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Rail News: BNSF Railway
3/14/2013
Rail News: BNSF Railway
Seven senators, BNSF disagree on Berkshire purchase's impacts to shippers
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A bipartisan group of seven U.S. senators recently sent a letter to Surface Transportation Board (STB) Chairman Dan Elliott III urging the agency to ensure that Berkshire Hathaway Inc.'s 2010 purchase of BNSF Railway Co. doesn't lead to rate hikes for certain rail shippers.
Berkshire recently revealed that it owned two other railroads when it acquired BNSF, which should have triggered a review by the STB since Berkshire failed to disclose those holdings at the time of the purchase, wrote Sens. Tammy Baldwin (D-Wis.), Al Franken (D-Minn.), Tim Johnson (D-S.D.), Amy Klobuchar (D-Minn.), Mary Landrieu (D-La.), Mark Pryor (D-Ark.) and David Vitter (R-La.) in their joint letter.
"Under existing law, Berkshire is not authorized to own or control multiple rail carriers without the board's approval, and this transaction should have only been allowed to proceed after a determination by the board that it was in the public interest," they wrote.
The senators also reiterated a previous concern that the $8 billion acquisition premium Berkshire paid to acquire BNSF could "artificially inflate" railroads' rate base, leading to higher rates for captive shippers.
"As railroads have consolidated over the last several decades, captive shippers have become more and more vulnerable to excessive rates and unreliable service. If BNSF is able to include the $8 billion acquisition premium in its capital asset base, we are concerned that fewer shippers will be eligible to file rate cases with the STB," the senators wrote. "We urge the board to exclude the acquisition premium for the two years that the transaction was not approved by the board, as well as all subsequent years that the railroad is owned by Berkshire."
However, BNSF prices its services to the market and not on regulatory costs, so the Class I's rates, with the exception of two customers' rates, are unaffected by Berkshire's purchase price, BNSF officials said in an emailed statement.
"Only two of the thousands of BNSF customers have transportation rates that were directly affected because of the unique nature of prior STB rulings regarding those specific customer rates in an ongoing proceeding, and even that impact is modest," they said.
Moreover, the issue of two small short lines being part of other Berkshire companies at the time BNSF was acquired was voluntarily disclosed by the Class I, and was quickly and completely addressed via a sale of those railroads, BNSF officials said.
"Their being part of other Berkshire businesses had no impact on interstate commerce and had nothing to do with the acquisition premium," they said.
Berkshire recently revealed that it owned two other railroads when it acquired BNSF, which should have triggered a review by the STB since Berkshire failed to disclose those holdings at the time of the purchase, wrote Sens. Tammy Baldwin (D-Wis.), Al Franken (D-Minn.), Tim Johnson (D-S.D.), Amy Klobuchar (D-Minn.), Mary Landrieu (D-La.), Mark Pryor (D-Ark.) and David Vitter (R-La.) in their joint letter.
"Under existing law, Berkshire is not authorized to own or control multiple rail carriers without the board's approval, and this transaction should have only been allowed to proceed after a determination by the board that it was in the public interest," they wrote.
The senators also reiterated a previous concern that the $8 billion acquisition premium Berkshire paid to acquire BNSF could "artificially inflate" railroads' rate base, leading to higher rates for captive shippers.
"As railroads have consolidated over the last several decades, captive shippers have become more and more vulnerable to excessive rates and unreliable service. If BNSF is able to include the $8 billion acquisition premium in its capital asset base, we are concerned that fewer shippers will be eligible to file rate cases with the STB," the senators wrote. "We urge the board to exclude the acquisition premium for the two years that the transaction was not approved by the board, as well as all subsequent years that the railroad is owned by Berkshire."
However, BNSF prices its services to the market and not on regulatory costs, so the Class I's rates, with the exception of two customers' rates, are unaffected by Berkshire's purchase price, BNSF officials said in an emailed statement.
"Only two of the thousands of BNSF customers have transportation rates that were directly affected because of the unique nature of prior STB rulings regarding those specific customer rates in an ongoing proceeding, and even that impact is modest," they said.
Moreover, the issue of two small short lines being part of other Berkshire companies at the time BNSF was acquired was voluntarily disclosed by the Class I, and was quickly and completely addressed via a sale of those railroads, BNSF officials said.
"Their being part of other Berkshire businesses had no impact on interstate commerce and had nothing to do with the acquisition premium," they said.
