(The following story by Charles S. Johnson appeared on The Missoulian website o November 3, 2009.)
HELENA, Mont. — Some Montana political and agricultural leaders said Tuesday they hope the state’s farmers will see lower grain shipping rates as a result of the purchase of Burlington Northern Santa Fe by Warren Buffett’s Berkshire Hathaway Inc.
Gov. Brian Schweitzer, himself a farmer and rancher, said he had spoken to both Buffett and Matthew Rose, BNSF’s chairman, president and CEO.
“I said to both of them I look forward to working with both in the future to improve service and shipping costs for our farmers, our miners and our merchants,” Schweitzer said. “One railroad has 90 percent of the track in Montana. Whether you’re in love with it or not in love with it, I didn’t create it. It’s reality.”
Sen. Jon Tester, D-Mont., an organic grain farmer, said: “Montana agriculture would be in pretty rough shape without the railroad, and vice versa. No matter who owns the rails, we need to work together to bring down shipping rates for Montana farmers, ranchers and businesses.”
Calling the railroads “a lifeline for Montana,” Sen. Max Baucus, D-Mont., said he spoke with Buffett Tuesday and would continue to make sure “this deal works for our state.”
“It’s vitally important to our producers, to travelers and to our entire economy,” Baucus said. “Warren Buffett is known for investing in the future of America, and you can be sure I’ll be keeping a close eye to make sure Montana producers get a fair shake on shipping rates.”
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Montana Farmers Union president Alan Merrill warned that the deal could be bad for farmers who ship grain on the railroad.
“Montana’s farmers have been in a captive shipper situation for years, with BNSF controlling more than 90 percent of the rail miles in Montana, “Merrill said. “This purchase will not diminish that market dominance or its detrimental effect on Montana’s farmers. In fact, the purchase could lead to more consolidation and concentration of the rail industry.”
Merrill said that agriculture generates a great deal of wealth for Montana.
“Our goal for Montana’s farmers is not expected to change,” he said. “We will continue to work at the federal legislative level and strongly urge Congress to continue to move forward with plans to overhaul the railroad regulatory oversight system.”
Jake Cummins, executive vice president of the Montana Farm Bureau Federation, said there is no way to know yet what the deal may mean for farmers.
“All there is for us to depend on is assurance from BN management that their operations will remain unchanged in Montana,” Cummins said. “There’s no logical expectation they’re going to do anything disruptive. Right now, I don’t think we’re going to see any change.”
Buffett’s history shows he invests in companies that “are considered solid and dependable,” Cummins said. “From our standpoint, we should be able to count on them to provide solid and reliable transportation to get our goods to market.”
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Big Sandy farmer Lochiel Edwards said: “It’s my belief that Buffett is buying the company along with its management. I’m not concerned because he likes the management and he’s not going to change it.”
Edwards was a key negotiator when the state’s largest grain groups – the Montana Farm Bureau Federation and Montana Grain Growers – approved a contract to mediate shipping disputes with BNSF.
Billings transportation consultant Terry Whiteside said this buyout could provide BNSF with investment capital and make it more dominant among the remaining four major U.S. railroads. But he also warned about the downside for Montana.
“Montana is the single-most dominated rail state in the union and this purchase certainly won’t diminish that concentration,” he said.
In addition to controlling BNSF, on June 30 Buffett owned 1.9 percent of Union Pacific and 0.5 percent of Norfolk Southern, according to Thomson Reuters news service.
“Today there are just four Class 1 railroads that control over 94 percent of the traffic in the country,” Whiteside said. “So the question is could there possibly be a BNSF and NS merger in the future?”