Tag: BNSF

Berkshire Open to Merging BNSF with Norfolk Southern or CSX

Post author By David Mazor
Post date December 16, 2015

(BRK.A), (BRK.B)

With Norfolk Southern the subject of repeated bids from Canadian Pacific, Berkshire Hathaway is considering jumping into the bidding too. And, while everyone has been focusing on Norfolk Southern, BNSF has interest in CSX as well.

“CSX would be at an enormous (competitive) disadvantage and so there would be another step towards consolidation,” Matt Rose explained to Reuters.

As for Norfolk Southern, the railroad rejected Canadian Pacific’s initial offer in early November and its most recent offer last week. There are significant questions on whether regulators would approve the deal, even if the price was right.

Grossly Inadequate

“Canadian Pacific’s revised, reduced proposal is not only less than what the Norfolk Southern board has already found to be grossly inadequate, it is even more uncertain and risky given the decrease in the cash consideration,” said Chairman, President and CEO James A. Squires in a statement released by the railroad. “In addition to being grossly inadequate, the proposal is based on a voting trust structure that we reviewed and do not believe would be approved by the STB. Yesterday we released a white paper by two former STB chairmen who believe that the STB would not approve any voting trust structure because there is no basis to determine that it would be in the public interest.”

STB Approval?

Norfolk Southern’s white paper by former Surface Transportation Board commissioners Francis Mulvey and Charles Nottingham 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.”

BNSF Jumps Onboard

BNSF Railway chairman Matt Rose has 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 told Bloomberg News.

While the path to North American railroad consolidation is a bit murky, What is clear is that BNSF is unwilling to have the current balance of power in North American freight hauling shift too heavily to any one railroad.

As for a potential price, anything in the $27-$40 billion range is within Berkshire’s means with its cash on hand and strong financing ability. The company is is still in the middle of its $32 billion acquisition of aerospace manufacturer Precision Castparts, but sometimes there is a parade of elephants.

(This article contains updated information from when it was first published.)

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.

Tags BNSF

BNSF

BNSF’s Proposed Intermodal Facility Awaits Court Ruling

Post author By David Mazor
Post date November 27, 2015

(BRK.A), (BRK.B)

The fate of BNSF Railway’s proposed near-dock intermodal rail facility, known as the Southern California International Gateway Project (SCIG), is hanging in the balance until a California judge rules on civil rights and environmental issues.

The Natural Resources Defense Council filed a lawsuit in June 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.

Last week, Contra Costa County Superior Court Judge Barry Goode heard arguments and set Jan. 28, 2016 as the date to hear additional arguments involving CEQA’s fair-hearing provision.

He is expected to rule by February whether the project can move forward.

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.

Whatever the case, it won’t be resolved until Judge Goode’s ruling, and even that may be just the first round of a protracted legal battle.

Tags BNSF

BNSF

Low Fuel Prices & Grain Shipments Boost BNSF’s Profits

Post author By David Mazor
Post date November 13, 2015

(BRK.A), (BRK.B)

While low crude oil prices reduce demand for BNSF Railway’s mobile oil pipeline business that hauls crude from the Bakken formation to west coast refineries, corresponding low fuel prices have had a positive impact on the railroad’s earnings.

BNSF had a boost in third-quarter earnings from $1.04 billion in 2014 to $1.16 billion in third-quarter 2015.

Big Agricultural Boost

Crude oil shipments may be down, but BNSF has seen a 13.93 percent year-to-date boost in agricultural shipments as compared to 2014. The rise in grain shipments has offset the 9.03 percent year-to-date drop in petroleum shipments.

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

At its low point in June of 2014, the average delay for grain shipping for BNSF was a whopping 32 days. It’s now running only three days behind.

The bottom line is that business is good. BNSF’s total year-to-date carload units, including intermodal units, are up just under one percent with a combined rise of 0.85%.

Tags BNSF

BNSF

BNSF to Benefit from Amtrak Rail Upgrades on LA to Chicago Route

Post author By David Mazor
Post date November 12, 2015

(BRK.A), (BRK.B)

Speeds for BNSF Railway’s freight service moving through New Mexico will receive a boost thanks to a $21.3 million upgrade of 158-miles of track between Pierceville, Kansas, and Las Animas, New Mexico.

