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10/9/2012


Rail News: BNSF Railway
BNSF on Rockefeller's call for federal review of Berkshire acquisition: Short-line ownership issue will be resolved quickly



U.S. Sen. John "Jay" Rockefeller (D-W.Va.) recently sent a letter to the Surface Transportation Board (STB) expressing concerns about the 2010 acquisition of BNSF Railway Co. by Berkshire Hathaway Inc.

At the time, Berkshire Hathaway unknowingly failed to acknowledge it acquired ownership of two short lines as part of the BNSF deal, which should have been subject to a statutorily-required review by the STB, wrote Rockefeller, who chairs the Senate Committee on Commerce, Science and Transportation.

"These multi-rail holdings raise questions about the federal approval process of the acquisition in 2010," he wrote, adding that he has requested a federal review of the purchase.

Last month, Berkshire Hathaway and BNSF officials received a letter from Lucille Marvin, the director of the STB's Office of Public Assistance, Government Affairs and Compliance, stating they had failed to properly acknowledge the acquisition of the short lines, the White City Terminal Union and CBEC Railway Inc. In a response letter, Berkshire Hathaway and BNSF officials informed the board that they plan to divest of the two short lines "to persons that are neither are rail carriers nor own other rail carriers so that neither such divestiture would be subject to STB jurisdiction."

Berkshire Hathaway and its subsidiaries currently are valuing the short lines, and identifying and contacting potential transferees, they wrote. Berkshire Hathaway and BNSF plan to divest of the short lines no later than Dec. 31, and update the STB on the divestitures' progress on Nov. 1 and Dec. 1.

In response to Rockefeller's letter to the STB, BNSF officials released a statement Oct. 5 that stresses the Class I "has moved quickly" to resolve the issue.

"The situation is unique because, despite a comprehensive review of the assets of both companies, we only recently became aware that two very small rail lines had been classified as rail carriers, and therefore were subject to STB review," they said. "The two rail carriers combined operate only 18 miles of track and are innocuous holdings of two of the nearly 2,000 subsidiaries within Berkshire's operating business groups. Nevertheless, this oversight was technically out of compliance with Surface Transportation Board regulations, which give that body the authority to review the merger of companies that own rail carriers."

BNSF voluntarily disclosed the matter to the STB, has identified a "sensible and equitable solution" by committing to sell both of the operations by year's end, and has pledged to report its progress to the STB every 30 days, BNSF officials said.

"In our view, any other resolution would be neither sensible nor equitable. No additional regulatory action would produce any tangible benefit to anyone who is served by or works for BNSF," they said. "Both Berkshire and BNSF went to great lengths before the merger to meet the requirements of all regulatory bodies, including the Department of Justice and the Federal Trade Commission. These steps included Berkshire divesting approximately $500 million in interests in other railroads."

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