STB
Rail Board Reviews Overcharge Claim
Did rates for rail shippers improperly jump when investment giant Berkshire Hathaway bought BNSF Railway Co. in 2010?
Federal regulators are looking into whether the purchase of BNSF Railway caused coal shipping rates to jump. (Photo By: traveler1116)
That’s a question that the federal Surface Transportation Board plans to look into, and billions of dollars in shipping charges could be at stake.
The three-member panel announced Sept. 26 that it will open a formal proceeding into whether a $7.6 billion premium Berkshire Hathaway paid when it bought the carrier should be subtracted from the base that determines freight rates.
The action came in response to a petition filed in May by the Western Coal Traffic League, a coalition of coal shippers that asked the agency to set aside the purchase premium.
NRECA and Consumers United for Rail Equity, a shippers group that is chaired by NRECA CEO Glenn English, have filed comments in support of the petition. “BNSF is clearly attempting to exploit loopholes here and impose unwarranted acquisition ‘costs’ on consumers,” English said on behalf of CURE.
The board said it will take comments from all parties, and plans to use the case and its implications in reviews of future mergers and regulatory formulas.
“This formal proceeding will allow stakeholders and the public to bring their perspectives to the Board,” said STB Chairman Daniel R. Elliott III. “This complex issue should be examined in a transparent way, with the inclusion of as many views and voices as possible.”
Berkshire Hathaway paid $34.5 billion for BNSF, or about $7.6 billion more than book value. Coal shippers say that write-up increased the railroad’s net investment base by 30 percent and affected the carrier’s annual depreciation figures to the detriment of shippers.
As a result, fewer shippers will be able to bring rate cases involving BNSF to the board. The change also means a hike in the maximum rates shippers can be charged, the coal shippers maintain.
A group of 11 U.S. senators also has weighed in, including Sens. Al Franken, D-Minn., and David Vitter, R-La. The lawmakers cautioned the board that “Put simply, Berkshire Hathaway could pay an inflated price for BNSF, and then pass that cost on to its captive customers in the form of higher rates.”
Opening comments are due by Oct. 28.
Tags: Captive Shipper, Railroad Reform, Surface Transportation Board