James,
It is not Shady Oak Lake, but that lake does happen to have a locomotive in it per documentation from the Hopkins Historical Society. That was a narrow gauge 0-4-0T being used by an excavating contractor to relocate the Milwaukee RR from the middle of Shady Oak Lake to a route about 600-800 feet south, still bisecting the lake somewhat. That line today is the TC&W RR. That locomotive was lost in conjunction with building a new fill off of a temporary trestle. Today, it is buried in the fill.
The engine I referred to in my previous post is reputed to be in Lake Minnetoga, a.k.a. Mud Lake, a couple thousand or so feet west of Shady Oak Lake. The M&StL roadbed that passes along the lake’s south side has been converted to a trail, and the lost engine would be about the middle of passing that lake, on its north side of the trail. There is a large wetland on the south side of the trail there, and in the 1800s, that was part of Mud Lake. The earth fill of the trail there today did not exist in the 1800s. In that era, the original location of the M&StL was just about 20 feet north of the trail, and crossed the larger lake on a 300-ft. long trestle. In 1902, they relocated much of the original line between Hopkins and Chaska. At Mud Lake, they replaced the trestle crossing with today’s earth fill just to the south, which divided the lake in half, thus causing the south half to lose its identity. Much of the old trestle ruins still exist under water.
I have concluded that the engine was lost during the trestle-crossing phase, which would narrow it down to 1871-1902. Several M&StL old heads recalled hearing that the company lost an engine in that lake, but never heard any detail other than the fact that they never recovered it.
I Performed two magnetometer surveys about one year apart and got the same result showing a significant magnetic anomaly about 50 feet off the lakeshore right alongside of the old trestle. The entire rest of the 27-acre lake is magnetically flat, so something has to explain that anomaly right where the legend says the M&StL lost a locomotive. In 1998, I hired a professional to perform a third magnetometer survey, which confirmed the same anomaly as my two surveys. The guy that did that survey had also done work for Robert Ballard and went down on the Titanic to sub-bottom image the hull to settle the question of exactly what the iceberg did to the steel hull plates. He said that the magnetometer survey of Mud Lake indicated a mass of iron weighing tens of tons, about 35 deep. That would put it about 20 feet into the organic muck of the lake bottom.
I have found nothing in the M&StL records that indicate losing a locomotive, but there is missing information in their records. They were known for borrowing motive power in the early era, so it may not have been an M&StL locomotive.