Washington, D.C. – A heated dispute over railroad shipping rates is unfolding at the Surface Transportation Board (STB) hearings, centering on Berkshire Hathaway's acquisition of BNSF Railway Company years ago. The controversy focuses on an $8.1 billion acquisition premium that freight customers fear will be passed on to them through higher transportation costs.
The Premium at the Heart of the Debate
In February 2010, Warren Buffett's Berkshire Hathaway completed its $43 billion purchase of BNSF, marking the largest acquisition in Berkshire's history and establishing its position in the U.S. rail industry. However, the acquisition premium—the amount paid above BNSF's book value—has become a flashpoint in ongoing freight rate disputes.
The $8.1 billion premium increased BNSF's book value, drawing fierce opposition from rail shippers who argue this artificial inflation of operating costs will inevitably lead to rate hikes. The Western Coal Traffic League (WCTL), representing coal consumers west of the Mississippi River, has spearheaded the challenge, filing a petition with the STB to exclude the premium from BNSF's Uniform Railroad Costing System (URCS) calculations.
Legislative Concerns and Market Realities
Senator Al Franken (D-MN) testified before the STB, warning that allowing the premium into BNSF's asset base would signal railroads can artificially inflate assets to circumvent regulations. "Most shippers facing rate increases have no bargaining power," Franken noted, emphasizing that few meet the STB's 180% revenue-to-variable-cost threshold to challenge rates.
Consumers United for Rail Equity (CURE) President Glenn English stressed that while Berkshire had the right to pay any price for BNSF, "freight customers shouldn't foot this bill." CURE officials warned inclusion of the premium would raise costs for captive shippers transporting manufactured goods, agricultural products, and fuel.
BNSF's Defense and Industry Perspectives
BNSF countered that its rates reflect market conditions, not costs, with less than 2% of customers potentially affected. Industry analyst Anthony Hatch of ABH Consulting observed that BNSF remains unique among Class I railroads in marking assets to market value, calling this "a strange regulatory relic" best resolved by eliminating all economic regulation.
Hatch noted that despite uncertain economic conditions, BNSF and other major railroads continue significant capital investments requiring improved returns—where rate increases play a key role. The STB now faces the complex task of balancing railroad profitability against shipper protections in its impending decision.
Regulatory Implications and Future Outlook
The dispute highlights broader challenges in U.S. rail transportation as industry consolidation increases shipper dependence. STB's ruling could set precedent for how acquisition premiums factor into future rate determinations, with potential ripple effects across the economy. As proceedings continue, stakeholders await clarity on whether $8.1 billion in premium payments will ultimately translate into higher freight bills for American businesses.