(The Associated Press circulated the following story by Joe Kafka on April 15.)
PIERRE, S.D. — Some state provisions regulating railroads that resort to forcible acquisition of private land in South Dakota discriminate against interstate commerce and violate other federal laws, the 8th U.S. Circuit Court of Appeals has ruled.
But the federal court refused to overturn other railroad restrictions passed by the 1999 state Legislature over the objections of Dakota, Minnesota & Eastern Railroad.
The decision deals with a December 2002 ruling by U.S. District Judge Lawrence Piersol of Sioux Falls, who issued an order preventing state officials from fully enforcing a law that placed several new restrictions on railroads.
A challenge to the law was filed by DM&E, which wants to extend its line to Powder River Basin coal fields in Wyoming and run coal eastward on trains across South Dakota and Minnesota.
DM&E officials said the 1999 law dealing with eminent domain — the legal process of forcing unwilling people to sell their land — is an illegal impediment to its proposed $2 billion expansion and would make it virtually impossible to complete.
Kevin Schieffer, DM&E president, said Wednesday the railroad would not appeal the 8th Circuit decision. Neil Fulton, a lawyer for the state, said state officials had not decided if they would appeal, but it did not appear likely.
Schieffer said he is optimistic the railroad project will go ahead.
DM&E plans to rebuild about 600 miles of track and extend its line 260 miles into Wyoming coal country.
“We’re past the major legal and regulatory hurdles, but I’m not taking anything for granted,” Schieffer said
He said the railroad continues to seek investors and hopes to have financing arranged by year’s end. If so, the massive construction project could possibly start next year, he said. “That would be a best-case scenario.”
However, Schieffer said, actual work would not begin immediately because engineering must first be finished, and there would be extensive lag time after ordering many steel rails and other essential materials.
“It’s darned complicated,” he said. “There’s a lot of ramp-up things to get ready. But the jobs would start almost immediately. There would be literally thousands engaged pretty quickly.”
Piersol had ruled that state government cannot require railroads that use eminent domain to prove they have sufficient financing to complete projects. Nor can the state make railroads provide complete building plans before even asking to use eminent domain, the judge ruled. He also tossed out a provision that allowed railroads to use eminent domain only when projects benefit South Dakota shippers.
Piersol said those restrictions would effectively prevent DM&E from moving ahead with its coal-train project. He said parts of the state law would have illegally usurped federal law on railroads, were unconstitutional and overly regulatory.
But the federal judge left intact a provision of the 1999 law that says railroads are allowed to take property from unwilling sellers only if the companies have first negotiated in good faith with those landowners.
Piersol also refused to overturn provisions that require railroads wishing to use eminent domain to first get permission from the governor or state Transportation Commission, which would have to decide if taking private property for railroad right of way is a public use and necessity.
Appealing Piersol’s ruling against several provisions of the new law, state lawyers argued that South Dakota’s sovereign immunity as a state bars federal courts from interfering with essential regulation of eminent domain.
The appeals court did not agree.
“This lawsuit does not involve lands that South Dakota owns, nor does it challenge the state’s power to take land by eminent domain,” wrote 8th Circuit Chief Judge James B. Loken.
Piersol’s injunction against the state was proper because it brings the state’s regulatory scheme into compliance with federal law, the appeals court decided.
The 8th Circuit also said Piersol did not exceed his power in requiring the state to comply with federal laws.
In a loss for DM&E, the appeals court decided that Piersol made the right call when he refused to overturn the entire 1999 state law that deals with eminent domain powers of railroads and the necessity to get approval of the governor.
DM&E had argued that remaining parts of the law would not have been passed by the Legislature without the provisions that Piersol ruled invalid.
The 8th Circuit said South Dakota law requires judges to uphold remaining sections of law if they can stand by themselves and if lawmakers would have intended them to take effect without invalidated provisions. DM&E did not prove that the Legislature would not have enacted the eminent domain law without the invalid sections, the appeals court decided.
“These provisions function logically on their own,” Loken wrote. “They effect significant changes in eminent domain law and procedure, giving the state greater control over the delegation of its eminent domain power and providing increased protection to affected landowners.
“These changes are clearly within the state’s sovereign powers.”
In another victory for the state, the appeals court overturned Piersol’s rejection of a state requirement that other utilities be given free use of railroad right of way when railroad companies resort to eminent domain.
The judge had decided that such a provision amounts to an unconstitutional taking of property.
The 8th Circuit said that only applies when the state fails to provide an adequate procedure to compensate railroads for use of land along their tracks.
Although it appears that DM&E would lose a property interest if it had to allow other utilities to use its right of way, the appeals court said Piersol failed to decide if DM&E would have a right to compensation.