It’s hard out there for captive shippers, or railroad customers who have access to only one rail service. Congressional attempts to curb railroad pricing power have faltered, and the Surface Transportation Board kicked a request for tougher switching rules down the road. And in November, shipper advocate Sen. Herb Kohl, D-Wis., will leave Congress.
Fortunately for captive shippers, they have a champion in Sen. Al Franken, D-Minn. The senator has repeatedly testified on the behalf of shippers at the STB, with his most recent appearance last week. Shippers told the STB that’s it’s unfair for them to pay higher rates to BNSF Railway because of the $8.1 billion premium Berkshire Hathaway paid to buy the railroad in 2010.
“I routinely hear from shippers in Minnesota that they do not feel there are real choices when it comes to shipping their goods by rail, and they don't feel they get a fair shake from the major railroads,” Franken told the board.
He said his father chose to open a quilting factory in Albert Lea, Minn., because a railroad went through the town. The railroad’s refusal to stop at Albert Lea helped lead to the shuttering of the factory two years later, Franken said.
“I tell that story, which is now 55-years-old, because I don't think much has changed for captive shippers like my dad over the last 55 years. If anything, things have only gotten worse,” he said.
Franken said using the $8.1 billion premium to determine the railroad’s cost base for shipper is unfair and will sent a message to “railroads that they can artificially inflate their assets.” He also criticized the STB for considering BNSF to be revenue inadequate, despite Berkshire Hathaway paying more than 30 percent of the trading price for the railroads shares.
“Most shippers facing this situation don't want to say anything publicly because they fear retaliation-and realize it would be a fight between David and Goliath,” Franken said. “In my view, that's one of the most telling signs that we do not have a competitive rail industry in America today.”