The upgrades are needed to provide speeds up to 79 miles-per-hour for Amtrak’s Southwest Chief service that runs daily between Chicago and Los Angeles. The Southwest Chief carried 352,000 passengers in fiscal year 2014.

Funding for the improvements come from a $12.5 million Transportation Investment Generating Economic Recovery grant, with an additional $9.3 million in state, local and private funds. BNSF is contributing $2 million of the private funds.

Passenger Service at Risk

Deteriorating track conditions had put Amtrak’s Southwest Chief in jeopardy, and the Colorado legislature in 2013 created the Southwest Chief Commission to negotiate with Kansas and New Mexico on saving the route.

Faster Passenger Service Means Faster Freight Too

Track improvements to speed up passenger service, and in some cases to save routes running on substandard track, brings significant benefits nation-wide to freight railroads such as BNSF.

The Southwest Chief’s route is not the only route being upgraded. High-Speed Intercity Passenger Rail funds currently being invested to bring higher speed passenger rail service in the Pacific Northwest will also bring benefits to BNSF’s freight hauling capacity.

Under the American Recovery and Reinvestment Act (ARRA), a 467-mile rail corridor between Eugene, Oregon and Vancouver, B.C., is being upgraded in order to bring improved passenger rail service for Amtrak’s Cascades service.

In the Pacific Northwest, the improvements include new bypass tracks to add capacity, upgrades to warning signal systems, safety-related improvements, and multiple upgrades to existing track. A new rail bridge will cross the Coweeman River near Kelso, Washington, and there will be upgrades to wayside signal systems components at all control points, sidings and turnouts between the U.S./Canada border and Vancouver, Washington.

Tags BNSF

BNSF

Keystone Pipeline Decision Benefits BNSF

Post author By David Mazor
Post date November 9, 2015

(BRK.A), (BRK.B)

The Obama Administration’s decision to reject the Keystone XL pipeline’s fourth phase will have a positive impact on BNSF Railway. BNSF, which since the oil boom in the Bakken Formation has become a mobile oil pipeline, is facing increased competition from a variety pipelines.

Keystone Was a Major Threat

Keystone XL, the fourth phase of the Keystone pipeline, would have moved crude oil from Alberta’s tar sands to refineries in Texas and Illinois, and most importantly in relation to BNSF, would have also carried about 100,000 barrels a day from the Bakken Formation in North Dakota and Montana.

Roughly twelve percent of Keystone XL’s capacity would have been used to carry Bakken crude through a lateral addition called the Bakken Marketlink.

While BNSF offers an advantage to crude of oil producers of being able to route shipments to different refineries depending on demand, it has about a $2 per barrel cost disadvantage versus pipeline transport.

Pipelines Keep Coming

BNSF will not be able to avoid pipeline competition forever, in fact, some of it has already started.

The Keystone XL’s Bakken Marketlink is not the only threat to BNSF’s mobile pipeline business. In August, Kinder Morgan’s 485-mile Double H pipeline began carrying crude from the Powder River Basin by way of a new connection in Douglas, Wyoming.

The Double H pipeline originates in the Bakken oil production areas near Dore, North Dakota and Sidney, Montana, and terminates near Guernsey, Wyoming. Double H interconnects with the Pony Express pipeline for further transportation to the Phillips 66 Refinery in Ponca City, Oklahoma, or the Deeprock Terminal in Cushing, Oklahoma.

The Double H pipeline has a capacity of 99,000 barrels per day and is expandable.

Kinder Morgan acquired the pipeline from Hiland Partners in January 2015.

Tags BNSF

BNSF

BNSF Solves Grain Issues

Post author By David Mazor
Post date October 26, 2015

(BRK.A), (BRK.B)

For the past three years, BNSF Railway has been pilloried by grain producers for its extended shipping delays. The good news is that those delays are mostly behind them these days and grain shipments are running on time.

Back in June of 2014, the average delay for grain shipping was a whopping 32 days. In October 2014, the delay was running a solid two weeks. However, with some reduction in the number of oil trains running from the Bakken Formation, and improved track and signaling on the Great Northern Corridor, the shipments are now averaging only three days behind schedule.

