PARTY TO WHOM HE SELLS THE GRAIN. THIS IS NOT TO SAY, HOWEVER, THAT

THE ACTIVITIES OF THE TRANSPORTATION SYSTEM ARE NOT OF VITAL IMPORTANCE

TO THE GRAIN GROWER. REGARDLESS OF THE MODE USED IN TRANSPORTING OUR

PRODUCTS TO MARKET. THE FACTOR THAT SETS THE PRICE AT A COUNTRY ORIGIN

IN MONTANA IS THE PUBLISHED RAIL RATE FROM THAT ORIGIN TO A PACIFIC NORTH

COAST TERMINAL. IT FOLLOWS. THEN, THAT THE LOWER THE FREIGHT RATE, THE

HIGHER THE WHEAT PRICE IN THE COUNTRY. THE RAIL FREIGHT RATE THEN BE

COMES A MOST IMPORTANT FACTOR IN THE TRANSACTION; AND IN DEALING WITH

RAILROAD PEOPLE IN THIS AREA, IT IS DIFFICULT FOR GRAIN GROWERS TO UNDER

STAND THE RATIONAL BEHIND RATE LEVELS THAT ARE PUBLISHED ON WHEAT AND

BARLEY FROM MONTANA TO THE NORTH COAST WHEN THEY DO EXCEED RATE LEVELS

PUBLISHED FROM OTHER AREAS OF THE COUNTRY, LIKE NEBRASKA FOR EXAMPLE, TO

THESE SAME PRIMARY MARKETS WHERE MONTANA GRAIN IS SOLD. THE BASIC DIF

FERENCE IS THAT OTHER RAILROADS SERVE STATES LIKE NEBRASKA AND RAIL COM

PETITION EXISTS THERE, AS OPPOSED TO MONTANA BEING CAPTIVE TO BURLINGTON

NORTHERN. CONCURRENTLY, THE RATES ON GRAIN ARE HIGHER AND THE HIGHER THE

FREIGHT RATE, THE LOWER THE WHEAT PRICE.

NOW SKETCHING THE CONCERN OF MONTANA GRAIN GROWERS ON SOME OTHER

AREAS. SUCH AS RATE FLUCTUATIONS AND THEIR RELATIONSHIP TO THE PROPORTION

OF AGRICULTURAL COMMODITIES MOVED BY RAIL VERSUS TRUCK/BARGE. IT IS OB

VIOUS THAT FROM PAST PRACTICES, THE RAILROADS WANT A MARKET SHARE SOME

WHERE IN THE 70 TO 90% RANGE. WHEN THE MARKET SHARE BY RAIL DROPS BELOW THAT LEVEL. AN ADJUSTMENT IS MUCH EASIER TO NEGOTIATE BECAUSE THEY HAVE

SEVERAL NET DOLLARS TO GAIN IN MAKING SUCH ADJUSTMENTS. WHEN THE MARKET

SHARE IS EQUAL TO 80 TO 90% OR BETTER, REDUCTIONS ARE FEW AND FAR BE

TWEEN AND INCREASES ARE MORE FREQUENT. NOW THAT WE ARE OPERATING UNDER

THE PROVISIONS OF THE STAGGERS RAIL ACT OF 1980. WE SEE QUARTERLY IN

FLATIONARY INCREASES ON ALL INTERSTATE COMMODITIES AND THEN WHERE THERE

IS A COMPETITIVE FACTOR THAT BEGINS TO TAKE AN UNSATISFACTORY SHARE,

THESE INCREASES ARE BACKED OFF TO THE ORIGINAL RATE LEVEL THAT APPLIED

PRIOR TO THAT INCREASE. THE BOTTOM LINE IS THAT RAIL RATES HAVE A

THE RAILROAD SO DESIRES.

