Category: BNSF

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The Surface Transportation Board has refused to hear Tesoro’s petition on a rail service dispute between the Swinomish Indian Tribal Community and BNSF Railway.

BNSF Railway’s oil train service to two refineries in the state of Washington could be in jeopardy due to an ongoing Federal lawsuit.

Filed in April 2015, the lawsuit stems from the Swinomish’s assertion that the railroad is violating the terms of a Right-of-Way easement granted to allow the railroad to cross the reservation.

The Swinomish are concerned that trains carrying Bakken crude oil run over bridges spanning the Tribe’s fishing grounds in the Swinomish Channel and Padilla Bay.

The Easement Agreement enables BNSF to bring Bakken crude oil to the Tesoro refinery in Anacortes, Washington by crossing the portion of the Swinomish Indian Reservation located on Fidalgo Island in Skagit County, Washington.

Under the terms of the 1991 Easement Agreement, BNSF is allowed to run one 25-car train per day in each direction. The tribe sued in April 2015 contending that BNSF was running as many as six 100-car “unit trains” per week.

In petitioning to the Surface Transportation Board, Tesoro hoped to get the STB to declare that the dispute fell under its purview through its role in the regulation of the Interstate Commerce Act. However, the STB ruled that Tesoro is not a party to the Swinomish’s dispute with BNSF.

A ruling in favor of Tesoro would have benefitted BNSF, as the refiner claims that as a shipper it has a right to receive rail service.

“Given that the district court has already denied a motion to refer the preemption issue to the board, that courts as well as the board can decide issues involving … preemption in the first instance, and that the court has clearly expressed its preference to decide the preemption issue itself, the board will decline to issue a declaratory order in this matter,” the STB said in its ruling.

Contentious History of Rail

Train travel across the tribe’s land has a long contentious history, with the original track having been laid in the late 1800s without consent from the Swinomish or the U.S government. The tracks cross the northern edge of the reservation, and the Swinomish, as the present day political successor-in-interest to certain of the tribes and bands that signed the 1855 Treaty of Point Elliott, first sued the railroad in 1976, alleging a century of trespassing on tribal land. The resulting settlement led to the 1991 Easement Agreement that allowed only the 25-car train limit without the Tribe’s permission.

The Tribe contend in its lawsuit that “BNSF never notified the Tribe that it intended to exceed the limitation of one train of 25 cars or less, nor did it request permission from the Tribe before it began to do so.”

A Deal is a Deal

“A deal is a deal,” said Swinomish Chairman Brian Cladoosby. “Our signatures were on the agreement with BNSF, so were theirs, and so was the United States. But despite all that, BNSF began running its Bakken oil trains across the Reservation without asking, and without even telling us. This was exactly what they did for decades starting in the 1800s.”

“We told BNSF to stop, again and again,” said Cladoosby. “We also told BNSF: convince us why we should allow these oil trains to cross the Reservation. And we listened for two years, even while the trains kept rolling. But experiences across the country have now shown us all the dangers of Bakken Crude. It’s unacceptable for BNSF to put our people and our way of life at risk without regard to the agreement we established in good faith.”
Under the terms of the Easement Agreement, the Tribe agreed not to “arbitrarily withhold permission” for BNSF’s request to increase the number of trains or cars.

Arbitrary or Not?

The Tribe contends that its refusal to grant permission is not arbitrary and is “Based on the demonstrated hazards of shipping Bakken Crude by rail, paired with the proximity of the Right-of-Way to the Tribe’s critical economic and environmental resources and facilities — and the substantial numbers of people who use those resources and facilities on a daily basis — the Tribe is justifiably and gravely concerned with BNSF’s shipment of Bakken Crude across the Right-of-Way in a manner and in quantities at odds with the explicit terms of the Easement Agreement.”

In addition to Swinomish’s concerns to possible environmental impacts on the Tribe’s fishing grounds, hey also note that the track runs across the “heart of the Tribe’s economic development enterprises,” which includes the Tribe’s Swinomish Casino and Lodge, a Chevron station and convenience store, and an RV Park, as well as a Tribal waste treatment plant.

