3.) encourage the affected states to join together in taking the Burlington Northern through every court in the country if necessary to keep agriculture from being totally subservient to the corporate will and wiles of BN; and

4.) assist the statewide groups already actively seeking a focus for their concerns and frustrations, by

a) coordinating input to the State Intermodal Transportation Team for recommendations to the Governor and the State Legislature,

b) organizing a network through the various farm groups to work toward local, state and national attention and action, and

c) activating and cooperating with the block of western states affected by BN's separation of land grant holdings from rail maintenance responsiblity and abandonment practices, in order to bring about action by Congress, the ICC, and the Courts.

To accomplish the goals set forth in its Position Statement, the North Dakota Department of Agriculture

has called a meeting of the western Commissioners of Agriculture at the National Association of State Departments of Agriculture, meeting in Boston on September 20, to focus ag attention in the states which are heavily affected by the land grant separation issue;

has the Assistant to the Chairman of the Interstate Commerce Commission coming to meet with North Dakota citizens in a series of events across the state, October 5-7;

has the USDA Office of Transportation Director researching a USDA position on the rail abandonment/land grant sepration issue, also touring the state October 5-7;

is communicating with all farm and community transportation interest groups to share through their regional and national counterparts the same sort of concerns and need for action on all levels;

- is working with the Governor and Attorney General's Office in seeking opinions on the BN land grant separation issue;

is cooperating with the Public Service Commission and the Highway Department and legislators, through the State Intermodal Transportation Team, to study problems and make recommendations for state and federal action; and

is urging the Tax Commissioner's Office to join in this concerted effort to provide a united front. Thank you for enabling the Commissioner to deliver his comments in abstentia. COMMISSIONER CONRAD: Thank you, Dina. Thank the Commissioner. We certainly appreciate his stand on this issue.

I think at this point we're at ten to five and, perhaps, we should break. We will break. I want to ask, before we do that, the members, Jerry Olson - Jerry, can you be here this evening? Al Schuette, can you be here, and Ron?

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UNIDENTIFIED PERSON: Yes, we'll be here.

COMMISSIONER CONRAD: We'll put you on the first thing, starting at seven this evening. And, Larry, are you going to be here? I appreciate that very much. We had a very full afternoon. I think we are well on the way to establishing a transcript that will be useful and helpful. I want to thank everyone who has already appeared and indicate we will resume at seven o'clock, same place. And we'll start with the labor panel and proceed with the rest of the schedule until we're completely done.

(Recessed at 4:50 p.m. until 7:05 p.m., the same day.)

COMMISSIONER CONRAD: We're going to start if everybody will take their seat. We are going to proceed very quickly. If the labor panel would be seated, because Ron has to leave to be in Superior, Wisconsin tomorrow, we're going to let him go first, if it's all right with you, gentlemen. Then, we will follow with Jerry and Al. So, Ron, why don't you go ahead.

MR. RONALD MORRIS: Good afternoon - or evening, ladies and gentlemen. My name is Ronald Morris. I am Vice General Chairman of the Brotherhood of Maintenance of Way Employees. I would like to advise you as to what type of work the Brotherhood of Maintenance of Way Employees do. Their work mainly consists of building and maintaining of track, bridges, buildings and maintenance of right-of-way and repairing of machines used in their work.

At this time I would like to thank Mr. Kent Conrad, State Tax Commissioner of North Dakota, for giving the Brotherhood of Maintenance of Way an opportunity to express their findings the hardship in loss of employment and the effect the Burlington Northern holding company, based in Seattle, Washington, will have on its Brotherhood members. Our opinion would be that this holding company was formed to take the money from Burlington Northern railroad mineral rights and use it in other interests; therefore, leaving the Burlington Northern railroad without proper funds to upgrade track on branch lines in the State, as is much needed. These branch lines have been neglected with very few Maintenance of Way people left to maintain these lines.

A section crew today with two or three men are given approximately fifty miles of track to maintain and, by no means, can keep maintenance up on this track. In the early part of the 1950's there would be seven to ten men assigned to a section, with approximately 25 miles of track to maintain.

There is indication that the Brotherhood of Maintenance of Way membership on the Burlington Northern system federation has declined by 600 members since the Burlington Northern holding company was formed. Our opinion is that this is a clear indication that the forming of the Burlington Northern holding com. pany is adversely affecting the welfare of all concerned. And this is only the beginning.

