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Montana report: BNSF charges 'excessive' rates and provides shippers 'poor' service; BNSF: Report is 'inaccurate and distorted'


In addition to paying the highest rail rates in the country, Montana shippers often receive second-rate rail service. So says Montana Attorney General Steve Bullock, who yesterday released a report entitled “Railroad Rates and Service Provided to Montana Shippers.”

Conducted in response to concerns raised by Montana’s legislature in 2007, the report found that BNSF Railway Co. controls 95 percent of freight-rail transportation in the state, the lack of rail competition makes Montana shippers the most captive in the nation and those shippers pay the highest rates in the country.

Of the five states with the largest volume of wheat shipped by rail in 2006, Montana shippers paid $3,454 per carload compared with $2,623 for Kansas shippers, $2,842 for Nebraska shippers and $3,336 for North Dakota shippers, the report states. In addition, Montana shippers paid $33 per ton compared with $26 in Kansas, $27 in Nebraska and $32 in North Dakota.

“The total overcharge by BNSF of Montana wheat shipments is estimated between $19 million and $50 million annually,” the report states.

In addition, a “drastic decrease in the number of grain elevators over the past two decades — due in large part to the business practices of the largest railroad in the state — has resulted in less reliable [rail] service at the elevators and greater distances to haul grain and other commodities to reach them,” according to the report.

"The lack of rail competition has caused both excessive freight rates and poor service," said Montana Gov. Brian Schweitzer in a prepared statement. "Our farmers, ranchers and other rail shippers deserve better."

Schweitzer plans to join Bullock in pushing for federal relief. They also will continue to work through the state’s Rail Service Competition Council, which was created in 2005 to promote rail service and competition in Montana. In addition, Schweitzer and Bullock affirmed their commitment to a recent arbitration agreement reached between BNSF and Montana agricultural advocacy groups.

However, BNSF officials “strongly disagree” with the report, which “inaccurately portrays BNSF rates and service,” they said in a statement.

The report “paints a distorted view" of the railroad's rates by using older 2006 data that is misleading, they said. BNSF’s tariff rates for Montana have not materially increased since 2005, but costs have. So, revenue-to-variable cost ratios reported in the study are “obviously inflated,” BNSF officials said.

"Contrary to this report, BNSF is doing great things for Montana producers and is providing best-of-class service at reasonable rates, which enhances Montana producers' ability to compete in world markets," said Kevin Kaufman, BNSF group vice president, agricultural products.

During the past several years, BNSF officials have met with Montana producers on a regular basis to discuss and resolve rate, service, fuel surcharge and other issues. In addition, BNSF placed an ombudsman in Montana, developed an Ag Rail Business Council, and recently signed a mediation and arbitration rate dispute agreement with the Montana Grain Growers Association and Montana Farm Bureau Federation, BNSF officials said.

“We have entered into a voluntary arbitration and mediation process that will hold us accountable and bring transparency to the process,” said Kaufman. “If Montana shippers are being charged excessive freight rates for substandard service, why would we subject ourselves to this process?"

Contact Progressive Railroading editorial staff.

More News from 2/27/2009