Rail Consumers: Buffet Purchase of BNSF Highlights Need For Reform

WASHINGTON, D.C.- Robert Szabo, Executive Director of Consumers United for Rail Equity (CURE), a coalition of freight rail customers seeking changes in federal law and policy that would require railroads to provide more competitive pricing and reliable service, issued the following statement in response to reports that Warren Buffett’s Berkshire Hathaway is purchasing BNSF railroad:

"The announcement of Berkshire Hathaway’s purchase of BNSF highlights some of the key reasons consumers need rail reform now: the current oversight system is broken and railroad monopoly pricing results in excessive rates for consumers.

"The Surface Transportation Board recently found BNSF to be "revenue inadequate," meaning the board found that BNSF is not earning enough money to attract and retain adequate capital. One source of capital is the purchase of railroad stock. Despite the recent STB finding, America’s savviest investor is not only purchasing BN stock, but purchasing all of BN’s stock and at a 30% premium! Consumers suffer from this consistent STB record of under estimating the financial strength of the freight railroads, which results in board toleration of every escalating captive rail rate."

"If the BN becomes the first privately held large freight railroad in the history of the nation, BN will become even less transparent in its activities because it will not be required to file reports with the SEC. The risk in a transaction like this is that consumers end up paying the premium paid for BN through excessive rates that BNSF can charge because of monopoly pricing protections. According to a study by the Consumer Federation of America, U.S. consumers pay roughly $3 billion per year in higher costs on everything from utilities to groceries because of the artificially high rates charged by railroads.

"Hopefully, Mr. Buffett will put BNSF on a more pro-competitive and consumer-friendly path. Whether or not he does so, there is a compelling need to restore fairness to railroad pricing for all rail consumers. We’re hopeful Congress will move quickly to remove the monopoly protections that railroads like BNSF have been exploiting and strengthen the regulatory oversight of the railroads by the STB."

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