MAGNOLIA — With a pair of bright red Ellis & Eastern train engines staged as a backdrop, dignitaries gathered Thursday afternoon in Magnolia to celebrate the planned $34 million upgrade to a short line railroad that stretches from western Sioux Falls, S.D., to the Agate terminal southwest of Worthington.

The project will be funded with an infusion of $19.4 million by Ellis & Eastern, which has leased the short line since June 2017, and a $14.5 million federal Consolidated Rail Infrastructure and Safety Improvements (CRISI) grant. The grant was awarded in early March to spur extensive upgrades to sections of Minnesota’s 42 miles of track, which sits on land owned by the Buffalo Ridge Regional Rail Authority in a joint powers agreement between Rock and Nobles counties.

The improvements include critical infrastructure upgrades to bridges, increasing capacity from 80-pound to 115-pound rail and adding double-lined rail cars, which will be required to transport ethanol beginning in 2023. The project will also include safety enhancements, according to Katie Hatt, interagency rail director for the Minnesota Department of Transportation.

Hatt, who began her new role in February, is already calling the project a success story because local communities stepped up and could see the value in the short line railroad when other communities chose instead to tear out railroad tracks.

Moving forward, Hatt’s role will be to develop relationships around rail with the hopes of seeing more goods — and even people — maximizing use of the state’s operating rail lines.

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On Thursday, Magnolia Mayor Dennis Madison welcomed the celebration’s roughly 30 attendees and spoke of the railroad’s importance to the community. In 1884, a rail station was established there, followed by a post office and two elevators within the first couple of years. By 1891, the city of Magnolia was incorporated.

“Without the railroad coming through, Magnolia wouldn’t be in existence today,” Madison said.

Now, the community will see some much needed improvements to the line, which should lead to increased transport of items between Sioux Falls and the Agate terminal near Worthington. Already, usage has picked up since last year’s opening of the Rail to Road transloading facility southwest of Worthington.

Jeffrey Cooley, an engineer with Brookings, S.D.-based Civil Design Inc., said upgrades to the rail line will span seven phases and several years, with rehabilitation of 11 timber bridge structures being the first priority. Two steel truss bridges are included in the project, and there will be a lot of new rail ties to add and replace on the line.

“In the six miles from Magnolia to Adrian, we’ll install 9,000 ties,” Cooley said, adding that about half of the existing ties in that stretch will be replaced. In the seven miles between Manley and Brandon, S.D., the existing track is not operational and all new ties will need to be installed.

Cooley said he expects the work under the CRISI grant will be completed in 2024.

“This is a tremendous project,” he said. “Ellis & Eastern is seeing the economic development ability in this line.”

Dan Kippley, who works in economic and business development for Ellis & Eastern, said it hopes to be able to spend some of the CRISI grant funds yet this year because of the drop in steel prices and some of the other products needed for the railroad rehab.

As work begins, communities along the rail line will see increased activity and increased business. District 22 State Sen. Bill Weber said the railroad will be spending money on labor and supplies, with rail line workers purchasing meals and staying in the area for an extended period of time. He said the project will result in $500,000 in additional tax revenue for the state.

Meanwhile, chairman of the Buffalo Ridge Regional Rail Authority and Rock County Commissioner Stan Williamson said both Rock and Nobles counties can anticipate future economic growth along the short line.

Minnesota Regional Railroads Association Executive Director John Apitz lobbies on behalf of the state’s 13 small and four large rail systems. He said the short line in Rock and Nobles counties, which connects with both Union Pacific and Burlington Northern Santa Fe lines, is vital and creates competition in the marketplace.

“Railroads here move 25% of everything in Minnesota,” said Apitz, adding that of the 4,500 miles of track in the state, short lines make up just 500 of those miles. Each rail car can haul the equivalent of three or four semi-truckloads of product and move it 432 miles on a single gallon of diesel fuel — saving highway infrastructure and being more environmentally friendly, he added.

“Short lines need more help to keep their operation going; they need additional resources to keep infrastructure in working order,” Apitz said. He noted that there is a tremendous need for funding to revitalize the state’s short line railroads.

Representatives for Sen. Amy Klobuchar and Rep. Jim Hagedorn attended Thursday’s celebration, as did Rock and Nobles County commissioners and administration; Luverne, Magnolia and Worthington mayors; individuals in economic development and banking, and neighbors to the rail line.