These lines planned for abandonment can and should be repaired. The Burlington Northern railroad has four gravel ballast pits in North Dakota; namely, the Kerry Pit located at Park River, North Dakota, in the eastern part of the state; the Dunseith Pit at Dunseith, North Dakota, near the middle of the State, the Minot Pit at Minot, North Dakota, in the western part of the State, and Falsen Pit near Minot, North Dakota, that would furnish ballast for these tracks.

The Burlington Northern have their own power shovel cranes to load gravel into ballast cars. Therefore, there would not be any need to purchase ballast for these lines under abandonment as they have their own ballast. They also have electromatic tampers that can lift, surface and line approximately one to one and one-half miles of track per 8-hour shift, with a crew consisting of one foreman, one operator and two laborers. The approximate cost of labor and fuel for an 9-hour shift would be as follows: thirty-five dollars for fuel and three hundred twenty-five dollars for labor. Therefore, the labor and fuel cost to lift, surface and line one to one and one-half mile of track would be approximately $335. The cost to load the gravel in the ballast cars would be approximately as follows: The labor for an 8-hour shift and fuel to operate machines to load forty cars of ballast with thirty cubic yards per car - the total cubic yards in forty ballast cars would be twelve hundred cubic yards. It would take approximately thirty cars of ballast to the mile to surface track in poor condition. The approximate cost of fuel and labor for an 8-hour shift to load these cars would be forty dollars for fuel and ninety dollars for labor, making a total cost for loading of $130. This would be at current labor and fuel costs.

The shaping of shoulders and plowing out of excess gravel to the shoulder and dressing track would be done by a ballast regulator-type machine. This takes one man to operate and can complete approximately one to one and one-half mile per 8-hour shift, with an approximate cost of eighty-five dollars for labor and thirty dollars for fuel cost, making a total of 115 per 8-hour shift in the shaping and sweeping, this being the final stage of the track-raising operation.

I did not get into tie replacement or rails as the time I have for this report is limited to allow people in this meeting to make their comments on the Burlington Northern holding company and Burlington Northern railroad line abandonments.

The testimony I have presented should show that the approximate cost to restore these lines would be much less costly than building and repairing the federal, state, county and township roadways to haul the large amount of tonnage that is hauled on the Burlington Northern branch lines. There would be a great cost to the taxpayers of North Dakota if these lines are allowed to be abandoned as Burlington Northern has plans for in the near future.

The people of North Dakota should also be thinking of arranging for some type of subsidy from federal aid or elsewhere to repair these lines as it would be less costly than building and rebuilding tar and concrete roadways to haul these products as the railroad track is there and in operating condition.

I would like to thank all of you for your time and interest in this meeting.

COMMISSIONER CONRAD: Thank you very much, Ron. We appreciate very much the fact that

you have taken the time to be here and provide the testimony to us.

Jerry, do you want to take it next?

MR. JERRY OLSON: Mr. Conrad, ladies and gentlemen, my name is Jerry Olson. I am a representative of Minot Lodge No. 99 of the Brotherhood of Railway and Airline Clerks and presently serve as Presi dent of the Minot Intercraft Railway Association.

I wish Mr. Conrad wouldn't have broke for dinner. I am a little meaner when I am hungry. But I feel my predecessors this afternoon have given you excellent input on the effect of the formation of a holding company by Burlington Northern will have on the railroad segment of the corporation and what we may expect in the future. I do want to read one comment on holding companies. It seems like we have heard quite a difference of opinion on holding companies today. This one was made by Will Rogers back on March 13, 1935. And it's quite interesting. "Say, did you read what the President said about those holding companies? I wouldn't want my worst enemy to call me names like that. Now, my senators can call each other names, but theirs is all in good, clean fun. They don't really mean it, but the President ain't kidding." What makes it worse, it's true. A holding company is a thing where you hand an accomplice the goods while the policeman searches you. March 13, 1935. Isn't it amazing that our forefathers recognized the threat of holding companies and, apparently, dealt with them some forty-six years ago.

