Tuesday, December 22, 2009

Dakota Southern owners consider rehabilitation for regional railroad line

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The recent sale of the Chamberlain, S.D.-based Dakota Southern Railway Company could result in lower shipping prices for area producers served by the line, according to its new owners, the Daily Republic reported. Mike Williams and Stan Patterson, who purchased the line, met in Chamberlain with the Mitchell-Rapid City Regional Rail Authority and laid out the broad strokes of a multi-year rebuilding plan.

"We talked about the railroad and our plans to rehabilitate it and get it opened up," Williams, a veteran railroader, told The Daily Republic.

The deal for the Chamberlain-based DSR closed on Oct. 1

Williams, 54, of Richmond, Mo., said he will handle engineering and rebuilding issues for the railroad and Patterson, 33, who plans to move to Mitchell, will specialize in marketing and operations. Both men were introduced to the MRC board by former DSR President Alex Huff.

"We saw great potential in the Dakota Southern," said Williams, who noted that the line's interchange agreements with other railroads will allow the railroad to possibly offer lower shipping rates. He foresees shipping contracts for grain, fertilizers and other commodities.

"The possibility of transloading - moving commodities from truck to rail - offers one of the greatest opportunities," he said.

Mitchell-Rapid City Regional Rail Authority Chairman Tom Greenway, a Mount Vernon farmer who also represents Davison County on the rail board, said the meeting was convened to meet the two owners and hear their plans. South Dakota owns the rail line and leases it to the regional rail authority, which in turn leases it to Dakota Southern.

Greenway said he was impressed with the positive outlook displayed by the new owners.

The MRC this summer paid off a long-term loan from the state rail board for revamping track west of Chamberlain. That means the board is now eligible for another loan, Greenway said. Before that happens, the MRC wants to see a third-party estimate on what it will take to rebuild the rail line. Greenway said the board will meet again in March to consider that estimate and to handle routine board business.

The new Dakota Southern owners laid out plans to rebuild three sections of track -moving from east to west - over an equal number of years. The Mitchell-to-White Lake segment will be rehabilitated first, followed by a segment from White Lake to 10 miles west of Chamberlain. The final leg in the plan is to open the remainder of the track to Murdo.

"Realistically, we have access to over 100 miles of track that's passable," said Williams, "but we'd have to creep across it."

High-speed rail may never be an option for the line without massive investment, said Greenway, but even a rehabilitated lower-speed line could offer shippers attractive shipping options.

The rehabilitation effort will be no small task, said Williams. It could include the replacement of 700 to 800 ties and 500 to 700 tons of ballast (rock) per mile, repairing drainage issues and realigning and resurfacing track.

While some rail may be replaced, initial rebuilding plans don't call for total rail replacement, Williams said.

Ironically, money to rebuild the rail line will come from the depressed economy. There's been a 25 percent drop in rail transportation industry-wide, said Williams, which means storage is needed for rail cars not currently in use.

Dakota Southern is generating money from car storage right now, said Williams, and the DSR is lining up even more one- to three-year storage agreements. The DSR will split the rental income with the local rail authorities involved. No figures were available on the total number of cars contracted in storage, but the DOT's Bruce Lindholm said storage contracts typically run for a year or longer and from $1 to $3 a day per car.

The new owners recommended to the MRC that a certified inspector examine the section of rail and make an official report on necessary repairs.

Under a December 2005 agreement, the state sold 368 miles of state-owned railroad to the BNSF for $42 million, but the agreement also tried to maintain a competitive climate and gave several shortline railroads like the Dakota Southern the right to use certain BNSF tracks for their own business.

Early this decade, the Dakota Southern line, which at time ran 190 miles from Mitchell to Kadoka, contracted to a single working mile and one client, Graphic Packaging in Mitchell, when the BNSF changed its pricing structure.

The DSR's trackage rights now extend to the Farmer's Alliance elevator in Mitchell as well as access to other rail carriers in Sioux City, Iowa

"The MRC worked a long time to get those trackage rights," said Greenway, who is hopeful the MRC's efforts to preserve the inter-county rail line will soon bear fruit. The DSR's tracks now stop at Vivian.

Dakota Southern will remain privately owned, said Williams, who also owns the 24-mile Ozark Valley Railroad in Missouri; a majority of the 42-mile Iowa River Railroad in Iowa; and the 135-mile-long BG&CM Railroad in Idaho.

Patterson operates the Washington Idaho Railroad and a branch line, the Washington Idaho and Montana Railroad.

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