Landmark Rail Line Sales in South Dakota

In the early 1980s, the State of South Dakota purchased several rail lines from the estates of bankrupt rail carriers. The State did so to preserve vitally important rail service for South Dakota shippers.  Under the State’s stewardship, rail service in the State is now thriving and, following the completion of a competitive proposal process, the State has finalized the sale of two State-owned ail lines– the MRC Line and the Sioux Valley Line.  These sales return these two lines to private sector ownership, a landmark achievement in the history of South Dakota railroading.  Slover & Loftus LLP served as outside transportation counsel on the two sales.

On February 17, 2021, the South Dakota State Railroad Board approved the South Dakota Department of Transportation’s sale of the MRC rail line to Ringneck and Western, L.L.C for $13 million.  Ringneck is a proposed new shortline railroad controlled by Watco Holdings, L.L.C.  The MRC line is a 285-mile rail line (a portion of which is rail banked) that runs from Mitchell, SD to Rapid City, SD.  The Sales Agreement requires Ringneck to comply with specified service and investment standards, including Ringneck’s obligations to invest approximately $10 million over the next ten years to maintain the line; to reduce and eventually eliminate currently effective customer surcharges applied to traffic moving over the line; and to contribute $1.5 million toward the cost of a new siding along the line.  Ringneck’s notice to exempt the sale from STB approval is currently pending before the Board in Docket No. FD 36494, with closing scheduled to occur shortly after the exemption notice becomes effective.

On December 16, 2020, the South Dakota State Railroad Board also authorized the South Dakota Department of Transportation’s sale of the Sioux Valley rail line to D&I Railroad Company, the current operator of the line, for $10 million.  The Sioux Valley rail line is a 68-mile rail line that runs from East Wye, Switch SD to Canton SD and from Hawarden, IA to Beresford, SD.  The Sales Agreement requires that D&I to comply with specified service obligations and to contribute to funding repairs to the line necessitated by flooding that occurred in 2019.   D&I’s exemption notice, filed in STB Docket No. FD 36497, became effective on April 13, 2021, and closing is scheduled to occur shortly thereafter.

Questions regarding this ruling may be directed to John H. LeSeur or any other Slover & Loftus LLP attorney.