The Tribe noted that these enterprises are the “primary financial source for funding of the Tribe’s essential governmental functions and programs.”

The 1991 Easement Agreement granted the Right-of-Way for an initial 40-year term, along with two 20-year option periods. The current agreement will expire no later than 2071.

The tribe is seeking a “permanent injunction prohibiting BNSF from (1) running more than one train of twenty-five cars or less in each direction over the Right-of-Way per day and (2) shipping Bakken Crude across the Reservation.”

The Swinomish are also seeking monetary damages for the prior trespasses and breach of contract in an amount to be determined at trial.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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American Crystal Sugar’s new bulk-sugar storage facility will mean plenty of business for BNSF Railway.

The $40 million facility in Montgomery, Illinois features a 26,000-square-foot storage dome and a 17,000 square-foot transfer facility.

Key to the facility is 5,500 feet of track space for BNSF trains hauling sugar to and from the facility.

The new facility enables American Crystal Sugar to store product closer to its customers in the Midwest, and according to BNSF, has the capacity to store 60,000 metric tons of sugar, and nearly twice that much will be transferred to customers each year.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Beginning Monday, Sept. 12, BNSF Railway (BNSF) will offer intermodal customers a new service option to move freight between the Pacific Northwest and Texas.

Shippers who move commodities and a wide range of consumer goods between Portland, Oregon, or Seattle and Dallas/Fort Worth (AllianceTexas) will now be able to reduce their transit times by up to two days when compared to rail transit time options currently in the marketplace.

The new BNSF service will be comparable in speed to single-driver, over-the-road options.

“We regularly work with our customers to identify and offer new and better transportation solutions to make their supply chains more effective. So we are constantly looking for opportunities to help meet consumer demands and this new service checks all the right boxes for adding efficiency to the marketplace,” said Katie Farmer, group vice president, Consumer Products. “With an economy as dynamic as ours, BNSF is focused on delivering options that strengthen the competitive advantage of U.S. companies through our country’s supply chain.”

This new service option, the first of other new routes that will be announced and rolled out over the next year, comes online just in time for the fall fruit harvest in the Pacific Northwest and will help local businesses get their products to market more efficiently. Faster, more direct routing means agriculture producers can move apples and other produce to southern markets at the peak of freshness.

By leveraging underutilized capacity in the central section of BNSF’s network, this new service option means that BNSF will offer expedited service for customers who wish to have their shipments arrive in Dallas/Fort Worth on the morning of the fifth transit day. From BNSF’s intermodal facility located just north of Fort Worth, customers can reach any of the major Texas or Oklahoma markets with a short-haul trucking option to move containers and trailers for dry or refrigerated goods. Northbound service will also be faster operating with both expedited service arriving on the sixth morning and standard service reaching its destination on the sixth day.

Traffic along the route will run Monday through Friday, in both directions. This route includes a refueling option along the way for refrigerated equipment that carry temperature-sensitive equipment.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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This has been a year to forget for BNSF Railway, with low oil prices and slack coal demand hitting the nation‘s top freight railway hard. Fortunately, there is finally some good news, as record grain production is boosting BNSF’s grain shipments.

Bin-buster

U.S. wheat and corn farmers are calling this year’s record crops a “bin-buster.” The crop yields will likely set a new all-time high as compared to the final yield in 2015. Grain production has been so good that silos in some areas are already reaching capacity, even before the September 1 start of the harvesting of the fall wheat crop.

Near Hutchinson, Kansas, an old runway is even being used to pile up wheat due to a lack of grain elevator storage space.

Even before the fall harvest, BNSF’s grain shipments are already up a dramatic 25.95 % so far in the 3rd quarter, and are up a very solid 7.91 % year-to-date.

A key factor for BNSF in its increased capacity for grain shipping come from its investment in Great Northern Corridor track upgrades made in 2013-2015.

Back in June of 2014, the average delay for grain shipping was running at 32 days. The improved track and signaling on the Great Northern Corridor, coupled with oil trains running at a level that is half what it was just a year ago, have enabled BNSF to move the grain without significant delays.

