SIOUX FALLS, S.D. — The Dakota, Minnesota and Eastern Railroad began arguing against the state’s eminent domain law in federal court on Wednesday, a wire service reported.
The DM&E wants U.S. District Judge Lawrence Piersol to strike down the 1999 law that requires the governor’s approval before railroads can use eminent domain to acquire land from owners who are unwilling to sell.
“I don’t think anything like this has been done, but if it has I’m sure it’ll be struck down,” DM&E president Kevin Schieffer said.
The Brookings-based company plans to build new tracks from western South Dakota into Wyoming coal fields and upgrade its existing track across South Dakota and Minnesota. The railroad then could haul low-sulfur coal from the Powder River Basin in Wyoming to power plants in Midwestern and Eastern states.
The railroad said the law interferes with interstate commerce and is slowing down the $2 billion expansion.
“It’s a big project in a state where hostile legislation was specifically aimed at this project,” Schieffer said.
But defense attorney Brent Wilbur said DM&E is challenging the law before the railroad even knows what effect it will have on the expansion project.
“You really just don’t want to go first,” Wilbur said to Schieffer. This is the first time the 1999 law would apply to a major project in South Dakota.
The federal Surface Transportation Board approved the DM&E project in January, but the railroad has not yet gotten state approval.
“I’m not going to engage in a process that’s unconstitutional and entangle my company in a quagmire we can’t get out of,” Schieffer said.
One provision requires a railroad to prove it has the financial resources for a project before getting the governor’s approval to use eminent domain. But DM&E will be unable to attract investors until it gets approval for the project, Schieffer said.
“It’s a strange little beast and no one knows how to build a fence around it,” Schieffer said.
Kurt Feaster, vice president and chief financial officer of DM&E, said the railroad has already spent about $40 million doing preliminary work to meet the statute’s requirements.
DM&E must gain the right to cross private land when it builds the new track around the southern end of the Black Hills to reach the coal fields. The lawsuit says the company already has reached agreement with most landowners who would be affected in western South Dakota and Wyoming.
The law allowing public utilities to place their equipment in the railroad right of way without a fee was originally passed because a different railroad had charged utilities thousands of dollars to pass over or under the tracks, said Dana Nelson, an assistant to Gov. Bill Janklow.
Several people said the DM&E was cited as an example of good business practices during a legislative committee meeting.
“More landowners testified on our behalf than against us at this hearing,” Schieffer said. “We got a lot of compliments from people for and against the project in that hearing.”
During the time this bill was in the legislature, Janklow received a lot of correspondence from landowners who thought they had been treated unfairly in eminent domain deals, Nelson said.
One landowner, Paul Jensen of Wasta, said he has not heard back from the railroad since getting an appraisal on his land that he thought was too low. He also said the DM&E has not listened to landowner concerns.
But rancher David Lewis of Oelrichs said he felt the DM&E negotiated in good faith.
“I’m satisfied and I can’t ask for a better deal,” he said.
Testimony is scheduled to continue Thursday and Friday.