Wheat growers are concerned about increased rail rates because of an acquisition premium paid by Berkshire Hathaway when it purchased the Burlington Northern Santa Fe (BNSF) railroad, NAWG Immediate Past President Wayne Hurst told members of the Surface Transportation Board (STB) Thursday.
Hurst spoke at a hearing in Washington examining a complaint by the Western Coal Traffic League, which is a captive shipper like many agricultural producers, related to BNSF rates after it was sold in 2010.
Representatives of the League argued that unlike past mergers or acquisitions, shippers did not achieve a benefit from the BNSF sale and should not bear additional costs. BNSF’s representatives argued the company should be allowed to capitalize the acquisition premium of $8.1 billion.
Hurst, who spoke on behalf of NAWG, representatives from the Alliance for Rail Competition (ARC) and the Consumers United for Rail Equity (CURE), and Sen. Al Franken (D-Minn.) spoke in favor of the League’s position.
While the case itself could increase rail rates between 5 and 10 percent, the main concern brought before the Board was the precedent of allowing an outside, wealthy investor to buy a railroad at an inflated price and then pass that inflated cost on to captive shippers.
“I worry about how this case will affect the future capital investments in other railroads by future wealthy investors,” Hurst told STB members.
“If the BNSF’s new owners can buy railroads at higher than market prices, and subsequently pass off the additional cost to their captive shippers in the form of higher rail rates, similar acquisitions of other railroads will be encouraged, and captive shippers nationwide will be harmed.”
As the only farmer testifying at the hearing, Hurst spoke about his operation and emphasized the importance of healthy railroads to a robust agricultural economy.
“For most of us, farming is not just a career, it’s a legacy, and a trust. We take a long-term view of life,” he said. “For many wheat producers, rail is the only realistic option. Because of consolidation in previous decades, most of us are served by one major railroad. We need them.”
NAWG works with a variety of stakeholders to increase rail competition and, where that is impossible, decrease captive rail rates for wheat producers. In addition to working with Members of Congress, ARC and CURE, NAWG also works directly with a number of railroads, including BNSF and Union Pacific.