State-owned rail line that runs west from Mitchell will be sold to a Kansas business

Capitol News Bureau
KELO Railroad Cross

PIERRE, S.D. (KELO) — The South Dakota Railroad Board agreed Wednesday to sell the state-owned MRC line west of Mitchell for $13 million, with $5 million up front and $8 million over 5 years.

The proposal came from Watco Companies, based at Pittsburg, Kansas. The plan calls for forming a new Class III short-line, according to Watco executive chairman Rick Webb.

Mike Williams, who heads the company that owns the MRC’s current operator, Dakota Southern, would have what Webb described as a “passive minority interest” in the new short-line. Webb said Williams wouldn’t have anything to do with day to day operations or long-term strategic planning.

The $50 surcharge per car would be eliminated as part of the deal, Webb said.

“We’re extraordinarily excited about it,” he told the state board after the vote for the sale.

Outside legal counsel for the state Department of Transportation has reviewed the proposal, state Transportation Secretary Darin Bergquist said. “We’re all in agreement, we can make this deal work,” Bergquist said.

Governor Kristi Noem will make the final decision.

The state board recently agreed to sell the state-owned Sioux Valley line in southeastern South Dakota to its current operator, D&I Railroad, a subsidiary of Sioux Falls-based L.G. Everist Inc.

Dick Huff of Chamberlain, one of the brothers who sold Dakota Southern to Williams, tried Wednesday to derail the MRC sale.

He presented information to the board that showed a Williams-owned company was delinquent on taxes in Idaho. Huff also said the Federal Railroad Administration might have ‘non-compliance’ concerns about railroad grants in South Dakota going forward.

Huff said he didn’t think the governor was aware that a Williams-involved company has been storing rail cars for carrying hazardous materials at a privately-owned parking area along the MRC line that serves the Gavilon grain terminal near Kimball.

“We feel strongly the governor needs to be aware of all this,” Huff told the board, calling for a ban against storing rail cars that carry hazardous materials. He said the governor didn’t reply to a May 5 letter that he sent to her.

Bergquist said the board has been aware of the hazardous-material situation since 2017. He said the Huffs have tried for years to remove Dakota Southern from the line and now state government has a chance to do that. He said hazardous materials move over many rail lines throughout the nation.

“A private entity can run this operation better,” Bergquist said, urging the board to move forward with the proposed sale. 

Watco’s Webb said the haz-mat parking area adjacent to the Gavilon terminal would be part of the new short-line if the state board agreed to the sale. 

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