(The following column by Chuck Taylor appeared on the Journal of Commerce website on June 28, 2010. Chuck Taylor is the former vice president of the Consumer Products Business Unit at BN, and participated on a World Bank projects with Mercer Management Consultants to reform railways in the former Soviet Republic of Kazakhstan. Taylor also founded the group Awake!)
WASHINGTON, D.C. — When Warren Buffett bought BNSF, I thought it was a curious move for two reasons. First, the coal issue. If things haven’t changed since I was at BNSF, the company makes most of its money hauling coal. I wondered if Buffett had considered that coal is a fossil fuel under attack for many reasons and ultimately there would be some restrictions on coal. However, I also believe that coal will be a source of electricity for some time. Maybe he thinks he can make it up before changes come.
The other reason involves my belief that higher oil prices will cause globalization to slow and impact the fastest growing segment of railroad growth (intermodal) although intermodal was never that profitable, at least for BN.
So I questioned Buffet’s decision as sound since he is the richest man in the world. I do recognize, on the other hand, that one could never duplicate BNSF and rails could become an important part of solving our energy issues – although probably only with a lot of government help.
While they want everyone to believe that railroads are titans of capitalism, few industries have benefited more for government largess and now it appears they are getting in line again. My initial reaction to the recent testimony by AAR’s President and CEO Edward R. Hamberger before the Congressional Coal Caucus was that the railroads didn’t bother to wait for a disaster to strike before they were way out front with a preemptive call for a government bailout.
As an aside, when I ran the Real Estate Department for BN we were still selling land that had Abraham Lincoln’s signature on the deed to the railroad.
I also wonder how hard railroads will fight against real change in our nations energy mix. Anything that nicks coal – natural gas, nuclear, wind, solar, geothermal – will have an impact on coal and we as a nation will need all of this.