When the South Dakota Department of Transportation sells state-owned railroad property, the law gives the lessees and abutting landowners 60 days' notice and a right to purchase at appraised value, except for sales 'for railroad purposes.' What does 'railroad purposes' mean, and when does a buyer get to skip the notice-and-purchase-right requirement?

Plain-English summary

South Dakota owns railroad property, managed by the Department of Transportation's Division of Railroads under SDCL 1-44-28. Some of that property is leased; some of it abuts privately owned land. When the State decides to sell railroad property, lessees and abutting landowners worry that a third party could buy the land out from under them. That was the concern Representative Wagner brought to the AG on behalf of his constituents, several of whom lease state rail property.

SDCL 1-44-28 protected them. The statute requires the State (acting through the DOT's Division of Railroads) to give 60 days' written notice of any proposed sale to lessees of affected property, or if no lessee, to owners of abutting property. The lessees or abutting owners then have 60 days to purchase the property at not less than appraised value. The protection rule has one exception: a "sale for railroad purposes."

Representative Wagner asked the AG to define "railroad purposes." His constituents wanted assurance that they could not be cut out of the notice and purchase rights through a sale to a third party for some non-railroad use.

The 1991 AG (Mark Barnett) gave a tight reading of the exception. A "sale for railroad purposes" means a sale to a buyer who will continue to operate a railroad on the right-of-way being sold. If the line has been abandoned and the prospective buyer plans to use the right-of-way for any other purpose (recreational trail, agricultural conversion, utility corridor, residential subdivision, anything other than rail operations), the State has to comply with the notice and right-of-purchase requirements.

The opinion's reading is functional. The "railroad purposes" carve-out makes sense because if the State sells a working rail line to another rail operator, the existing leases and rail-side uses stay in place and the lessee/abutting-owner protections are not really needed (the buyer just continues the railroad). But if the line is being repurposed, the existing uses are at risk and the protections become essential. The exception fits the case where the protections are unnecessary; it does not extend to cases where the protections are most needed.

In other words: the notice-and-purchase-right rule is the default; the railroad-purposes exception is narrow; ambiguous cases go to the lessees and abutting owners, not to third-party buyers.

Currency note

This opinion was issued in 1991. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL 1-44-28 may have been amended or renumbered since 1991. Anyone working with state-owned rail property today should locate the current statutory framework and check for any modern AG opinions or court decisions on the railroad-purposes exception.

What the opinion meant at the time

For SD lessees of state-owned railroad property in 1991, the opinion was reassuring. The State could not bypass their notice and purchase rights by selling to a third party for non-railroad use. Their statutory protections covered any sale that was not a continuation of railroad operations.

For SD landowners abutting state-owned rail lines, the opinion meant the same. Where there was no lessee, abutting owners got the notice and purchase right unless the buyer was continuing the railroad.

For the SD DOT's Division of Railroads (the operational unit managing the rail property), the opinion meant the notice and purchase-right process had to be the default in any non-rail sale. Skipping that process was lawful only for true railroad-to-railroad transactions.

For rail-to-trail advocates and other re-use planners working in SD in the early 1990s, the opinion meant their proposed acquisitions of abandoned rail rights-of-way would go through the lessee/abutting-owner notice and right-of-purchase process. They could still acquire the property, but only after giving the lessee or abutting owner a chance to buy at appraised value first.

For state legislators considering rail-property policy changes, the opinion identified the policy structure as a default-of-protection arrangement that the Legislature could adjust if it wanted to. SDCL 1-44-28 protected existing users; amending it would require an explicit legislative decision to weaken that protection.

Common questions

Q: What is SDCL 1-44-28?
A: The 1991-vintage statute governing sale of state-owned railroad property. It required notice to lessees (or abutting owners if no lessee) of any proposed sale, plus a 60-day right to purchase at appraised value. The "sale for railroad purposes" exception bypassed the notice and purchase rights for sales that continued rail operations on the same right-of-way.

Q: Who manages SD's state-owned railroad property?
A: Per SDCL 1-44-28, the Division of Railroads within the Department of Transportation manages "all real and personal property acquired by the state for railroad purposes" and secures the income from it. The director may lease, license, or grant easements on property not used directly in rail operations.

Q: What does "for railroad purposes" mean?
A: Per the 1991 AG, the buyer must continue to run a railroad on the right-of-way being sold. Continued rail operations is the only use that qualifies. Anything else (trail, agriculture, utility, development) triggers the notice and purchase-right rule.

Q: What if the buyer might run a railroad eventually but not immediately?
A: The opinion does not address that scenario directly. The statute's bypass requires that "it can be shown in advance of the sale that the use after sale will still be to 'run a railroad.'" An indefinite future intention probably would not meet that standard; the sale would proceed under the notice and purchase-right rule.

Q: What rights do lessees and abutting owners have?
A: 60 days from the notice of proposed sale to purchase the property "at not less than its appraised value." If they exercise the right, they buy at appraised value. If they decline, the State can complete the sale to the third party.

