August 29, 2005

Kevin Kaufman
Vice President
Agricultural Products
BNSF Railway
PO Box 961051
Fort Worth, TX 76161-0051

Dear Kevin,

            Thank you for your quick response to our joint letter of August 18, 2005, and making the effort to have your letter sent to our respective offices.

            Notwithstanding the promptness of the response, we take issue and respectfully disagree with your explanation of acceptable grain car availability and rates offered by the Burlington Northern Santa Fe Railway.

            Your letter states that for Aug-Sept-Oct non-shuttle Certificates of Transportation (COTs) and tariffs “all customers were awarded cars for the month requested or the following month.”  This statement is deceptive and simply fails to address our base concern that BNSF has shut down the ability of shippers to even order cars.  Some COTs for August and September delivery were ordered in April, May and early June, and we expect the shippers will receive those cars.  However, except for 1000 October singles, further ordering in the COT auction for the busy harvest months of August, September and October was shut down effective June 20.  In May 2004, BNSF shifted 11,000 cars from the COT ordering program to the tariff lottery.  Then the tariff lottery was reduced, and now has been suspended for the last third of August and all of September.  BNSF has simply made it impossible to order cars for placement during the busiest shipping season.

            Historically, North Dakota shippers have struggled with late, or even no delivery of cars that they had ordered from the BNSF.  Apparently you have decided to resolve that issue by not making the cars available in the first place.  We urge you to address this situation by continuing to provide more total cars in your fleet to serve all shippers, as identified in a set of objectives by BNSF leadership in early 2004.

            According to BNSF’s records, the availability of COTs and tariff cars offered has declined dramatically.  The following numbers are from BNSF’s Fleet Performance Reports and lottery announcements.

2004

2005

August tariffs 4,860 

August tariffs 600

September tariffs 3,876

September tariffs   0

October tariffs 2,766

October tariffs   1,020

August-October COTs Total 18,902

August-October COTs  14,806

Total August-October 2004:  30,304

Total August-October:  16,426

            These numbers do not demonstrate your railroad’s commitment to the majority of your shippers who seek to utilize the less-than-shuttle size.

            You assert that the BNSF does not restrict car supply specifically to manipulate after-market bidding.  However, when the number of cars offered is reduced or completely suspended and desperate shippers must bid against each other up to, and over $400 per car over the tariff rate, it is clear that demand exceeds supply.  This spike in the car auction demonstrates the lack of freight for small and mid-sized shipments.

            When the primary BNSF market has less car supply and receives higher bids, secondary market prices increase too.  We recognize that this is not an official BNSF market, but the level of your company’s offerings in its primary market is certainly the biggest influence on secondary market availability and prices.  Recently, some cars for nearby placement were sold for around $800 per car over tariff.  If this bid was for a single car from west-central North Dakota to Minneapolis at a base rate of $3,000 per car (already 88 cents per bushel), the extra $800 is a 27% rate increase for that shipper (an additional 24 cents per bushel) for a total of $1.12 per bushel.  These high rates and added extra costs are paid by farmers.

            Your letter says:  “BNSF recognizes the importance of 26- and 52-car shippers in North Dakota and we have not eliminated a customer’s ability to ship these unit sizes.”  But nevertheless, in June you announced elimination of the 52-car rate, and it has been restored only for westward movements.  But with suspension of both COT and tariff ordering, there are no cars available for 52-car shipments.

            North Dakota produces upwards of 60 different crops and leads the nation in the production of twelve.  We recognize the efficiencies of the shuttle trains for moving large volumes of uniform commodity product to market, but the smaller units need to be available in order to satisfy the needs of the unique crops and qualities of crops that are grown in this state.  It is important for BNSF to serve all sectors of the grain shipping industry, and not focus its best service exclusively on the largest shippers.  Increased size and scale may lead to greater efficiencies and we acknowledge that BNSF has reduced the costs of shipping for some elevators and farmers.  But that gain in efficiency must not come at the expense of poorer service and increased rates on other smaller shipments.

            As you know, North Dakota farmers and shippers need the railroad, and the BNSF reaps substantial revenue from agriculture.  This interdependent relationship has proved challenging as the supply and delivery uncertainty of rail freight takes an even greater share out of returns for farmers.  We continue to urge you in the strongest possible terms, to enhance your service to meet market demand for all shipment sizes.

            We appreciate your immediate attention to this matter.  

Sincerely,

Governor John Hoeven                                 Ag Commissioner Roger Johnson
North Dakota Barley Council                       North Dakota Corn Growers Association
North Dakota Corn Utilization Council        North Dakota Dry Pea & Lentil Association
North Dakota Farm Bureau                           North Dakota Farmers Union
North Dakota Grain Dealers Association      North Dakota Grain Growers Association
ND Public Service Commissioners:               North Dakota Soybean Growers Association
            Susan Wefald                                     US Durum Growers Association
            Kevin Cramer                                     North Dakota Wheat Commission
            Tony Clark

 

Cc:       Senator Kent Conrad
            Senator Byron Dorgan
            Congressman Earl Pomeroy
            Secretary of Agriculture Mike Johanns

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