As of October 17, 2015, BNSF’s grain shipments system-wide are up 22.69% for the 4th quarter to date, and are up 13.51% for the year to date; both over 2014 figures. Conversely, Petroleum shipments are down 7.97% for the year to date, as compared to 2014.

The improvements have grain producers and BNSF officials in a much happier mood.

“We have substantially better Ag shuttle turns per month as compared to last year,” a BNSF official said in May. “Last year we were below 2 turns per month, and now we are over 2.5 turns per month.”

2014’s Winter of Discontent

Back in the winter of 2014, grain shipments were running weeks late with the shipping time from the Midwest grain belt to the Pacific Northwest running a whopping 22 days. The delays added substantial costs to grain producers, as they paid ocean-going freighters some $30,000-$50,000 per day to sit in port waiting for the delayed grain.

Huge Rise in Traffic

With the boom in crude oil transport by rail, BNSF has seen a 69% increase since 2009 in traffic going out of the region, and the traffic running into the region has also increased by 31% over the same time period.

Key Improvements on the Great Northern Corridor

The Great Northern Corridor, which links Chicago with the Pacific Northwest, moves grain for export from the Midwest to ports in Washington and Oregon. BNSF has been working to increase the number of sidings and improve existing sidings, as most of the Corridor is single track, so the sidings are necessary to allow trains to pass each other. In total, BNSF has added 72 miles of double track in the Corridor, nine new sidings, and 9 siding extensions. The railroad also made improvements to its centralized traffic control (CTC) signaling.

Since 2013, BNSF has spent $1 billion on improvements in North Dakota alone.

Tags BNSF

BNSF

BNSF’S 150-Car Sand Train Highlights Growth in Locomotive Power

Post author By David Mazor
Post date October 22, 2015

(BRK.A), (BRK.B)

When someone needs to move 33 million pounds all at one time, it’s nice to know they can call on BNSF. In this case, the someone was U.S. Silica Holdings, Inc., which needed to move a 16,500 ton (33 million pounds) load of U.S. Silica White® frac sand 1,272 miles from Ottawa, Illinois to Loving, New Mexico.

BNSF Railway’s recent a 150-car frac sand train, which made a delivery to Rangeland Energy’s RIO Hub, highlights the growth in locomotive power over the past two decades.

The load, which was delivered October 2, 2015, was one of the heaviest unit frac sand trains ever run in North America.

Demand for sand has boomed in recent years as hydraulic fracking needs thousands of tons of sand per well. The sand used is “frac sand,” a high-purity quartz sand with very durable round grains.

The RIO Hub is a 300-acre rail facility located near Loving, New Mexico, in the center of the Delaware Basin’s drilling and production activity. The terminal provides services for outbound crude oil and condensate and inbound frac sand as part of Rangeland’s RIO System, which serves oil and gas producers in the Delaware Basin in West Texas.

“Despite the current pricing environment, the Delaware Basin remains an economic play, and producers operating in the region continue to require increasingly large volumes of frac sand to drill and complete their wells,” notes Rangeland Executive Vice President and Chief Operating Officer Steve Broker. “Our goal is to serve the needs of our customers, and we are pleased to have the capacity and flexibility to receive this record-breaking unit train at RIO. Rangeland was able to accommodate the unit train’s arrival and unload it in a timely manner because we designed the RIO Hub to have the size and scale to meet the sand or oil market’s requirements in a way that increases efficiencies and reduces costs. We expect sand volumes to continue to increase as operators drill longer wells and complete larger fracs. We are well positioned to meet those needs at the RIO Hub.”

Increased Locomotive Power

The Association of American Railroads notes that the average tonnage of freight that a train can haul has been dramatically increasing, due in part to improvements in locomotive power and rail car design. One of the keys is the efficiency of modern hybrid diesel-electric locomotives that capture braking energy and store it in batteries. The average freight train hauled 3,606 tons of freight in 2014, which was up from just 2,222 tons in 1980.

Tags BNSF

BNSF Special Report

Special Report: Improvements to LA to Chicago Transcon Corridor Key to BNSF’s Future

Post author By David Mazor
Post date October 13, 2015

(BRK.A), (BRK.B)

With BNSF Railway’s coal and crude oil transport business sure to decline, where does BNSF look for future growth?

