PIERRE — A private railway that runs on state-owned track west from Mitchell gave a related company exclusive control last summer of a state-owned siding connected to the main line at Mitchell.
However, no one told the South Dakota Railroad Board about the deal. The governor-appointed members are responsible for all state-owned rail lines in South Dakota.
Dakota Southern Railway Co. signed away 1.4 miles of siding right to Brule Terminaling LLC for storing up to 100 railcars holding liquid natural gas, also known as butane.
The Federal Railroad Administration tracks movement of hazardous materials such as butane.
An administration inspector cited Dakota Southern for 11 counts of a hazardous material violation Sept. 5 because cars carrying liquid natural gas had been stored too many days on the Wheat Growers siding at Kennebec.
Mike Williams owns Dakota Southern and Brule Terminaling. His name was on both signature lines of the original contract for the Mitchell line dated March 15. His name appears again on both signature lines again for the June 23 amendment.
A sentence in the amendment says: “Private Track will be exclusively by BT.”
Williams listed himself as president for each company on the amendment. The companies shared the same Kansas City, Mo., street address and email address on the contract and the amendment.
The existence of the contract and the amendment emerged Dec. 20 during a state board meeting about how Dakota Southern Railway operated the Mitchell line.
Karla Engle, the state board’s chief legal counsel, said Dakota Southern management didn’t present the contract or the amendment to the state board. She said the company also didn’t give documents to the Mitchell-Rapid City regional rail authority that leases the line from the state board.
The state Department of Transportation also wasn’t aware of the amendment, Engle said.
Williams attended the meeting, as did several employees of Dakota Southern and another company he owns, as well as other people from South Dakota who showed up to support him.
Engle said she received a copy of the amendment during the meeting. Williams then confirmed to her the amended contract was allowed to expire Nov. 30.
State Transportation Secretary Darin Bergquist confirmed further details through a series of emails Dec. 20-22.
Bergquist wrote that Dakota Southern employee Heath Haden gave a copy of the original contract, without signatures, to Jack Dokken in April. He is head of the state department’s office of air, rail and transit.
Bergquist said Engle, in her role as the department’s chief legal counsel, received a signed copy of the original contract Dec. 4.
Bergquist said the signed copy came from the federal inspector Scott Cassidy.
“Later that same day, the (department’s) legal office was also provided a copy of the signed amendment to that agreement, which was when the department first became aware of the existence of an amendment,” Bergquist said.
Bergquist said he was referring to Engle.
Bergquist also confirmed the state board first learned earlier on Dec. 20 about the contract and the amendment.
As to the significance of the amendment, Bergquist wrote:
“The amendment included the following language: ‘Private Track will be exclusively used by BT. DSRC will exercise no control over the Private Trackage during the term of the Agreement.’
“The lease and sublease require written consent from the State and the Authority prior to assignment of any rights by Dakota Southern,” Bergquist continued.
Shortly after starting the meeting on Dec. 20, the state board spent about 30 minutes behind a closed door discussing a legal matter. The specific topic wasn’t publicly identified.
Engle said during the subsequent public discussion that private agreements in the future need approval by the state board, the local regional authority and the state department.
State board members didn’t publicly raise the question about whether they should terminate the sublease Dakota Southern has for the Mitchell-Rapid City line.
Williams distributed a sheet showing data about Dakota Southern as the meeting ended. The information included railcar growth during the past five years to 9,580 this year from 4,492 in 2013.
The sheet noted the 2010 car count was 687. That year Williams acquired Dakota Southern from Alex Huff of Oacoma.
Nebraska-based Gavilon built a large grain terminal near Kimball, and Aberdeen-based Wheat Growers recently opened a large grain terminal at Kennebec since Williams became owner. Rapid City-based Dakota Mill & Grain now plans to build a terminal at Presho along the line.
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