It think I heard someone make the comment earlier today, maybe we need that big stick of Teddy's or possibly FDR when he was in during this very time the statement was made. I believe I can better serve this hearing by keeping my remarks to the adverse effects of branch line abandonment, advise you on how to recognize the beginning of railroad abandonment and what you and I, as citizens of our community, can do to reduce the negative impact. My first item will be tax loss projection. No. 1, the loss of tax revenue on railroad property in the community now served by Burlington Northern - we have many small towns that will suffer irreparable damage to their local government budgets. Two, loss of tax revenue from Burlington Northern employees who must relocate or seek other employment; again, a disaster to local government budgets.

Three, the additional tax burden to communities on account of upgrading and continued maintenance of present roads to sustain additional truck traffic to transport grain and other commodities. We have already witnessed this type of extraordinary expense to counties in the western portion of our state due to the additional traffic from energy development. We have heard cries of help from them right at this date.

My second item will deal with business loss projection. No. 1, the loss of daily trade generated by farm-to-elevator traffic. Certainly, many of the smaller business ventures in the rural communities are dependent on the sales made to customers who stop in for essentials because they just happen to be in town with a load of grain. No. 2, the loss of railway employment income now spent in the local community. The rail dollar is a hard dollar. This is turned over and over again in a community before leaving. And it's vital to the economy of these small-town communities. No. 3, the loss of the spot grain market to the producer. How vividly I can recall riding with my grandfather to the local elevator and waiting for the noon grain quotation, to take advantage of what we may find, whether it be in the morning or in the afternoon rate, No. 4, the loss of the competitive enterprise in regards to freight rates and service. Many of our communities will be completely isolated from any other transportation than the trucking industry. And don't forget that pie-in-the-sky promise of reduced rates through unit grain trains which can be eradicated by the stroke of a pen. Five, loss in valuation of real estate. The previous factors I have covered can only affect your community in one way, by lowering the value of your real estate holdings.

My third item is environmental impact. Who will reclaim the track beds, what will become of the mineral rights if the railroad is allowed to pull out? Why should farmers' fields remain divided by a band of track land which will be overrun by noxious weeds which are even now prevelant along the right-of-way. Most of you have been up and down the highway on No. 2 to Grand Forks. You have this creeping in of leafy spurge. Believe me, a lot of this type of weed comes right from transportation forms. You see it along the track beds of the railroad also. There was a day when we had a strong maintenance on weed spraying and, of course, at one time, before the environmental impact, we burned our roadbeds, but today this is something to look at. Why should we give up a fuel-efficient transportation system in an era of energy shortage. Each day we hear news commentaries informing us of the power of the Mideast oil cartel, that it must be broken and we must all sacrifice. So why should we sit idle by while Burlington Northern abandons one of few forms of fuel conservation, the transportation of freight by rail.

Each year, regulations are imposed on industry to lower the level of exhaust emission. Why should we give up a form of locomotion that perpetuates this concern.

My fourth item is legal and moral obligations. Burlington Northern and its predecessors developed other segments of the holding company from profits partially derived from the branch lines. In contrast, should not profits from the other segments be used to revitalize the branch lines so that they may become more profitable? Much of the land and its resources now held by Burlington Northern was obtained through

federal land grants. In contrast, should not ownership of this land be retained by the railroads as originally granted. Certainly, our forefathers did not envision a holding company at the time this land was granted.

My fifth item is negative attitude by the Burlington Northern. Burlington Northern claims modern technology and equipment make it unfeasible to service outmoded branch lines. In contrast, should not modern-day grain yields obtained through this same technology and equipment enable Burlington Northern to sustain their branch lines? I quote Mr. Dennis Kavinow, Vice President, Operations, Soo Line railroad, taken from the Minot Daily News, Saturday's edition, September the 19, 1981, "Soo had a near record month in August, a model month for railroading." Again, I quote, "Every branch line Soo Line has in the State of North Dakota is profitable and the company has a strong maintenance program for them.'

At this time I will focus on the first visible signs the community and the shippers therein may recognize as preliminary preparation for branch line abandonment. No. 1, the establishment of direct service agencies, thereby removing the small town agent that serves you on a personal basis. No. 2, the consolidation of the direct service agencies into a single centralized agency, such as Minot has at Gavin Yard. Now, you have cut off an extension of the marketing arm of a viable business. No. 3, curtailment of 24-hour service at the centralized agency. Although customers at the Minot centralized agency were promised 24-hour service during their Public Service Commission hearing, we are now restricted to 16-hour service. The 24-hour service promise is documented in the transcript of the Public Service Commission Case No. 9609. Yet, today, we do not have this service.

