Tag: BNSF

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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.

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BNSF Railway has budgeted $130 million for Minnesota in 2016. The money will be used for replacing and upgrading rail, rail ties and ballast. BNSF has already spent $550 million in Minnesota over the last three years.

In 2015, BNSF spent $326 million in Minnesota, which included 13 miles of new double tracks in the Staples area, new track in the Twin Cities, and upgrading a connection with another railroad in the Twin Cities.

With a slowdown in shipping revenues, last year’s record $6 billion in capital spending by BNSF will be cut 26% to $4.3 billion for 2016, which represents the first reduction in spending in six years.

Heavy spending in 2015 helped resolve shipping bottlenecks that outraged grain producers when their shipments experienced extensive delays in 2014. The investment included 82 miles of new double track on the northern tier.

“Each year, our capital plan works to balance our near term need to regularly maintain a vast network that is always in motion with the longer term demand outlook of our customers,”said Carl Ice, BNSF president and chief executive officer. “While our customers’ demand outlook has softened in a number of sectors, regular maintenance of our network continues to drive the majority of our annual investments and helps ensure we continuously operate a safe and reliable network.”

© 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.

Some 150 BNSF Railway locomotives are sitting idle on tracks between Rozet and Gillette, Wyoming, as BNSF’s 2016 shipping slump continues to worsen.

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 whopping 15.6-percent.

Coal shipments, which last year at this time had reached 233,205 carloads, are only at 165,689 carloads through February 7, 2016. The change represents a 28.95% decrease.

BNSF spokesman Matt Rose noted that the drop in carloads was not just due to coal, but cut across a number of sectors.

As he noted, it’s not just coal shipments that are lagging, as shipments of metal ores are down 35%, and shipments of iron and steel scrap are down 25.65%

With global oil prices in the doldrums, shipments of petroleum are down a dramatic 24.63%.

BNSF is not waiting for further poor results to trim its costs, and has already announced a 26% cutback in capital spending.

So far, it’s a hard winter for BNSF.

© 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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It’s early, but BNSF Railway is off to a weak start in 2016 with total shipping slipping 3.2% from the same period in 2015.

The weak start is industry-wide, as combined railroad freight volumes for all U.S. railroads are down 2.5 percent from 2014.

BNSF is not waiting for further poor results to trim its costs, and has already announced a 26% cutback in capital spending.

As of the week ending January 16, 2016, BNSF’s coal shipments were down a whopping 28.19%, petroleum shipments were down 22.21%, and the shipment of metal ore was down 32.29%.

Also down 11.66% was the shipment of sand and gravel, which are used in fracking.

On the positive side, shipments of containers were up a solid 13.34 %, and shipments of grain and chemicals were up 8.6% and 8%, respectively.

Last year’s record $6 billion in capital spending will be cut 26% to $4.3 billion for 2016, which represents the first reduction in spending in six years.

Heavy spending in 2015 helped resolve shipping bottlenecks that outraged grain producers when their shipments experienced extensive delays in 2014. The investment included 82 miles of new double track on the northern tier.

“Each year, our capital plan works to balance our near term need to regularly maintain a vast network that is always in motion with the longer term demand outlook of our customers,”said Carl Ice, BNSF president and chief executive officer. “While our customers’ demand outlook has softened in a number of sectors, regular maintenance of our network continues to drive the majority of our annual investments and helps ensure we continuously operate a safe and reliable network.”

On the national level, BNSF’s numbers are a barometer that confirms that U.S. economic growth is slowing. The Federal Reserve’s letter on January 27 noted that “net exports have been soft and inventory investment slowed.”

With weakness in coal and oil shipments, BNSF has been laying off railroad workers in Minnesota and North Dakota. Roughly 100 employees have been affected.

© 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 U.S. railroad consolidation that is slowly chugging down the track with Canadian Pacific’s $28 billion bid to acquire Norfolk Southern will be derailed if two senior Democratic senators have their way.

Peter DeFazio (D-Ore.), the House Transportation and Infrastructure Committee’s ranking member, and Mike Capuano (D-Mass.), the ranking member of the Railroads, Pipelines, and Hazardous Materials Subcommittee, have written a letter to the Surface Transportation Board (STB) asking for the STB to nix any railroad mergers on the ground that it would reduce competition.

In their view, a Canadian Pacific merger with Norfolk Southern would upset the balance of power that currently exists between the seven Class 1 railroads, and would likely lead to another round of consolidations.

If Canadian Pacific and Norfolk Souther tie-up, another possible merger would be BNSF Railway with CSX to create a second railroad that stretches coast-to-coast.

BNSF Railway chairman Matt Rose recently indicated that BNSF is interested in either Norfolk Southern or CSX depending on the outcome of Norfolk Southern’s status.

“I’ve had general conversations with both of them and told them that we’re going to watch this with interest,” Rose recently told Bloomberg News.

However, in their letter to the STB, DeFazio and Capuano stated that they “have significant concerns with CP’s proven track record of boosting profits at the expense of its workforce” and “further consolidation of an already healthy industry is unwarranted.”

It’s an opinion that Norfolk Southern anticipated thanks to Norfolk Southern’s white paper by former Surface Transportation Board commissioners Francis Mulvey and Charles Nottingham, which concluded that, “As simple background, rail carriers cannot assume control of another carrier without prior STB approval. The STB’s approval process can last between 19 and 22 months. Current STB regulations, adopted in 2001, set a high bar for approval of a proposed major merger and related voting trust based on an untested public interest standard. In our expert opinions, the STB is not likely to approve CP’s proposed voting trust or the CP+NS merger.”

Now, as Congress starts to weigh in, it looks all the more doubtful that truly national railroads are in the offing.

© 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 new climate change agreement signed in Paris may mark the long term death of coal as a primary energy source, but in the short term, coal shipments have stayed surprisingly strong.

BNSF Railway, which is one of the nation’s largest coal shippers, has seen its year-to-date coal shipping actually rise not drop.

The rise is surprising, as coal plants have been closing, as the need to meet costly tougher emissions standards makes them uncompetitive, especially with a flood of cheap natural gas, and the ever dropping price of solar and wind generation.

Millions of Car Loads

BNSF’s total car loads of coal through December 12, 2015, were at 2,127,879, as compared to 2,177,183 car loads for the same period in 2014. The 2015 number represents a solid 2.3% increase over 2014.

There’s no doubt that as more coal fired generating plants close around the world, coal will become a fuel of the past, but for now, it’s still a key part of BNSF’s freight hauling revenues, and there’s no lump of coal in BNSF’s Christmas stocking.

© 2015 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.