RAILROAD MAKES WRONG RATE MOVE AGAIN SAYS GRAIN DEALERS (7-22-02)    

“The Burlington Northern Santa Fe Railway made the wrong move a year ago when it started its discriminatory inverse rate program,” says Keith Brandt, president of the North Dakota Grain Dealers Association and manager at the Enderlin (ND) Farmers Elevator. “Now they have compounded the error by moving in the wrong direction with rates.”  The statewide association of grain elevators says the railroad should have lowered rates to all other shippers instead of raising rates to the few who had been getting more favorable treatment.

“The inverse rate scheme has shown that BNSF Railway is willing to haul wheat from elevators in western Minnesota and eastern North Dakota to places like Portland, Oregon for 79¢ or 80¢ per bushel,” says Grain Dealers First Vice President Mike McNamee of Beulah. “Why then must they charge $1.09 for a bushel of wheat to move 300 miles less from Dickinson, ND, to that same destination?  These discrepancies expose the railroad’s excess profits in moving grain out of North Dakota and will be firm ground for filing a formal rail rate complaint with the Surface Transportation Board,” says McNamee, “a possibility that is being closely studied.”

Estimates have been made by the Upper Great Plains Transportation Institute at NDSU in Fargo and by the ND Public Service Commission that railroad rate overcharges on grain shipped from North Dakota total $50 million to $100 million per year. 

Jim Bobb, grain division manager at Southwest Grain Cooperative near Gladstone, ND adds, "This past year the public became aware of the predatory tactics the BNSF will use to eliminate grain elevator facilities and competition in their long term strategic plan to have only a few efficient super shippers (shuttle).  These tactics initially were offered (secretly) to a few, and have cost millions of dollars to producers who are forced to endure long hauls and excessive rail rates in captive markets.  This brings us back to the point that we still need a simplified rate relief mechanism and government oversight."

“The inverse rate scheme also showed BNSF’s hypocrisy about free markets,” says Steve Strege, executive vice president of the Grain Dealers Association.  “BNSF says it favors free markets.  It doesn’t want any government interference in its rate or service plans.  But the abnormal supply chain brought about by inverse rates short-circuited a free grain market that should have bid up prices for westbound wheat.”

The Association also points out that the shipping rate charged for wheat is much higher than for corn or soybeans shipped to the same destinations.  “A carload is a carload, whether it contains wheat or soybeans or corn,” says Brandt, “All weigh approximately the same.  But wheat rates are 30-50 percent higher than the other two commodities.  There is absolutely no cost justification for the railroad to be doing this.  The BNSF takes advantage of us whenever and wherever they can.”  Grain Dealers says the excess charge for wheat shipments is one factor causing farmers to reduce wheat plantings over the past few years.

Brandt says the railroad should serve its customers and markets rather than trying to manipulate customers and markets. 

BNSF had started its inverse rate program in mid-2001, charging grain elevators in western North Dakota and Montana more to ship grain to the Pacific Northwest (PNW) than it charged for a few selected shuttle train loading elevators in eastern North Dakota and western Minnesota, hundreds of miles farther from that market. 

The Grain Dealers and nearly every other ag group in the state said this was discriminatory and that all grain shippers and farmers should get the benefit of lower rates.  The North Dakota congressional delegation, Governor Hoeven, Public Service Commission, ag commissioner and other elected officials had joined in the protest to BNSF Railway.  The North Dakota Legislative Interim Agriculture Committee held hearings on the issue in late February.  Senator Dorgan held a U.S. Senate hearing on this topic in Bismarck in late March.  Governor Hoeven rallied four other governors to jointly confront BNSF about these and other inequities.  In addition, the Legislative Interim Taxation Committee is looking into the level of taxation on railroads in North Dakota as compared to other states.