Category: BNSF

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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.

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Projected skyrocketing demand for plastic resin has BNSF Railway, resin packaging firm Packwell Inc., and real estate developer Hillwood proposing to build a plastics export packaging facility in North Fort Worth.

The facility will be located at the AllianceTexas development, Hillwood’s18,000-acre master-planned, mixed-use community located in north Fort Worth.

AllianceTexas offers a variety of commercial real estate options, including new industrial, office and retail space, and is anchored by the multi-modal inland port known as the Alliance Global Logistics Hub.

According to the trade association, the American Chemistry Council, export demand for plastic resin will grow dramatically over the next four years, with the demand level of $6.5 billion in 2014 increasing three-fold to $21.5 billion by 2020.

The boom in U.S. resin production is due in part to cheap natural gas available in Texas.

“The advantage of a facility at AllianceTexas is that it offers superior rail connectivity, access to the largest array of ocean steamship lines, and we can deliver the facility to Packwell in time to support the rapidly increasing demand,” notes Hillwood President Mike Berry.

Packwell is already one of the largest resin bagging companies in North America with over 160 thousand square meters of warehouse facilities.

The new facility will allow bulk hopper cars of plastics resins to arrive by BNSF trains from Houston where they will be packaged for shipping. After packing the shipments will again be moved by BNSF to steamship lines that operate between the BNSF Alliance Intermodal terminal and Asia via West Coast ports in Los Angeles, Long Beach and Oakland, California.

© 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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Nationwide unemployment in the U.S. is only five-percent, and the country has come a long way from the Great Recession, but the same can’t be said for BNSF Railway, which is laying off employees due to cratering coal and oil volumes.

BNSF is furloughing roughly ten-percent of its workforce, according to Chairman Matthew Rose, who spoke at the Montana Energy conference in Billings, Montana.

While the U.S. economy added some 215,000 jobs In March 2016, BNSF’s planned layoffs stand at roughly 4,600 personnel, some ten-percent of its workforce.

Lines of idled BNSF locomotives that are in storage on tracks in rail yards near Oklahoma City and Wichita, Kansas, are a visual reminder that 2016 car loads are down dramatically from 2015 levels.

BNSF’s total carloads for coal are down 32.86% year-to-date through March 28, 2016, for petroleum they are down 26.25%, and metallic ores carloads are down 33.44%.

Total carloads including intermodal freight are down 6.07% year-to-date from the same period in 2015.

Grain Shippers Benefit

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

For BNSF, a tough year keeps getting tougher.

© 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 California superior court judge has put a halt to BNSF’s planned 153-acre intermodal rail facility, the Southern California International Gateway, 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.

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.”

Gateway to the Nation

Some 40-percent of imported goods sold across the country are shipped through the ports of Los Angeles and Long Beach.

The 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.

Environmental Hazard or Asset?

While environmental groups, the City of Long Beach, and the local school district decry the project, BNSF claims the project will actually bring environmental benefits, as it will be cleaning up an existing truck yard and investing over $100 million in green technology.

The Port of LA’s draft environmental review found that SCIG will 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.

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.

© 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 low crude oil prices putting a major dent in BNSF Railway’s shipping demand, the freight railroad has cut its price for shipping grain by $100 a carload.

BNSF also cut the rates $75 per carload for shipping pulse crops, such as peas and lentils.

BNSF’s total carloads for coal are down 32.2% year-to-date through March 21, 2016, for petroleum they are down 26.57%, and for metallic ores, carloads are down 32.53%. The drop in shipping volume has the railroad idling hundreds of locomotives.

BNSF’s drop in rates has especially benefits Montana’s farmers. Lola Raska, the Executive  Vice President of the Montana Grain Growers Association, noted that the cut in shipping costs helps the farmers that held on to their wheat in the hopes that demand would firm up.

Approximately 80-percent of Montana’s wheat is moved by rail for export.

In November 2015, Combined U.S. rail grain shipments hit their highest levels in five years, and the number of days behind schedule dropped dramatically.

At its low point in June of 2014, the average delay for grain shipping for BNSF was a whopping 32 days, but that delay has now evaporated due to the drop in carloads of coal, petroleum, and metallic ores, and through improvements in track and signalling that the railroad made in 2015.

© 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 Swinomish Indian Tribal Community’s lawsuit against BNSF Railway is not preempted by the Interstate Commerce Commission Termination Act according to the tribe.

In papers filed in a Washington federal court as a part of their ongoing lawsuit, the tribe argued that “Actions to enforce a railroad’s voluntary contractual undertakings are not preempted by the ICCTA, because such voluntary commitments are themselves an admission by the railroad that their enforcement would not unreasonably interfere with railroad operations.”

A decision against BNSF could severely restrict the number of trains and the total number of permissable railcars that the railroad can run daily on track that crosses Swinomish tribal land on its way to the Tesoro refinery in Anacortes, Washington. It could also make BNSF liable for damages for prior trespasses and breach of contract.

The Swinomish Indian Tribal Community initially filed their lawsuit in March 2015. In September 2015, a federal judge ruled affirming the Native American tribe’s right to sue the railroad for violating the terms of a Right-of-Way easement granted to allow the railroad to cross the reservation.

The Easement Agreement enables BNSF to bring Bakken crude oil to the Tesoro refinery by crossing a 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 contending that BNSF was running as many as six 100-car “unit trains” per week.

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.

Is it Arbitrary?

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.”

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. They also noted 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.