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MEMBERS OF THE WESTERN COAL TRAFFIC LEAGUE
Arizona Electric Power Cooperative
Celanese Chemical Company
Central Power and Light Company
City of Colorado Springs
City Public Service Board of San Antonio
Houston Lighting and Power Company
Iowa Power and Light Company
Iowa Public Service Company
Kansas City Power and Light Company
Minnesota Power and Light Company
Omaha Public Power District
On January 26 the Board of Directors authorized the management of Burlington Northern Inc. to proceed with the formation of a holding company. The matter will be presented to our stockholders for their approval at their next annual meeting on May 14, 1981. Assuming the stockholders approve the recommendation of our Board of Directors, it is our intention to promptly create a holding company.
The Board of Directors also approved a new organizational. structure for the Company providing for seven separate profit centers. The principal profit center will be the railroad. In addition, we will have trucking, air freight forwarding, and four separate nontransportation business profit centers.
During the last five years we have invested in excess of $2.1 billion in capital expenditures to expand and improve our rail service. Approximately $1 billion of this amount was spent to expand and improve our capacity to transport coal. We want to assure you that the formation of such a holding company will not in any way detract from our efforts to provide the necessary personnel and facilities to meet the needs of all of our rail shippers. However, we believe it important that each of our separate lines of business. "stand on its own feet." We are confident that the formation of a holding company will ensure this result and that it will allow our nontransportation businesses to grow along with the railroad and thereby make an even larger contribution to the overall corporate enterprise and to the public interest.
Because Burlington Northern operates a single, integrated transportation system, the formation of such a holding
company, under existing law; does not require Commission approval. However, because this is an important step in strengthening our management structure and providing better service, I wanted to personally inform each member of the Commission of our plans.
If you want any additional information; either Mr. Grayson, our Vice Chairman and President of our Transportation Division, or I would be happy to meet with you and discuss our plans in greater detail. If you have any questions, please feel free to call or write me.
As President of the Western Coal Traffic League, I am writing you to urge that you take immediate. and decisive action to prevent the formation of the holding company which has been announced by Burlington Northern Inc. until it has been approved, formally, by the Commission. (see Attachment I).
The Western Coal Traffic League and its members ship and receive over 40 million tons of bituminous coal annually. The majority of this coal moves over the lines of Burlington Northern (BN) and its affiliates, and for this reason the League is vitally concerned over the future. financial health and well-being of BN which is such a vital link in our national transportation system..
The League is apprehensive over the proposed restructuring of BN because of its potentially adverse impact upon the railroad's continued capacity to provide adequate and efficient coal transportation services to League members and to other coal receivers. That WCTL's fears in this connection are with good cause is shown in the Commission's report entitled Railroad Conglomerates & Other Corporate Structures, A Report To Congress S.Directed By Section 903 Of The Railroad Revitalization And Regulatory Reform Act of 1976.
Therein, following a full study of past and similar transactions in the railroad industry, the Commission concluded:
It is our conclusion, based on the results
transfer of control over any one major rail-
Among the other findings reached by the Commission in its report were the following:
Few holding companies have provided rail-
The railroads, once divested of non-
...the railroad as an instrument of public
It is no understatement to say that the Commission's Railroad Conglomerates Study is a ringing indictment of the very kind of financial transaction now proposed by BN. For this reason, the Commission concluded in 1977 and represented to the Congress that it would "take action" to monitor the future creation of railroad conglomerates especially in proposed transactions governing land grant properties. (Report, p. 75)
The BN proposal calls upon the Commission to make good its promise to the public and to the Congress. The BN seeks to elude any Commission scrutiny of its proposed transaction on the basis of its self-serving representatica that as a "single, integrated transportation system, the formation of such a holding company, under existing law, does not require Commission approval" (See Attachment I).