(The Associated Press distributed the following article by Dale Wetzel on September 30.)
BISMARCK, N.D. — Facing questions about their property management, spokesmen for North Dakota’s two largest railroads said Monday they are reluctant to sell their property when it still has rail service nearby.
The Legislature’s interim Transportation Committee is exploring the land sale and lease practices of North Dakota’s railroads, particularly the two largest, the Canadian Pacific and the Burlington Northern Santa Fe.
The study arose from a dispute during the 2003 Legislature between the railroads and businesses that lease their property. Grain elevator managers and other business people say the railroads often impose onerous insurance requirements, and demand exorbitant prices to sell land to a company that is leasing it.
Canadian Pacific generally wants at least $10,000 to sell land that it currently leases, regardless of the parcel’s size. The Burlington Northern Santa Fe usually asks for 10 times the annual lease payment for the property. Land prices are much lower if rail service has been abandoned.
David Drach, a Canadian Pacific property manager, said a certain amount of work is needed in any sale of leased property, and a minimum price helps the railroad concentrate on more attractive deals.
He said lawmakers are sometimes more willing to put restrictions on railroad land than they are on other types of private property.
“We should have the right to manage our property just like anyone else,” Drach said. “If we don’t want to sell it, we don’t have to sell it.”
Sen. David Nething, R-Jamestown, a committee member, told Drach that the Canadian Pacific’s minimum price is often unrealistic.
“When you talk about fair market value … in some of our small, rural communities, that’s just puffery. That doesn’t mean anything, because your minimum can be the killer,” Nething said.
This year, the Legislature approved limits on the insurance coverage that railroads may require of the grain elevators and potato warehouses that they serve, and set out new procedures for selling abandoned property.
Steve Strege, a spokesman for the North Dakota Grain Dealers Association, asked lawmakers to support changes to the new insurance law, to ensure that shippers are responsible only for damages that they cause.
Under the new law, shippers can be on the hook for damages that are partially the fault of the railroad, Strege said.
“All we wanted … was for everyone to cover his own negligence,” he said. “If we were at fault for the damage … then we, or our insurance, should pay for that. We accept that. But that’s not how it turned out in the end.”
Burlington Northern Santa Fe now leases about 4,000 acres of property statewide. It has 960 property leases, said David Schneider, a BNSF real estate manager. Of those, 168 are grain elevator leases, for which the railroad charges an average of $2,337 annually. Drach said the Canadian Pacific has more than 680 leases.
Schneider said the Burlington Northern Santa Fe recently sold a package of more than 1,500 leases across its system. But Schneider and Drache said their railroads generally do not aggressively market their leased property. Instead, they respond to questions from potential buyers, they said.