The answer is the long-distance freight hauling currently provided by the trucking industry.

BNSF is about to complete a new 2,200-mile parallel line to its Transcon Corridor along the Los Angeles to Chicago route that will allow it to greatly increase the amount of intermodal freight it can carry.

The challenge in competing with the trucking industry is improving shipping times, which often suffer from delays as trains sit on sidings in order to allow other trains to pass.

The new second line will eliminate those bottlenecks, and reduce the LA to Chicago run by a total of three hours down to 61 hours from the current 64 hours.

Building for the Future

System-wide, BNSF is working to increase capacity. In 2015 alone, BNSF is spending $1.5 billion on terminal, line and intermodal expansion and efficiency projects, which also includes the completion of more than 65 miles of new second main track on the busiest segments of their Northern Corridor.

Rails Efficiency Over Trucks

According to the Association of American Railroads, trains are four times more fuel efficient than trucks. And that efficiency has been growing over the past three dacades, with railroads now able to move a ton of freight an average of 479 miles per gallon of fuel. This is up more than double from the 235 miles per gallon of fuel in 1980. One of the keys is the efficiency of modern hybrid diesel-electric locomotives that capture braking energy and store it in batteries.

The Association of American Railroads also notes that the average tonnage of freight that a train can haul has been dramatically increasing, due in part to improvements in rail car design. In creased double-stacking of cargo containers has helped the average freight train hauled 3,606 tons of freight in 2014, which was up from just 2,222 tons in 1980.

The Window of Opportunity

While the window of opportunity may be closing for coal and oil, freight hauling of consumer goods offers plenty of opportunities for growth. Of the 71 million trailer loads that travel 550 miles or more, currently only 19-percent are moving by rail. Increased track capacity offers massive growth potential in regards to intermodal shipments.

The total amount of business that railroads could convert to rail from trucking is estimated to be as much as $100 billion.

Rising Intermodal Freight Volumes

Total intermodal shipments were up 2 percent over last year’s first quarter volumes, according to the Intermodal Association of North America, the industry trade association
representing the combined interests of the intermodal freight industry. This was despite port congestion issues that impacted international container traffic. Even stronger were domestic intermodal loads, which grew 4.5 percent, led by domestic containers, which rose 6.5 percent in a quarter-over-quarter comparison.

Corridors of Commerce

BNSF has three “Corridors of Commerce” — TransCon, Great Northern, and Mid Continent (MidCon) — that cover more than 11,000 miles of the nation’s rail network.

The TransCon, which includes the portion that runs from Los Angeles to Chicago, has 4,647 route miles running through 13 states. Much of the international freight that is heading east on TransCon comes in the Port of Long Beach in Long Beach, California, and the Port of Los Angeles in San Pedro, California.

In September, the Port of Long Beach announced its overall cargo volume had jumped 22.8-percent in August 2015, which broke an all-time record for cargo volume in its 104-year history.

The Port of Los Angeles, the number one port in the U.S., saw its imports rise 6.3-percent from a year ago to 407,804 TEUs. A twenty-foot equivalent unit (TEU) is a standard measure of a ship’s or shipping terminal’s cargo handling capacity.

Of benefit to BNSF and other railroads has been larger cargo ships that delivering higher container volumes per call.

Strong Environmental Benefits

With environmental concerns increasingly in the forefront, rail transport has another appeal, as moving freight by trains instead of by trucks lowers greenhouse gas emissions by 75 percent.

A conversion of 50-percent of truck transport to rail would save 8 billion gallons of fuel per year, and greenhouse gas emissions would be reduced approximately 90 million tons. The reduction is the equivalent of taking 18 million cars off the road. It also lowers damage to roadways, which costs billions a year in road repairs, and reduces highway congestion due to construction delays.

Tags BNSF, Special Report

BNSF Marmon Group Special Report UTLX

Special Report: Oil Volatility and the NTSB

Post author By David Mazor
Post date October 8, 2015

(BRK.A), (BRK.B)

Shipments of Bakken Formation crude oil have brought billions in revenues to BNSF Railway, and new opportunities to Berkshire Hathaway’s tank car manufacturer UTLX. It has also put Berkshire and BNSF in the middle of disputes over the safety of these shipments and the source of various hazards.

