(The Associated Press circulated the following article on November 24.)
PIERRE, S.D. — A rail line that the state rescued from abandonment 25 years ago to preserve train service in South Dakota will be sold to Burlington Northern Santa Fe Railway.
The deal not only provides the state with $40.3 million, but it also improves short-line railroad access to BNSF tracks, Gov. Mike Rounds said Wednesday.
“We have access to outside markets for these short-line operators that we have not had up until this point,” he said. “That access has not been readily available.”
Improved shipping access could be a key factor in state economic development efforts, including a possible doubling of the already-strong ethanol industry in South Dakota, he said.
Company officials and Rounds announced in April that they had reached a tentative agreement in which BNSF would buy the 368-mile, state-owned core rail line, but the final terms were not settled.
The state rescued the line in 1980 after it was deserted by the bankrupt Milwaukee Road.
Former Gov. Bill Janklow persuaded the Legislature to temporarily raise the state sales tax by one cent to buy the core line, which runs from Aberdeen to Mitchell, Canton, and Sioux Falls and from Mitchell to Sioux City, Iowa.
Burlington Northern has operated trains on the tracks since mid-1981 in an agreement with the state.
Rounds said the sales agreement was reached late Tuesday. He said access of short-line railroads to BNSF tracks had been the sticking point in the talks.
“If you don’t have rail access within our state, it means all the commodities that we produce have to move by highway,” Rounds said. “It means a huge amount of truck traffic on our roads. It also means a higher cost to our … farmers and ag producers in terms of what they have to pay for getting their product out to the open market.”
Rounds said the state has agreed to spend about $6.5 million to improve the access of short-line railroads to the BNSF line over the next several years. BNSF also has agreed to make improvements to the core line for the benefit of the smaller rail firms, he said.
A 1986 contract provision gives BNSF an option to buy the tracks. The company went to court after talks with the state faltered. The litigation, however, was later suspended in hopes that a deal could be negotiated.
“BNSF is pleased to be implementing the win-win outcome reached with the state in April that enhances rail service options for shippers in South Dakota and supports our continued investment in the core line for the future,” said Peter J. Rickershauser, BNSF vice president for network development.
“The purchase of the core line continues our successful partnership with and commitment to the state and freight rail shippers over the last two decades to revitalize and upgrade these once-abandoned lines.”
Rounds characterized the sale as complex and said it is subject to approval of the federal Surface Transportation Board. The process could be complete by Dec. 15, he said.
Improved rail links in South Dakota will also help ship ethanol and its byproducts to customers in other states, he said.
“If we have access with these short lines … to get this product to other places, it means that we get more on the bottom line for our producer back home.”
“There’s a whisper out there right now of as many as 11 new ethanol plants being considered within our borders. Those ethanol plants can go into more rural areas if we have places where they can get rail access. That is a major part of economic development for our rural communities.”
Eleven ethanol plants currently operate in South Dakota.
“The more small communities we can get rail service to, the better chance we have of keeping them as a viable economic point of interest for businesses to come into,” Rounds said.
Kevin Tveidt assistant state transportation secretary, said the state will make core line interchange improvements at Wolsey and Napa Junction, which is north of Yankton. It also will build a railroad siding north of Aberdeen, he said.
Sidings allow trains to pass one another and are used to load and unload train cars.
The sales agreement requires BNSF to build sidings on the core line at Alpena, Redfield and North Sioux City, Tveidt said.