BNSF’s grain shuttle trains have hit record numbers, with 130 shuttle trains shipped or scheduled to be shipped during July and August

An additional 137 of BNSF’s 110-car unit trains are scheduled to transport the fall harvest of corn, soybeans and other late season crops.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Will BNSF be able to build its proposed facility at the Port of Los Angeles? The answer could be in the hands of the City of Long Beach.

A new ruling by California superior court judge Barry P. Goode in favor of Long Beach and the other litigants, and against BNSF Railways, found that the environmental impact report prepared by BNSF needed to be “a more robust and accurate analysis.”

The ruling puts the $500 million rail-yard project at the Port of Los Angeles in jeopardy unless BNSF can quickly work out its differences with environmental groups and the City.

Dubbed the Southern California International Gateway (SCIG), the project would create an intermodal rail facility near the ports of Los Angeles and Long Beach. The ports are located approximately 25 miles south of downtown Los Angeles. The port complex is composed of approximately 80 miles of waterfront, and 7,500 acres of land and water, with approximately 500 commercial berths.

In April, judge Goode put a halt to BNSF’s planned 153-acre intermodal rail facility, siding with citizens’ groups suing over environmental concerns.

The Natural Resources Defense Council, which is the lead plaintiff in the lawsuit, filed the lawsuit in June 2015 in Los Angeles Superior Court on behalf of Harbor residents living near the proposed development that would be built on Port of Los Angeles property.

The Plaintiffs contend the proposed Southern California International Gateway rail yard project violates the California Environmental Quality Act and the state and federal Civil Rights Acts.

Specifically, they assert that the facility will increase cancer rates, chances of children developing asthma, and add to chronic air pollution plaguing the region.

The SCIG is subject to the California Environmental Quality Act, a statute that requires state and local agencies to identify the significant environmental impacts of their actions and to avoid or mitigate those impacts, if feasible.

BNSF has 60 days from Judge Goode’s most recent ruling to appeal, and it’s unclear whether the SCIG is salvageable.

A Call to Work Things Out

The Long Beach Press Telegram has called for all sides to resolve the issues, in order to not lose the jobs and other benefits the project would bring.

In an editorial published on July 13, the paper stated that, “The editorial board repeats its position that all sides should sit down and try to work out a solution to this issue.”

The paper went on to state: “We have said there are many positives to the project for the entire region. It will provide hundreds of jobs and help relieve congestion near the ports, and make them more competitive with rival ports.

But we’ve also said this economic development should not come at the expense of the health of students and 30,000 residents who live east of the proposed project.”

The mayor of Long Beach, Robert Garcia, noted the impact of the most recent ruling, stating in The Long Beach Press Telegram that “It certainly strengthens our hand, definitely.” Garcia added that “The city is now in a position where we have a court standing on our side.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Is the Southern California International Gateway dead? Both environmental groups and BNSF Railways are asking the same question.

In April 2016, a California superior court judge put a halt to BNSF’s planned 153-acre intermodal rail facility, the SCIG, siding with citizens’ groups suing over environmental concerns.

Judge Barry Good of the Contra Costa Superior Court sided with the Natural Resources Defense Council, which is the lead plaintiff in the lawsuit.

The environmental group filed the lawsuit in June 2015 in Los Angeles Superior Court on behalf of Harbor residents living near the proposed development that would be built on Port of Los Angeles property.

The Plaintiffs contend the proposed Southern California International Gateway rail yard project violates the California Environmental Quality Act and the state and federal Civil Rights Acts.

Specifically, they assert that the facility will increase cancer rates, chances of children developing asthma, and add to chronic air pollution plaguing the region.

At the time, BNSF officials were quick to respond to the ruling. “Upon initial review, we are disappointed, because the decision appears to delay a nationally and regionally significant transportation infrastructure.”

In May, at the Berkshire Hathaway annual meeting, BNSF officials seemed unclear whether the proposed facility was dead or not, even as they stressed that it would bring some substantial environmental benefits.

BNSF notes that the project would clean up an existing truck yard, and BNSF would be investing over $100 million in green technology. The Port of LA’s draft environmental review found that SCIG would have a positive impact on traffic, both locally and regionally, by eliminating millions of truck trips from the 710, reducing congestion near the ports and along the 710 corridor.