On one side are environmentalists and communities along rail lines that have cited volatility concerns as to the flash point of Bakken Formation crude oil, claiming it is a special hazard as compared to the transportation of other crude oils. On the other side is the AFPM, a trade association representing 400 refining and petrochemical companies, which is suing over BNSF Railway’s $1,000 per tank car surcharge in a battle to keep costs low in producing crude oil from the Bakken Formation.

BNSF’s surcharge is designed to incentivize shippers to move to tank cars that meet new Department of Transportation standards. Technically, BNSF is not calling its $1,000 per tank car charge a surcharge, rather it says it has raised its rates and is discounting rates for shippers using new DOT 117/TC-117 tank cars. A court will decide whether that holds up and certainly key to that may be whether Bakken crude is more hazardous than other cargo.

The AFPM has disputed that Bakken crude oil is more hazardous a cargo than other crude oil, or other chemicals hauled by railroads. AFPM’s position is that the surcharge on tank cars ignores the root cause of derailments, which they assert is tied to poor track conditions and human error.

Will the Surcharge Stand Up?

In a letter to Transportation Secretary Anthony Foxx, AFPM stated that “Any effort to enhance rail safety must begin with addressing track integrity and human factors, which account for sixty percent of derailments. Investment in accident prevention would result in the greatest reduction in the risk of rail incidents.”

Now, the head of the National Transit Safety Board has weighed in on the issue.

NTSB’s Christopher Hart Dismisses Volatility Concerns

Concerns that the oil from the Bakken Formation are of higher volatility and create a greater risk in the case of accidents were downplayed in recent statements by the National Transportation and Safety Board (NTSB) chairman Christopher Hart.

Hart, in a radio appearance on radio station KFGO-AM in Fargo, North Dakota, stated that the NTSB’s accident investigations of rail accidents found that Bakken crude volatility isn’t a significant issue.

“The biggest contributor to a large explosion or fire is how much product is released, rather than the volatility of the product,” Hart said.

The Department of Transportation is working to reduce the amount of product of all types released in a rail accident by mandating new tank car standards that require jacketed and thermally insulated shells of 9/16-inch steel, full-height half-inch-thick head shields, and re-closeable pressure relief valves and rollover protection for top fittings.

The Department of Energy Report

A U.S. Department of Energy (DOE) report in March 2015 looked at the volatility of light sweet crude from the Bakken Formation in comparison to other crude oils in the same category. The report was prepared by Sandia National Laboratories with the assistance of a technical team that included the University of North Dakota Energy & Environmental Research Center.

In its report, the DOE found no link between crude oil properties and the chance or severity of a fire caused by a derailment. Instead, the report found that the kinetic energy created by the derailment was a larger factor in the size of a fire than the volatility of the crude being transported, the researchers said.

Is Bakken Crude More Volatile?

As for the volatility of crude oil from the Bakken Formation, Turner, Mason & Company conducted a study in 2014 for the North Dakota Petroleum Council (NDPC) which found that Bakken crude “appears to be generally similar in vapor pressure and light ends content to most light crude oils, and there are certainly crudes, particularly those produced from tight oil formations, which are higher in those parameters.”

Congress Looks at Bakken Crude

The U.S. Congress took up the issue of the safety of transporting crude oil from the Bakken Formation last year.

In September 2014, the House Science, Space, and Technology Committee held an energy and oversight hearing with experts from the Pipeline and Hazardous Materials Safety Administration, the Department of Energy, ND Petroleum Council, Turner, Mason & Company, and the Syracuse Fire Department. The hearing examined the characteristics and behavior of crude oil from the Bakken region.

At the hearing, officials testified that the increased risk of an incident has to do with the increased volume of product being transported and not the volatility characteristics of Bakken crude.

BNSF’s Role as a Common Carrier

As a common carrier, BNSF Railway can’t refuse under most circumstances to carry cargo, despite the potential loss or damage presented by the cargo.

And, while BNSF’s growing role as a mobile crude oil pipeline has meant billions in new revenue, it also has presented new risks in regards to fire in the event of derailment, collision, or other accidents.

