Transportation Regulation

Firm Runs Afoul of Rail Regulators

By Steven Johnson | ECT Staff Writer Published: September 27th, 2012

Captive shippers sat up and took notice when investment behemoth Berkshire Hathaway entered the railroad industry by purchasing BNSF Railway Co. in 2010.

Regulators are questioning whether an investment giant owns too many railroads. (Photo By: iStockphoto)

Regulators are questioning whether an investment giant owns too many railroads. (Photo By: iStockphoto)

As it turns out, the holding company owned by billionaire Warren Buffett was already in the rail business, and that was a strict no-no.

The federal Surface Transportation Board has given Berkshire Hathaway and BNSF until Sept. 28 to decide how they are going to divest themselves of two rail carriers.

In a Sept. 18 letter, the board told the company, represented by former STB Chairman Roger Nober, that it failed to comply with the law when it acquired BNSF because it already owned two other regional lines.

“As you observed, Berkshire is not permitted to own or control multiple carriers without Board authorization,” the letter said. “Berkshire must promptly take action to comply with its legal requirements.”

That could include divesting itself of the White City Terminal Union Railway in Oregon and CBEC Railway, which is mostly used for coal hauling in Iowa. Berkshire Hathaway owns MidAmerican Energy Co., an IOU that owns a majority of CBEC.

Nober said Berkshire will divest itself of the two railroads or take “other appropriate means.”

The action comes as the board is considering other steps to curb what shippers consider to be a rail monopoly that jacks up rates for business, utilities and other companies lacking access to competitive rail service.

The three-member STB also has been weighing shippers’ petitions to exclude an $8 billion premium that Berkshire Hathaway paid when it bought BNSF for $43 billion from the rail company’s asset base.

They fear inclusion of the premium could lead to higher rates for transporting coal, chemical and other goods.

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