TREMENDOUS INFLUENCE ON THE PRICE OF WHEAT IN THE COUNTRY, AND ALSO CONTROL WHETHER THE GRAIN WOULD MOVE IN RAIL SERVICE OR IN A TRUCK/BARGE COMBINATION THROUGH THE CLEARWATER, SNAKE OR COLUMBIA RIVER SYSTEMS. THE RATE LEVEL CONTROLS COMPETITOR PROFITS AND CAN TOTALLY ELIMINATE THEM IF

IN CONNECTION WITH RAIL LINE ABANDONMENTS. THE CONCERN OF THE

GROWER IS THAT RATE LEVELS ON BRANCH LINES COULD REACH A LEVEL THAT WOULD

TOTALLY EMBARGO THE MOVEMENT OF GRAIN BY RAIL. FOR EXAMPLE, SOME BRANCH

LINES HAVE SINGLE CAR. 26-CAR AND 52-CAR RATES, HOWEVER, THE CONDITION OF

THE LINE IS SUCH THAT FOR SAFETY REASONS. HEAVY LOADINGS AND MULTIPLE CAR

UNITS ARE NOT PERMITTED, NOT-WITHSTANDING PROVISIONS PUBLISHED IN THE

TARIFF. UNDER THESE CIRCUMSTANCES, SINGLE CAR UNITS ARE THE ONLY METHOD

AVAILABLE, AND THE RATES ARE HIGHER THAN THE MULTIPLE CAR UNITS AND. THERE

FORE. THE ELEVATOR LOCATED ON THIS BRANCH LINE LOSES HIS POWER TO BUY COM

PETITIVELY, AND THE GRAIN MOVES FROM THE FARM TO A LARGER TERMINAL THAT

CAN TAKE ADVANTAGE OF THE 26 OR 52-CAR RATES. BUYERS USE PORTIONS OF THOSE

SAVINGS TO INDUCE THE MOVEMENT OF GRAIN TO A MAIN LINE POINT DIRECT FROM THE FARM. THIS BY-PASSING OF THE BRANCH LINE ELEVATOR CAN BE LIMITED IF

THAT ELEVATOR CHOOSES TO TAKE LITTLE OR NO MARGIN, AND THEN IS FORCED TO

TRUCK HIS GRAIN TO THE PRIMARY MARKET AT RATES LOWER THAN RAIL SO HE MAY

COMPETE WITH THE LARGER TERMINAL IN THE OVERALL TRANSACTION. WITH THIS

TYPE OF THING GOING ON, RAIL TRAFFIC FROM BRANCH LINES CONTINEUS TO DE

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TERIORATE AND ULTIMATELY THE RAILROADS ARE IN A POSITION TO SHOW THAT

THE LACK OF BUSINESS WILL NOT JUSTIFY THE COST OF MAINTENANCE OR RE

HABILITATION AND. THEREFORE, THE LINE SHOULD BE ABANDONED. THIS SITUATION

AS VIEWED BY A GRAIN GROWER, IS TOTALLY CONTROLLED BY THE RAILROAD ITSELF,

AND THOSE FIXED WITH THE RESPONSIBILITY OF GRANTING THOSE ABANDONMENTS

SHOULD BE APPRISED OF WHAT IS GOING ON PRIOR TO THE TIME THE RAILROAD

ABANDONMENT APPLICATION IS FILED AND EVIDENCE PRESENTED TO MAKE IT LOOK

LIKE THE RAILROAD CANNOT CONTINUE TO OPERATE THE LINE BASED ON PAST SHIPPING PATTERNS THAT ARE TOTALLY CONTROLLED BY THE RAILROAD ITSELF.

