stone power plant in Grant County. Ownership transferred in August 1991.

BNSF also owns other pieces of former Milwaukee Road line that were part of the state-owned core system. In November 2005, state government sold to BNSF the lines between Aberdeen and Mitchell, Mitchell and Canton, Canton and Sioux Falls, and Mitchell to Sioux City.

State board chairman Jerry Cope of Rapid City asked Wednesday that the South Dakota Department of Transportation officially notify the regional railroad authorities that lease the state-owned lines and the railroads that run on those tracks.

The potential sales have support from Governor Kristi Noem, according to Bergquist.

State officials said they will try to have packages put together for the state board’s review at the July 17 meeting.

Once board members decide the packages are acceptable to be presented as offers, proposals will be sought.

If the board decides to consider a specific proposal, the potential buyer would be asked to answer questions from board members. If a potential buyer passes that test, private negotiations would be next, officials said.

No sale is required, according to Bergquist. “We have no pre-conceived ideas of how that may come out,” he told the board.

Bergquist said a line would be sold to the most-qualified bidder, rather than automatically to the highest bidder. The deals would be structured so state government has the first opportunity to get the line back.

“There are a lot of moving pieces,” Bergquist said.

An outside law firm, Slover and Loftus, based in Washington, D.C., will help assemble each package. John LeSeur will oversee that work.

Several business interests have publicly inquired recently about availability of several lines. Agreements vary among current operators.

Negotiations, if any, could take months beyond the fall date that proposals would be due. Those talks will be held behind closed doors in executive sessions, according to Karla Engle, a lawyer for the state department.

“So that’s what I’m envisioning would be happening,” she said.

For a historical perspective on how and why the Milwaukee Road and other railroads struggled in the 1970s:

For a map showing the state-owned and privately owned lines in South Dakota:

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