BNSF has responded by pushing for safer tank cars, and has boosted training for both its crews and emergency responders in communities along its routes.

New Tank Cars and Retrofitting Existing Fleets

Under Enhanced Standards for New and Existing Tank Cars for use in an HHFT—New tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria.

The standards will require replacing the entire fleet of DOT-111 tank cars for Packing Group I, which covers most crude shipped by rail, within three years and all non-jacketed CPC-1232s, in the same service, within approximately five years.
‘
An HHFT (high-hazard flammable trains) is defined as a train carrying 20 or more tank carloads of flammable liquids, including crude oil and ethanol.

The need for replacement and retrofitted tank cars impacts a wide-range of shippers that transport by rail. Those shippers include shippers of LPG, oil producers and refiners, and ethanol producers that own their own tank cars or lease them from leasing companies. It also impacts BNSF Railway’s own fleet of tank cars.

Retrofitting existing tank cars is an important bridge to safer shipping of flammable liquids, as the current backlog of new tank car orders sits at a record 52,000 units.

A Significant Portion of BNSF’s Revenue

One thing that’s not in dispute is how significant the transportation of volatile liquids is to BNSF. Petroleum, Ethanol and LPG make up roughly 7-percent of BNSF’s freight hauling. In 2014, BNSF moved enough petroleum to fill the gas tanks of 350 million vehicles.

Another thing that’s not in dispute is that the move for safer tank cars benefits Berkshire’s UTLX, a manufacturer and retrofitter of tank cars that has been hiring and opening new facilities due to the unprecedented demand.

Berkshire has also been expanding the number of tank cars that it owns.

Berkshire’s Marmon Holdings, Inc., the unit of Berkshire Hathaway that owns UTLX, acquired substantially all of GE Railcar Services’ owned fleet of railroad tank cars as of September 30, 2015. Roughly 25,000 full-service and net-leased tank cars are covered by the transaction.

Still One More Dispute in the Wings

With NTSB’s Christopher Hart dismissing the volatility issue of Bakken crude as an extraordinary hazard, BNSF’s dispute with the AFPM may mean it is now in a weaker position to justify its tank car surcharge, which is something that could potentially cost Berkshire and BNSF millions down the road.

Tags BNSF, Marmon Group, Special Report, UTLX

BNSF Commentary

Commentary: Accident Bad Timing for BNSF in Tribe’s Lawsuit

Post author By David Mazor
Post date September 25, 2015

(BRK.A), (BRK.B)

Talk about bad timing, a BNSF 98-car ethanol train that derailed on September 19, in southeastern South Dakota, adds fuel to the fire for a key portion of the argument in a Native American tribe’s lawsuit against the railroad.

The Swinomish Indian Tribal Community in the state of Washington filed a lawsuit in April 2015 against BNSF alleging that the railroad had violated an Easement Agreement that allowed trains to cross a portion of the tribe’s land. The Easement Agreement enables BNSF to bring Bakken crude oil to the Tesoro refinery in Anacortes, Washington.

U.S. District Judge Robert Lasnik on Friday, September 11, 2015, ruled that BNSF’s request to have the lawsuit dismissed or stayed was denied. The ruling opened the way for the tribe to press its lawsuit, which expressed environmental concerns as a key part of its argument.

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.

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.”

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, and the tribe’s environmental concerns are a key part of its argument that withholding approval would not be arbitrary.

Bridges Cross Fishing Grounds

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, who call themselves “The People of the Salmon,” 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 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, an RV Park, and the Tribal waste treatment plant.

The Tribe stated 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.

The South Dakota Accident

While the South Dakota accident was an ethanol train not an oil train, it was exactly the type of accident the Swinomish are concerned about. Seven tank cars derailed with three spilling their contents of ethanol, and one catching fire. The fire spread to a nearby pasture, which was put out by local firefighters, and BNSF hazardous materials teams aided in the clean up. NTSB investigators are currently interviewing the train’s engineer and conductor as they investigate the cause of the accident.

Fortunately, there were no deaths or injuries from the accident, which happened in a rural area that did not cross a body of water. However, the financial damages for BNSF may be far greater than three punctured tank cars if the Swinomish are able to show that their environmental concerns are grounded in reality, and that they have the proof to back it up.

Tags BNSF