ND GRAIN DEALERS ASSOCIATION TESTIMONY ON SB 2008
HOUSE APPROPRIATIONS COMMITTEE  - GOV’T OPERATIONS DIVISION
presented by Steve Strege, Executive Vice President  --  March 4, 2003

Good morning Mr. Chairman and members of the Committee.  I am Steve Strege with the North Dakota Grain Dealers Association.  We are a 92 year-old voluntary membership trade association in which about 90% of our state’s grain elevators hold membership. 

PSC works well with our industry and responds assertively to protect farmers when necessary.   An example of both is in Section 2 of SB 2008, rail rate complaint.  I am here today especially to tell you of our support for the $250,000 transfer in that Section to investigate a rail rate complaint case.

North Dakota has been taken advantage of by railroad grain rates for a long time.  I think the triggering event for proposing this rate case action was that nonsensical inverse rate the BNSF had on wheat to the west coast in much of 2001 and through July 2002.   It plainly showed how excessively profitable their wheat rates are. Imagine this, they were hauling wheat out of western Minnesota to the west coast for 79 cents a bushel, while farmers and grain elevators in western North Dakota paid nearly 40% more than that, $1.09, to haul wheat to the west coast, 300 miles LESS distance.   If BNSF can make money hauling 1800 miles for 79 cents, then how much more are they raking into their coffers by hauling it 1500 miles for $1.09?  This is the kind of exploitation they have been getting away with, and it’s time to do something about it. 

         Another indicator of excessive rates on wheat is a comparison with corn and soybean rates.  Why does it cost up to 50% more to pull 100 tons of wheat to the west coast than 100 tons of corn or soybeans, with the same locomotives, in the same cars, and over the same track?   From a station in western North Dakota, the per car wheat rate is $4250, as compared to $2850 for soybeans and corn to the PNW in 54 car trains.  At a BNSF station south of Grand Forks the rate difference is in the $800 per car range.     I should mention that we aren’t asking for an increase in corn and soybean rates.

Revenue to variable cost ratios are a measure of railroad profitability.  On most rail movements of North Dakota wheat, these ratios far exceed the threshold of a potential finding of unreasonableness. 

The bottom line is that we are being gouged on wheat rates, our largest crop.  

           We’ve heard a concern expressed about the source of this $250,000, the rail assistance fund.  Opponents of this transfer have said it will deny funds for branchline rehabilitation or construction projects at new or existing industries.   Let’s not have our attention diverted away from the multimillion dollar problem of excess rates and a chance to do something about them, by concerns of a few with an interest in leaving those funds where they are at.  $250,000 will rehabilitate only one to two miles of track, depending on how much work is being done.  Contrast that with the tens of millions of dollars in potential savings for thousands of farmers by reducing rates.  That money then re-circulates in our state’s economy.  A one-cent reduction in the rate for wheat grown in North Dakota is $2.5 million, ten times the amount of money we are talking about in this bill for this purpose.  This is a matter of doing the greatest good for the greatest number.  At a time of scarce state resources we need to invest where the most have the most to gain.   An amendment wisely added in the Senate provides for repayment of this fund if a successful rate case is prosecuted.

We ask the Legislature to approve the expenditure of these funds to start the rate complaint process.  It has a great potential payoff for North Dakota in terms of saving freight cost and making our wheat more competitive in world markets.   I’ll try to respond to any questions.