Monday, October 01, 2012

STB to Berkshire Hathaway: Divest two railroads

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The Surface Transportation Board has directed BNSF Railway's parent, Berkshire Hathaway, to "promptly remedy its noncompliance with railroad control requirements" stemming from its acquisition of BNSF in 2010.

BNSF is not directly affected, but Berkshire Hathaway previously had acknowledged ownership or control in two railroads other than BNSF. Berkshire is not permitted to do so without STB authorization. Omaha-Neb.-based Berkshire Hathaway says it had not sought required STB approval for the BNSF purchase because it was unaware at that time that it controlled the other rail properties.

In a letter to the STB on Sept. 18, Berkshire Hathway said that when it purchased BNSF, it held about 90% of MidAmerican Energy Holding Co., itself a majority owner of Council Bluffs, Iowa-based short line CBEC Railway. BNSF and Union Pacific utilize the CBEC to access a coal plant south of Council Bluffs.

Berkshire Hathaway also had a controlling interest in Marmon Group, which includes RailServe as one of its 150 businesses. RailServe controls White CityTerminal Union Railway (pictured), a 13-mile short line that operates between White City and a junction north of Medford, Ore.

In a Sept. 18 letter to BNSF, STB said Berkshire must "promptly take action to comply with its legal requirements" and submit within 10 days a letter specifying the method and timing by which it proposes to comply with law. The STB said it would determine whether further action is needed after it received Berkshire's plan to comply with the regulation.

In response, BNSF Executive Vice President, Law Roger Nober on Sept. 25 wrote that BNSF s seeks to divest both railroads to interests that are "neither rail carriers nor own other rail carriers" so that neither divesture will be subject to STB jurisdiction. The company intends to complete the divesture of the two railroads no later than the end of the year.

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