Bloomberg News

Buffett’s Railway Gets U.S. Deadline for Grain Cargo Plan

June 23, 2014

Warren Buffett’s BNSF Railway Co. and Canadian Pacific Railway Ltd. (CP) face a June 27 deadline to say how they will clear a backlog of grain shipments that has some farmers fuming over rotting wheat and late deliveries.

The U.S. Surface Transportation Board ordered the railroads to outline by then how they will deal with service disruptions, including a timeline for doing so, and to subsequently provide weekly updates about their progress.

“The board remains very concerned about the limited time period until the next harvest, the large quantities of grain yet to be moved, and the railroads’ paths toward meeting their respective commitments,” the STB said in a decision released June 20.

Setting the schedule escalates the scrutiny from the agency after the two carriers were summoned to an April hearing to discuss service. An unseasonably harsh winter forced U.S. and Canadian railroads to shorten trains and added to congestion on a system already coping with an increase in crude oil shipments from the Bakken region and a record grain harvest.

BNSF, based in Fort Worth, Texas, and Canadian Pacific (CP:US) were joined at the hearing by farmers and representatives of agriculture producers who outlined fallout from the backlog. The railroads’ critics cited elevators running out of storage capacity, penalties incurred for tardy shipments and the risk of stored grain spoiling.

BNSF’s View

“We are disappointed that we have not met our customers’ expectations, but we have made significant progress toward substantially satisfying outstanding orders and we will be prepared for this fall’s harvest,” Michael Trevino, a BNSF spokesman, said today by e-mail. “We will continue working with the STB and will continue frequent communications with all of our agriculture customers.”

The STB said BNSF has outlined plans since the hearing to add employees and locomotives and make additional capital investments, with a “significant portion” allocated to its Northern corridor where the railroad moves a significant amount of grain traffic.

BNSF is the main carrier hauling crude from the Bakken shale formation centered in North Dakota. Berkshire Hathaway Inc. (A:US), of which Buffett is chairman and chief executive officer, acquired the railroad in 2010.

The STB said Canadian Pacific’s public submissions have not “to date clearly articulated its plans” for resolving the problem.

Canadian Pacific “continues to look closely” at the STB’s order and “will be responding directly to the agency,” Ed Greenberg, a spokesman, said by e-mail.

Canada experienced similar logjams after also producing the largest crop yield in that nation’s history. In March the government imposed minimum shipping requirements, with financial penalties, to help ease as much as $18 billion of crops stuck on the prairies at the time.

To contact the reporter on this story: Caelainn Barr in New York at cbarr15@bloomberg.net

To contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net Molly Schuetz


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