Baucus, Max (acting chairman)-Continued "Studies in Railroad Mergers-Continued Letter to Senator Baucus, re antitrust investigation Benefits of Northern Lines merger.. Study by the Congressioal Research Service entitled “A Legal Analy- sis of the Land Grants of the Northern Pacific Railroad," prepared 602 50 645 Exhibit A.-Member of the Western Coal Traffic League Exhibit B.-Letter from Richard Bressler, Burlington Northern, to Exhibit C.-Letter from Joseph H. Shafer, Jr., The Western Coal Traffic League, to Marcus Alexis, Interstate Commerce Commis- sion, re action to prevent the formation of a holding company Exhibit D.-Article from March 8, 1982 Business Week, entitled "Burlington Northern's Cash Cow-Cost-cutting and Tax Breaks Will Generate Funds for Resource Development' Exhibit E-Letter from Richard C. Grayson, Burlington Northern Railroad, to Arthur J. Doyle, Kansas City Power & Light Co., re Memorandum on the railroad land grant issue. Letters re to the obligation of the land grant railroads 459 461 Resolution adopted by the Five-State Legislative Conference... Brief from U.S. District Court, Western District of Washington at Seattle; Citizens Committee To Save the Land Grant Railroads, et. al. v. Bur- Decision by the Interstate Commerce Commission on railroad consolidation Denied petition of three petitioners relating to the expected formation by Burlington Northern, Inc. of a holding company Response to questions from Senator Baucus to the Interstate Commerce Com- Letter from Richard M. Bressler, Burlington Northern, to Thomas A. Tran- tum, Interstate Commerce Commission, re authorization to proceed with Article from the Transportation Journal entitled "Rail-Based Holding Compa- nies: A View of Some Indicators of Strategy, Management Change, and Resolution adopted by the Five-State Legislative Conference, Rapid City, S. Study commissioned by Water Transport Association and American Water- ways Operators, Inc. entitled "Federal Aid to Railroads," by Jesse J. Fried- A historical, economic, and legal interpretation of public policy which encour- aged the building of transcontinential railroads entitled "Railroad Land Grants: Paid For in Full," by Frank N. Wilner, Association of American An act granting lands to aid in the construction of a railroad and telegraph line from Lake Superior to Puget Sound, on the Pacific Coast, by the Prepared statement of Kent Conrad, North Dakota Tax Commissioner Transcript of hearing before North Dakota State Tax Commissioner, Kent RAIL MERGERS AND FORMATION OF THE BURLINGTON NORTHERN HOLDING COMPANY FRIDAY, MARCH 26, 1982 U.S. SENATE, COMMITTEE ON THE JUDICIARY, The committee met, pursuant to notice, at 9:05 a.m., in room 2228, Dirksen Senate Office Building, Hon. Max Baucus (acting chairman of the committee) presiding. Staff present: Peter N. Chumbris, counsel for majority; and Rick Applegate, senior legislative assistant to Senator Baucus. OPENING STATEMENT OF SENATOR MAX BAUCUS Senator BAUCUS. The hearing will come to order. Today the committee will hear testimony on railroad mergers and the formation of the Burlington Northern Holding Co. Over the past several years, a number of major rail mergers have occurred. Today's rail industry appears to be healthier in many respects. But it is not clear that this can be attributed to the mergers of the sixties and the seventies. At the same time, a persistent chorus has been heard concerning the competitive situation in America's transportation system. Weak railroads continue to stagnate or go bankrupt, causing difficulty for shippers and employees. Strong railroads produce complaints by shippers who feel they are captive to excessive rates. Today we want to explore the extent to which rail mergers are beneficial and the extent to which they impose costs on competitors, shippers, and employees. I continue to believe that we need healthy railroads in a competitive environment. At the same time, it is clear we need responsible railroads. Railroads must meet a sometimes difficult dual test. They pursue profit and at the same time the public interest. I know that this is not an easy standard but I believe it is an essential one. These issues have been raised sharply with the formation of the Burlington Northern Holding Co. Some urge that the holding company will allow BN to prosper and that rail service will improve. Others contend that the holding company will sound a death knell to the railroad either by diverting natural resource assets and income from the railroad or by encouraging some other corporation to acquire the holding company and eventually junk the railroad. I know that some of our witnesses today may address themselves to the 19th-century railroad land grants. This is an old issue that generates considerable controversy. For my part, I believe that the Federal Government should determine once and for all whether the land grants created a continuing obligation for rail carriers to provide rail service. We cannot resolve that issue today, but I do hope that one day an appropriate forum will do so. We have a long witness list. We do not have a long day. I will repeatedly encourage witnesses when they give their testimony to summarize as much as possible. Otherwise, if witnesses read their entire statements throughout the day, I am afraid we will not be able to conclude. I must warn everybody that I will be quite strict in imposing some time limits. We will begin with Congressman Pat Williams and Senator John Melcher from Montana as well as Bill Fogarty representing the Governor of the State of Montana. John, it is good to have you here today. Why don't you begin, John, and then Pat follows and then Bill after that. STATEMENT OF HON. JOHN MELCHER, A U.S. SENATOR FROM THE STATE OF MONTANA Senator MELCHER. Thank you, Mr. Chairman. I want to compliment you for your efforts in holding these hearings on matters which both of us know are so important to our State. I am very pleased to join you, our House colleague, Pat Williams, and our Governor's representative from Montana, Mr. Fogarty in these hearings. These hearings regarding railroad mergers and the BN Holding Co. could not be more timely, given the effect that actions completed and contemplated have or will have on our State's economy. NORTHERN LINES MERGER Back in the late sixties and up until 1970, when the Great Northern, Northern Pacific, and Burlington merger was first proposed and eventually consummated, many promises and assurances were made to both shippers and employees. Protective conditions were established by the Interstate Commerce Commission to insure both open and fair competition for any of the merged railroad's rail carrier competitors. Assurances of shipper services at freight rates at competitive levels with other areas were made. What happened? Seven years later the Milwaukee Road, the merged railroad's prime competitor from our perspective, filed for bankruptcy. Two years after the filing, the Pacific Coast Extension of the Milwaukee across Montana ceased operation. Well, so much for protective conditions in the merger. What about the Justice Department and its Antitrust Division? Not much help coming from them either. The ICC therefore had better look close at the Union Pacific, Missouri Pacific and Western Pacific merger and the need for protective conditions unless Montana and our Nation's other Northwest States experience resulting from the northern lines merger is to be repeated. Some might conclude that Montana's economy can only support one railroad. Well, I will tell you this. I know Montana and I know Montana can support and vitally needs more than one railroad. |