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Franken, Klobuchar urge transportation board to examine rail practices that increase costs for farmers

WASHINGTON, D.C. - Minnesota industries that rely on the Burlington Northern Santa Fe (BNSF) Railway to get their products to market may have to pay an unfairly inflated shipping rate unless an independent transportation board intervenes, U.S. Sens.

WASHINGTON, D.C. - Minnesota industries that rely on the Burlington Northern Santa Fe (BNSF) Railway to get their products to market may have to pay an unfairly inflated shipping rate unless an independent transportation board intervenes, U.S. Sens. Al Franken and Amy Klobuchar (D-Minn.) said in a letter this week.

The letter was also signed by Sens. David Vitter (R-La.), Mike Enzi (R-Wyo.), and six other senators. The senators released a joint letter today they are sending to Daniel R. Elliott, III, Chairman of the independent Surface Transportation Board (STB), urging the board to stop letting railroads pass along these "acquisition premium" costs to customers. The letter was authored by Sens. Franken and Vitter.

"Uncompetitive rail rates pose huge costs for Minnesota's grain elevators, and those costs get passed down directly to the farmers, whether they grow corn, soybeans, or wheat," said Sen. Franken. "The independent Surface Transportation Board exists to protect businesses from exactly this type of anticompetitive practice and I don't think it's been doing its job."

"Today, farmers and manufacturers in the Upper Midwest find themselves captive to a handful of railroad companies that control this essential form of transportation," Sen. Klobuchar said. "It isn't fair that these giant railroad companies pass along the inflated costs of their financial deals to captive customers without any shipping alternatives."

Under current federal regulations, financial company Berkshire Hathaway, Inc. which acquired BNSF Railway in 2010 for an estimated $7 billion more than book value, may be able to simply pass along that "acquisition premium" cost to its customers. Minnesota and Louisiana farmers, paper mills, ethanol producers, local utilities and others who rely on BNSF have no choice but to pay this added fee because they have no alternate way of shipping their goods. In their letter the senators expressed concern that these "captive customers" face a monopoly and need the federal board to protect them from these unfair fees.

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By statute, in order for a shipper to make a rate dispute, at least a 180-percent ratio of a railroad company's rates must by charged to its variable cost. Acquisition premiums increase a company's variable cost, meaning that higher rates are needed in order to meet the 180-percent minimum that allows a case to be considered by the STB.

According to a Government Accountability Office report, 30 years ago, there were 63 Class I railroads operating in the United States, but today, there are only seven. As rail competition has all but disappeared, producers and consumers are paying the price, especially in rural areas. These captive shippers, with access to only one rail line, suffer the most, said the senators.

Klobuchar and Franken are original cosponsors of the Railroad Antitrust Enforcement Act, which would subject the freight railroads to the same antitrust laws that most other industries have to abide by, making it easier for shippers to sue freight railroads for anti-competitive behavior.

Joining Sens. Franken, Klobuchar, Vitter and Enzi in sending the letter were Sens. Tom Harkin (D-Iowa), Tim Johnson (D-S. Dak.), Mary Landrieu (D-La.), Herb Kohl (D-Wisc.), Mark Pryor (D-Ark.), and Jon Tester (D-Mont.).

Related Topics: TRANSPORTATION
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