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The Montana State Highway Commission was created in 1913 by the state Legislative Assembly. The original Commission was composed of three members. In 1917 new legislation altered the organization of the Commission by authorizing the appointment of twelve members according to geographic highway districts. Membership was changed again in 1921 to three members appointed by the Governor and in 1941 to five members, also appointed by the Governor. In 1971 the Commission was renamed the Montana Department of Highways, created by Chapter 7 of the Executive Reorganization Act of 1971 and implemented by executive order of the Governor on December 16, 1971. The Department of Highways took over all but the advisory functions of the State Highway Commission.

By 1972, the Department consisted of seven divisions: the Legal Division, Personnel Division, Centralized Services Division, Engineering Division, Motor Pool Division, Gross Vehicle Weight Division, and the Maintenance Division. Each division is headed by an administrator. The Centralized Services Division, Engineering Division, Motor Pool Division, Gross Vehicle Weight Division, and the Maintenance Division are furthered sub-divided into bureaus, headed by Chiefs. In 1991, the Department of Highways became the Department of Transportation. This was primarily a name change. However, there were some structural and administrative changes.

The Rail Planning Unit was organized in 1979 under the Department of Highways in response to significant changes in Federal funding distribution requirements and assistance for railroad rehabilitation in the mid-to late seventies. Specifically, the 4R Act—Section 803, extended Federal railroad planning. Montana Department of Agriculture was responsible for rail planning activity prior to October 1978. As a requisite of receiving funding to assist with rail plans, the state was required to create a State Rail Plan. The Rail Planning Unit was established as a designated state agency to undertake this task. The plan would, among other things, study the adverse affects of gradually increasing rail line abandonment, (predominately by the Milwaukee Railroad) and its impact to Montanan communities; implement a program which would sustain or revitalize rail lines and properties, and provide support and assistance (largely through Federal means via the Railroad Revitalization and Reform Act of 1976) to branch lines and light-use lines where needed.

The Montana Dept. of Highways Rail Planning Unit, the Montana Dept. of Agriculture Transportation Unit, the Montana Dept. of Commerce Transportation Division, and the Montana Governor's Office of Rail Planning all cooperated in developing the Montana Rail Plan. The Montana State Rail Plan is predominately a planning and management design document to implement revitalization and assistance. The Plan dealt predominately with abandoned, underutilized, and branch lines of the Burlington Northern, Milwaukee, and Union Pacific. The plan included a complete systems analysis and inventory of Montana rail lines; surveys and various other stages of data collection—including survey of transported materials, public hearings, and studies of communities affected by changes to rail lines/abandoned rail line; acquisition, condemnation, lease, sale or title transfer of abandoned properties; full consideration of the community and parties within jurisdiction of the once abandoned line; strategies to appropriate and administer funding to property and/or line rehabilitation, maintenance, and modernization; an financial planning to undertake the rehabilitation.

Coinciding with the creation of the State Plan was an ongoing bankruptcy and reorganization of the entire Milwaukee Railroad, between 1978 and 1980. While Montana attempted legislation, loans and other means of sustaining the Milwaukee rail lines throughout the state, all Milwaukee lines west of Butte were eventually abandoned. Part of the State Plan focused on rehabilitating, maintaining and revitalizing “light load” lines (non national main lines) in order to address local community concerns and economies as much as possible.