(The following article by Peter Harriman was posted on the Sioux Falls Argus Leader website on November 21.)
SIOUX FALLS, S.D. — Even as the Dakota Minnesota & Eastern Railroad waits to hear whether it qualifies for a $2.3 billion federal loan to reconstruct its line across South Dakota and Minnesota, the railroad has contracted with a company that casts concrete bridges to build a plant in Rapid City to serve the as-yet-unconfirmed expansion.
“The execution of this agreement represents another significant calculated risk for us. In a perfect world, the project would be fully approved and committed before we made this kind of investment,” DM&E President and Chief Executive Officer Kevin Schieffer said of the railroad’s plan to extend to Wyoming’s Powder River Basin coal mines.
“But because of the size of the Powder River Basin project, and the number of component parts required to build the project, plant construction has to begin now in order to be able to produce enough parts to build the line. So we run the risk of spending several million dollars developing this plant that will be lost if the project is not built.”
35 new positions
DM&E’s new partner, Omaha-based Coreslab Structures, began in 1975 with the purchase of a hollowcore manufacturing operation in Ontario, Canada. It has since expanded to 19 facilities making precast and prestressed concrete components, mostly in the southern United States, according to Mark Simpson, its general manager for railroad sales.
It expects to have the Rapid City plant at full production by June, employing about 35 construction and heavy-equipment workers. It will rely on cement from the GCC Dakotah cement plant in Rapid City and steel from Dakota Steel and Supply to produce 60- to 80-foot concrete girders used in bridge spans.
The privately owned company did not disclose details of its arrangement with DM&E or wages it will pay other than to say, “It looks like we’ll be a little over what construction jobs there in Rapid City typically pay,” Simpson said.
A Coreslab plant in Florida was fined $45,000 by the federal Occupational Safety and Health Administration in January for forklift-safety violations, and in 2004, OSHA cited Coreslab for worker-safety violations at a job site at Kennesaw State University in Georgia.
The fact the railroad might not hear from the Federal Railroad Administration until next year about its loan did not deter Core-slab, Simpson said.
“We feel comfortable with the financial commitment they’re making with us in setting up this plant,” Simpson said. He added the DM&E is employing consultants and designers for its expansion project who are nationally recognized in the rail industry.
“We like to know the people we are dealing with are very legitimate. These guys are extremely that,” Simpson said.
CEO still confident
The DM&E, which has faced tough opposition from some civic and business leaders along the railroad line who fear that excessive train traffic will divide their cities, expects to know by early 2007 whether it will get the loan. Its chief opponent is the Mayo Clinic in Rochester, Minn., which has been critical of DM&E’s safety record and is trying to block the loan.
Schieffer, however, remains confident. Since early this year when he announced the DM&E was seeking the federal loan, he has touted economic development that will spring from the project as its chief benefit to South Dakota and the nation.
“The bridge component manufacturing facility is just one of many developments that will come with the rail-upgrade project,” Schieffer predicted.
Whether the Rapid City plant is permanent “depends on what happens in the next 21/4 or three years. We’ll have to see what happens then,” Simpson said. However, “The DM&E sounds like there is a tremendous amount of work to be done after” the rail-expansion project. “It does seem like a long-term commitment we’re making with them,” he said without being more specific.
Coreslab already builds bridge components for several major railroads, according to Simpson, and the products it will make in Rapid City probably will be supplemented by other components made in its existing Kansas City and Omaha plants. “This project is so big, we couldn’t make everything there,” Simpson said of Rapid City.
“The DM&E rail upgrade holds incredible potential for the whole Black Hills region – not just in terms of the construction phase, but longer term,” said Bob DeMersseman, president of the Rapid City Economic Development Partnership. “This is what value-added manufacturing is all about.”
Simpson said the combination of available concrete and steel, a reliable work force and proximity to DM&E’s planned new rail line in western South Dakota and Wyoming made Rapid City an attractive site for the new plant.
“This project is so big and so fast track, that’s why the DM&E went with a company as experienced as ours,” Simpson said.