OUR CONCERN IN MONTANA DEALS WITH THE FACT THAT IT WILL TAKE A

GREAT DEAL OF THOUGHT AND COOPERATION AMONG THE RAILROADS AND THE SHIP

PING PUBLIC TO ACCOMPLISH PRESERVATION OF THE SYSTEM IN SERVING THE PUB

LIC INTEREST. THE MONTANA WHEAT RESEARCH & MARKETING COMMITTEE, TOGETHER

WITH GRAIN INTERESTS IN MONTANA, HAVE SOUGHT DIALOGUE WITH THE RAILROADS IN

COOPERATION ON AREAS OF CHIEF CONCERN IN MONTANA. CERTAINLY, THE RAILROADS WILL HAVE TO STOP A LOT OF THEIR PRESENT TACTICS IN ORDER TO BETTER SERVE

THE PUBLIC INTEREST, AND NOT SELF-DESTRUCT AS A PRIVATE ENTERPRISE. THE

SHIPPERS, OF COURSE, MUST RECOGNIZE LEGITIMATE FINANCIAL NEEDS OF THE CAR

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RIERS, AND WE IN MONTANA DO. HOWEVER. WE MUST ALSO RECOGNIZE THAT THE

LONG-TERM FINANCIAL WELL BEING OF THE GENERAL PUBLIC AND SHIPPERS REVOLVES

AROUND THE COMMON-CARRIER RAIL SYSTEM, WHICH IS ADEQUATELY SUPERVISED AND

HAS A SENSITIVITY TOWARD ALL ASPECTS OF ITS LONG-TERM SURVIVAL. A LOT DE

PENDS UPON. OF COURSE, HOW QUICKLY THE RAILROADS. THE SHIPPERS AND THE

POLITICIANS CAN COME TO GRIPS WITH THE FACT THAT ONE OF OUR MAJOR OBJEC

TIVES IS TO PRESERVE RAILROADS IN PRIVATE OWNERSHIP, YET HAVE A RAILROAD

Senator BAUCUS. Next, we will hear from Paul Sacia.

Mr. SACIA. Thank you, Mr. Chairman.

I am Paul Sacia, legislative assistant to the National Farmers' Union, and we want to thank you for conducting this hearing today.

The Farmers' Union, as well as well as most of the other major farm organizations in this country, has called for a congressional inquiry into the transfer of land grant resources from railroad companies into the giant holding companies which they have formed. And for your information, I have attached some letters, statements and resolutions for your own perusal, by other farm organizations on this issue.

Because transportation of our members' commodities and the items required for their production are so major to the cost of the farming operation, rail rates and branchline abandonments are vital concerns of ours. Therefore, we are especially disturbed over the rail industry's handling of its vast natural resources, particularly their land grant holdings, and the ever-present threat of abandonment of many branchlines by railroads claiming unprofitable operations.

As you know, Mr. Chairman, more than 100 years ago, between 1850 and 1871, substantial grants of public lands were made to railroad builders in the West, Midwest, and South to support the construction of the national railroad system. The grants were extensive, consisting of 128 million acres of Federal land, 49 million acres of State lands, for a total of 177 million acres. They comprise one-tenth of the entire land mass of the continental United States, and up to 30 percent of the area of individual major States. I have listed here those States that are involved and the percentage of land grant land within those States.

Many of these States, Mr. Chairman, are where our farmers are having their most serious transportation problems. Wildly fluctuating rail rates and increased branchline abandonments threaten the efficient flow of our members' commodities-a fact that is even more important in light of the current depressed farm economy.

The four major western railroads, the Burlington Northern, the Union Pacific, the Southern Pacific and the Santa Fe, received 88 percent of all Federal land grants. These properties are rich in oil, coal, timber and other resources, and together with reserve mineral rights on grant lands previously sold, produce a large and rapidly rising flow of cash income.

Although the lands were clearly granted for railroad purposes, three of these major railroad systems, the Union Pacific, the Santa Fe, and the Southern Pacific, have transferred the lands to holding companies of affiliates that have no responsibility for railroad service. The fourth system, the Burlington Northern, has only just established a holding company, and similar transfers of the land originally granted can be expected within the near future.

These holding companies were established in order to separate land and mineral wealth from their railroad responsibilities.

When Congress passed the Railroad Revitalization and Regulatory Reform Act of 1976, they included a proviso, section 903, which required the Interstate Commerce Commission to report back to Congress about any concerns they might have in regard to