(The following article by Jared Miller was posted on the Great Falls Tribune website on March 4.)
HELENA, Mont. — Montana grain growers spend roughly one-third of their crop value on railroad shipping costs — far more than farmers in other wheat-producing states with more competitive freight markets.
But a bill in the state Legislature aims to reduce the cost discrepancy by essentially giving Burlington Northern Santa Fe Railway — the chief hauler of Montana grain — a choice: Either reduce freight rates for Montana farmers or pay higher state property taxes.
“This is about equity and fairness. That’s all we’re asking for is be fair with us,” said the bill’s sponsor Rep. Bob Bergren, D-Havre, during a Thursday hearing in the House Taxation Committee.
BNSF officials opposed the bill in Thursday’s hearing, saying the proposal is illegal, unfair and would likely entangle the state in a long and costly federal courtroom battle.
“We would have little choice but to file suit if this bill were to be enacted,” BNSF representative Alec Vincent told the committee.
House Bill 703 would attempt to level the playing field for Montana grain growers by changing the method the state uses to tax railroad property.
If the bill becomes law, railroads that charge Montana farmers more for shipping than their customers in other states would pay more taxes.
The size of the tax increase would depend on the gap in shipping rates between states; the bigger the discrepancy, the higher the taxes.
However, if BNSF brings its Montana shipping prices in line with what it charges in other states, its taxes would not go up.
“I don’t look at this as a tax bill, I look at this as a fair shipping bill,” Bergren said.
A 2004 report on Montana freight competition confirmed that farmers in the state pay roughly 50 percent more for shipping to Pacific Northwest ports than states where competition exists. The discrepancy costs Montana farmers about $60 million a year, the report said.
BNSF hauls more than 90 percent of Montana grain to markets on the West Coast. Trucks, river barges and multiple railroad lines compete for business in wheat states like Kansas and Texas.
Bergren said he has long sought a way to force BNSF to reduce freight rates for Montana grain farmers, but federal law limits how states regulate railroads inside their borders.
“They take advantage of farmers, producers and the general public with little fear of consequences,” Bergren said.
Richard Owen, executive vice president of the Montana Grain Growers Association, said BNSF charges higher shipping rates for Montana crops simply because they can.
“We are tired of the abuse and it’s time the state of Montana took more aggressive steps in holding the railroad accountable,” Owen said in testimony Thursday.
Bergren said he believes HB703 is plausible because it merely “tweaks” the existing state tax code. State officials agree.
“It’s just another factor we would add into our valuation formula,” Eugene Walborn of the state Revenue Department said.
Railroad officials said the bill is designed specifically to punish BNSF and should not be allowed.
The bill would create “extremely poor tax policy” that is confusing and violates federal tax law prohibiting discriminatory property tax assessment of railroads, Vincent said.
He said the federal government has exclusive rights to regulate the industry.
Pat Keim of BNSF said it would be “mind boggling” to calculate the new tax formula, which requires the state to determine the average commodity freight rates for Montana and for shippers outside the state.
Ed Bartlett of Union Pacific Railroad, which operates 125 miles of track in Montana, opposed the bill, which he said violates federal law.
“It’s discriminating. It’s complicated. It’s bad tax policy,” Bartlett said.
The Montana Taxpayers Association also weighed in against the bill.
Mary Whittinghill, a lobbyist for the group, said tax policy should never be used to dictate business decisions. She also emphasized the high cost of fighting a rail company in federal court.
“It just adds a lot of complex aspects to what should be a simple tax evaluation process,” Whittinghill said.
HB703 is based on an identical bill that died this week in the North Dakota Legislature.