Gateway to the Nation

If there is a gateway to the U.S. it is the ports of Los Angeles and Long Beach. Some 40-percent of imported goods sold across the country are shipped through the two ports.

The SCIG intermodal rail facility would be near the ports of Los Angeles and Long Beach. The ports are located approximately 25 miles south of downtown Los Angeles. The port complex is composed of approximately 80 miles of waterfront, and 7,500 acres of land and water, with approximately 500 commercial berths.

The ports include: automobile, container, omni, lumber, and cruise ship terminals; liquid and dry bulk terminals; and extensive transportation infrastructure for cargo movement by truck and rail.

Time to Work it Out?

While environmental groups, the City of Long Beach, and the local school district have decried the project over environmental fears, the local newspaper, The Long Beach Press Telegram, is calling for all sides to resolve the issues, in order to not lose the jobs and other benefits the project would bring.

In an editorial published on July 13, the paper stated that, “The editorial board repeats its position that all sides should sit down and try to work out a solution to this issue.”

The paper went on to state: “We have said there are many positives to the project for the entire region. It will provide hundreds of jobs and help relieve congestion near the ports, and make them more competitive with rival ports.

But we’ve also said this economic development should not come at the expense of the health of students and 30,000 residents who live east of the proposed project.”

Is There a Solution?

The Port of LA’s draft environmental review did find that the SCIG will have a positive impact on traffic, both locally and regionally, by eliminating millions of truck trips from the 710, and reducing congestion near the ports and along the 710 corridor.

NRDC attorneys and scientists have suggested several solutions to reduce the anticipated pollution associated with the project:

1.) Utilization of cleaner Tier 3 and Tier 4 locomotives instead of older, more polluting locomotives;
2.) Expand on-dock rail to eliminate the need for thousands of additional short-haul truck trips;
3.) Use zero-emission container movement systems.

Jobs and the Environment

Perhaps the Press Telegram is right, and the Southern California International Gateway project is not dead after all. If it can be can be built in a way that brings needed jobs and solves the environmental hurdles, it may just surprise everyone and have a long life.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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A head-on collision between two BNSF freight trains on Tuesday in the Texas Panhandle highlights the need for Positive Train Control technology. The collision, which killed three crew members and left one injured, also left box cars blazing and torrents of heavy smoke that could be seen for miles.

Each train had two crew members, and one crew member jumped to safety just before the trains collided.

According to BNSF, the remains of two BNSF employees have been recovered, while the third missing employee is still unaccounted for. The fourth employee remains in stable condition at a local hospital.

The investigation is now being overseen by the National Transportation Safety Board (NTSB).

Bad Timing

Coal shipments are down, oil shipments are down, metal ore shipments are down, in fact, BNSF Railway’s total carloads including intermodal freight are down a dramatic 8.45-percent year-to-date as compared to 2015.

The one thing that is up is the cost of installing Positive Train Control (PTC), the federally mandated safety system that was supposed to be on all Class 1 railroad trains by December 31, 2015.

When the railroads couldn’t meet Congress’s deadline, it was pushed back to 2018, giving the railroads a breather.

What BNSF didn’t get a breather from is the $200-$300 million annual cost of installing the system. The cost is huge, and Warren Buffett reiterated that figure at the 2016 Berkshire Hathaway annual meeting.

What is Positive Train Control?

PTC is a communication-based/processor-based train control technology designed to automatically stop a train in order to prevent accidents.

Calls for improved safety systems, including PTC have only gotten louder since high profile accidents such as Amtrak’s May 12, 2015 derailment in Philadelphia, Pennsylvania. That accident, which was caused by a passenger train going 102 mph in a 50 mph zone, and had 8 fatalities and over 200 injured, was thought to have been avoidable if the train had PTC.

The High Cost of Safety

In a September 9, 2015, letter from Carl R. Ice, BNSF’s President & CEO, to U.S. Senator John Thule, the Chairman of the Committee on Commerce, Science and Transportation, BNSF noted that the total cost for deploying PTC would exceed $2 billion.