Q: What if there is both a lessee and an abutting owner?
A: Under the statute, the lessee gets the notice and purchase right. The abutting owner gets the rights only if there is no lessee.

Q: What about public utilities on rail corridors?
A: The statute's last sentence preserves "any existing right of use enjoyed by any public utility, municipally-owned utility or cooperative utility which provides electricity, gas, water or telephone service." So utility easements on rail corridors survive any sale, vacation, change, or relocation.

Q: Does this opinion still apply to current SD rail property?
A: The opinion interprets a statute that has since been renumbered or modified. The general principle (narrow reading of bypass exceptions to protective statutes) likely survives, but anyone working with current state-owned rail property should look up the current statutory framework and any modern AG or court interpretations.

Background and statutory framework

SDCL 1-44-28 charged the Division of Railroads within the Department of Transportation with managing "all real and personal property acquired by the state for railroad purposes" and securing "all income available from those properties." The director of the Division could "negotiate, enter into, execute and issue leases, licenses, easements or other agreements as may be necessary to provide for the use of any property or facility not used directly in rail operations."

When the State decided to sell rail property, the statute imposed a protective process. Notice had to go to the lessee of the affected property; if there was no lessee, notice went to the owner of property abutting the railroad property. The lessee or abutting owner had 60 days from notice to purchase the property "at not less than its appraised value." Only a "sale for railroad purposes" was exempt from those requirements. The statute also provided that no vacation, change, relocation, or sale could diminish any existing right of use enjoyed by a public, municipally-owned, or cooperative utility providing electricity, gas, water, or telephone service.

The protective process gave lessees and abutting owners a meaningful chance to buy the corridor before it passed to a third party for an unrelated use. The "railroad purposes" carve-out, by contrast, applies where the buyer will keep running a railroad on the same right-of-way, the case in which continued rail service benefits those parties rather than threatening them.

But the carve-out had to be narrow to make the broader scheme work. If "railroad purposes" were read broadly, any plausible future rail-related use could justify bypass. The 1991 AG reads it strictly: the buyer must actually continue to run a railroad on the right-of-way being sold. Speculative future rail use, conversion to trail with an option to revert to rail, or sale to a holding entity does not qualify.

The opinion is short and structured around the statutory text. The closing line ("the notice and opportunity requirements of the statute apply to protect lessees and abutting landowners, in all cases, except in that narrow circumstance where it can be shown in advance of the sale that the use after sale will still be to 'run a railroad'") is the operational rule: the bypass requires concrete advance demonstration of continuing railroad operation. Anything less goes through the protective process.

Citations and references

Statutes:

• SDCL 1-44-28 (state-owned railroad property sale; notice and purchase rights; railroad-purposes exception)

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=1699

Original opinion text

Railroad Property

Dear Representative Wagner:

You have requested an official opinion of this Office concerning the following factual situation:

FACTS:

Certain constituents in my legislative district have a vital interest regarding the future sale of state-owned railroad property and state-owned property adjacent to rail lines. Many of the constituents lease this property from the state and need to be guaranteed that a third party could not buy the land they are leasing and then force them out of business.

In researching this concern, the LRC staff directed me to SDCL 1-48-28. This section provides strong safeguards in line with my concerns and those of my constituents. I believe, however, that one phrase included in the section is unclear. I therefore request an opinion on the meaning of the following:

SDCL 1-44-28. The division of railroads shall manage all real and personal property acquired by the state for railroad purposes and shall secure all income available from those properties. The director of the division may negotiate, enter into, execute and issue leases, licenses, easements or other agreements as may be necessary to provide for the use of any property or facility not used directly in rail operations. Prior to any sale, except a sale for railroad purposes, of state-owned railroad property, the state shall provide the lessee of any railroad property affected by the sale and, if there is no lessee, the owner of any property abutting railroad property with written notice of the proposed sale. The state shall give the lessee or abutting owner sixty days from the notice to purchase the property at not less than its appraised value. No vacation, change, relocation or sale of state-owned railway property as provided in this chapter shall diminish any existing right of use enjoyed by any public utility, municipally-owned utility or cooperative utility which provides electricity, gas, water or telephone service. [Emphasis supplied.]

Based upon the above factual situation, you ask the following question:

QUESTION:

The exclusion to the notice requirement in the above referenced statute is "a sale for railroad purposes." You would like a definition of what the term "railroad purposes" in the statute might mean.

IN RE QUESTION:

In examining SDCL 1-44-28, it is my opinion that the phrase that you emphasize, "except a sale for railroad purposes," anticipates a sale for the purpose of running a railroad on the right-of-way sold. Thus, if the line were abandoned and the prospective buyer sought to do something with the right-of-way other than run a railroad on it, the State would need to comply with the notification and property purchase requirements set forth in the statute.

In other words, the notice and opportunity requirements of the statute apply to protect lessees and abutting landowners, in all cases, except in that narrow circumstance where it can be shown in advance of the sale that the use after sale will still be to "run a railroad."

MWB:CME:ss