PIERRE, S.D. (KELO) — The South Dakota Railroad Board heard proposals Wednesday from seven companies hoping to purchase lines that state government owns.
The panel, an arm of the state Department of Transportation, plans to decide December 18 whether to negotiate with bidders, seek new offers, take routes off the market or do some combination.
“This board has substantial power to acquire and dispose of railroad lines,” DOT lawyer Karla Engle told members Wednesday.
The board also received 16 offers from non-operators. Chairman Jerry Cope of Rapid City said they’ll get limited time for presentations December 18.
The Milwaukee Road bankruptcy in 1980 led to then-Governor Bill Janklow and the Legislature purchasing hundreds of miles of rail lines that otherwise would have been abandoned.
Five lines remain state-owned and are up for sale. They are:
Two are between Canton and Elk Point, and between Beresford and Hawarden, Iowa, that Sioux Valley regional railroad authority leases. D&I Railroad operates on them.
Dakota Southern Railway operates 190 miles of what’s known as the MRC line between Mitchell and Kadoka. The 98-mile Kadoka to Rapid City segment was closed.
Dakota Southern also subleases the Napa Junction to Platte route.
Dakota, Minnesota Valley & Western operates the Britton line between Aberdeen and Geneseo Jct., North Dakota.
Governor Kristi Noem’s sign-off would be needed for any sale.
Four companies want the Napa-Platte line, a situation that state Transportation Secretary Darin Bergquist described as “ironic” because it’s the one that isn’t actively used.
Rick Webb from Watco Companies, based in Kansas, presented proposals to buy the MRC and Napa-Platte lines.
Watco offered to pay $6 million cash for MRC and $1.85 million cash for Napa-Platte. Webb said Dakota Southern would remain operator on both.
He and Mike Williams, president for Dakota Southern, described themselves as long-time family friends.
Doug Davis, representing Utah-based A&K Railroad Materials, offered by telephone to buy Napa-Platte for $216,500 for eventual salvage sales.
Chuck Jepson from Sioux Falls-based Blue Hen Holdings said his plan for Napa-Platte changed after hearing the Watco presentation. His proposal didn’t show an offer amount.
Jepson said he wants to develop five miles from the Napa area to Janousek and salvage the track west from Tyndall. He and Williams had worked together in the past too.
Also placing an offer for Napa-Platte was SDR Holding, whose president is Williams. Vice president Heath Haden proposed $1,795,000.
Williams said he was an investor in a pellet plant at Napa he said would open in 2020. Having the rail line there could help attract new development along the route, he said: “Once you own this, there’s such a greater opportunity than when you’re leasing it.”
A second company offered to buy the Mitchell-Kadoka stretch of the MRC line. Matt Walsh of Genesee & Wyoming Inc. proposed $10 million cash.
G&W already owns the Rapid City Pierre & Eastern line that runs through the state-owned Wolsey exchange site. Walsh’s offer included extending its Wolsey lease 10 years through 2036 for $250,000.
G&W’s offer included a promise to invest $7.4 million into the Mitchell line during the first year it would operate there. Dakota Southern’s sublease runs potentially through 2031.
Walsh said the $10 million would potentially be a net offer of $5.7 million if a portion was used to repay a $4.3 million loan the MRC regional railroad authority owes the state board.
The Sioux Valley lines drew one offer from their current operator. L.G. Everist Inc., owner of D&I Railroad, offered to pay $1 million up front and $8,390,298 over 10 years at two percent interest, according to the railroad’s manager, Scott Van Den Top.
The same was true for the Britton line. Jeff Wood from Dakota, Missouri Valley & Western proposed buying it for $100,000.