“PTC deployment is an unprecedented technical and operational challenge that requires the entire U.S. railroad network to develop, test and implement this new safety system, and avoid impacts to network capacity and fluidity as we do,” Ice explained.

A Tough Time for BNSF

Just a year ago, BNSF’s business was booming with its mobile pipeline oil trains carrying records amounts of crude oil from the Bakken Formation. Now, the cost of PTC comes as BNSF is slashing expenses. The railroad has mothballed hundreds of locomotives, initiated selective employee buyouts, and laid off 4,600 employees, which represent a full 10% of its workforce.

Those layoffs include 62 management positions that come as a result of a realignment that has the Class 1 freight railroad consolidating its operations organization from three regions down to two.

The new era of Positive Train Control is coming. It is necessary to bring a much needed new level of safety to America’s rail system, but for America’s Class 1 railroads (several of which are already pushing to extend the deadline to 2020) it’s also bringing lots of pain at a time when they can least afford it.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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With coal and petroleum carloads plunging, BNSF Railway continues to adjust to the new market reality of lower shipping volumes.

The numbers are grim. Coal carloads are down 36.39% year-to-date, and petroleum carloads are down 26.29%.

Total carloads, which includes intermodal has slumped 8.59% this year, as well.

BNSF has responded to the shipping downturn by idling hundreds of locomotives, selective employee buyouts, and laying off 4,600 employees, which represent 10% of the workforce.

Those layoffs now include 62 management positions that come as a result of a realignment that has the Class 1 freight railroad consolidating its operations organization from three regions down to two.

In a statement, BNSF noted that,“Realigning the operations organization responds to the changing business environment and helps us better align resources with our customers’ demand for freight service.”

While the future for crude oil volumes is cloudy at best, BNSF is already making plans for a post-coal world.

“We are seeing a fundamental, structural shift in the coal industry, with double-digit volume declines in the first quarter of 2016 alone and no expectation for a return to previous levels.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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The 45 locomotives now sitting idle in a Fargo, North Dakota trainyard highlight the continued slump in BNSF Railway shipping volumes.

BNSF also has 150 locomotives and rail engines sitting idle near Gillette, Wyoming, and dozens more in temporary storage in Oklahoma City.

The locomotives, which are lined up in an almost endless train, are just one physical manifestation of a dramatic drop in demand for coal, petroleum, and metals.

For the year to date, total carloads are down a precipitous 18.49%.

Coal shipments, which last year at this time had reached 826,353 carloads, are only at 520,742 carloads through May 9, 2016. The change represents a 36.98% decrease.

BNSF’s carload reports show that the drop in carloads was not just due to coal, but cut across a number of sectors.

Shipments of metal ores are down 36.76%. And with global oil prices still low, shipments of petroleum from the Bakken Formation are down a dramatic 26.89%.

Profits for the first quarter of 2016 were down 25%.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BNSF is responding to weak demand for coal and petroleum by lowering its rates for grain and pulse crops.

BNSF is trying to encourage grain producers to move some of their surplus out of storage and into the market.

“BNSF is always evaluating market-based conditions in evaluating rates and, as a result of our recent review, made the adjustments in the northern tier states,” John Miller, group vice-president of agricultural products, was quoted in the Farm and Ranch Guide.

It’s a far cry from May 2014, when BNSF was running two months and 500 car loads behind. Back then it was the overwhelming demand for BNSF’s mobile oil pipeline that was creating rail congestion as 100-car oil trains caused backlogs for grain shippers.

BNSF has cut its price for shipping grain by $100 a carload, and cut the rates $75 per carload for shipping pulse crops, such as peas and lentils.

BNSF is facing soft demand for coal, petroleum, and metallic ores that has only worsened as the year has gone on.

BNSF’s total carloads for coal are down 35.58% year-to-date through April 16, 2016, for petroleum they are down 26.6%, and for metallic ores, carloads are down 37.61%.

Combined carloads, including intermodal freight, are down 7.7% year-to-date from the same period in 2015.

The drop in shipping volume has the railroad idling hundreds of locomotives and furloughing some 400 employees.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.