No. 4, the reduction of personnel who serve the customers through the centralized agency. Again, examination of Public Service Commission testimony in Case 9609 reveals the promise of retaining two mobilized vans to serve the surrounding communities affected by centralization of the agencies. Today, we have only one mobilized van serving the entire area. Again, our promises were not fulfilled.

Let me tell you that one van serves some 714 customers. Can you imagine efficiently serving 714 customers with one van that must run from the limits of Williston, North Dakota, west to the limits of New Rockford, North Dakota, east and all the branch lines that run off of that main line. No. 5, the removal of local marketing agents, the arm that solicits and assists the customer in obtaining reliable service. Here again, although Minot is a moderate sized community, we have experienced the removal of the local marketing department. Once we recognize these visible signs, what can we, as an individual or a community, do to reverse this trend. Many of the rulings of the Interstate Commerce Commission are so vague that it's hard to pursue. However, there are some definite criteria. There is the various curtailment of service, such as I have just gone over. Note the quality of the maintenance the railroad performs on the lines in your area. List the discrepancies in regularity of service. Are they still making the same number of weekly runs? Note if they are sticking to a timetable. Can you depend on whether they will be there in a reasonable time frame or is it anybody's guess? How long does a loaded car set before it is picked up? How long a time does it take you to receive a car you have ordered? Document your facts, car initial, number, car involved, the date, the time, and et cetera. When you, as a member of your community recognizes these signs, you have a right to protest. You can do so by writing the North Dakota Public Service Commission, also the Interstate Commerce Commission in Washing. ton, D.C. These agencies have a legal and moral responsibility to protect the public interest. Write your Senators and Congressman, write your Governor, contact your public officials. As a matter of fact, contact any agencies that may be interested. This is how we get results.

Thank you for taking the time to listen to me.

COMMISSIONER CONRAD: Thank you very much, Jerry, for providing that testimony. We heard testimony this afternoon on behalf of Burlington Northern officials that the holding company structure makes no difference to the railroad and to the assets that are left with the railroad. I would like to read into the record an additional portion of the report I was reading from earlier today, entitled "Railroad Conglomerates & Other Corporate Structures," report of the ICC in February 5, 1977, page 71. It indicates - and I quote "As independent financing units, railroads under the control of diversified holding companies are now limited to the use of internal funds and debt financing to satisfy operating and capital improvement requirements.

The result of this situation is that these railroads must incur an increasing amount of outstanding debt, absent sufficient cash flow to amortize such debt on a reasonably regular basis. Further, even when economic conditions might be conducive to equity financing, the holding company railroads, including pros. perous carriers, could not take advantage of the situation. If, as is probable, the carrier's debt to debt plus equity ratio then continues to deteriorate, the vulnerability to economic downturns is increased. The ability to meet fixed charges and pay dividends decreases. Ultimately, the railroad can become a burden to the hold. ing company and a candidate for divestiture, as described earlier. Despite assertions of some holding companies of their capability to assist railroads with their capital needs, there is little evidence of such aid at a time when there is general agreement respecting the railroads' substantial need for capital to meet deferred maintenance and delayed capital improvements. More likely because of the holding company's profit center philosophy, its management's decision on use of capital will turn on unanticipated yields among competing investment opportunities."

I think that's of some interest on the questions that we heard raised this afternoon. Finally, in the conclusion section, which the Burlington Northern representatives read the first sentence of the conclusions and recommendations, I went on to read the next several paragraphs, which I think give a different light on the question. I also would turn to page 74 of that same report and the conclusions and recommendations section and would quote the following: "We are particularly concerned that lands which were granted by the Federal Government to railroads to enable them to fund the construction and operation of their rail lines or the proceeds from the transfer of those lands or of interests in those lands have been and will be transferred from the railroads to their parent holding companies at less than fair value. Were the railroads receiving these properties, or their railroad successes in interest, to be deprived of the fruits of these land grants at a time, whether now or in the future, when they are needed to support rail services esential to the public interest, the intention of the Congress in making these grants would be subverted, and today's citizens would lose the benefit of the contract made by their forebearers with the land-grant railroads."

I just think it's important to have that on the record. Al, would you care to testify at this point?

MR. ALTON SCHUETTE: Good evening. My name is Alton Schuette of Bismarck, North Dakota. I am the State Legislative Director for the United Transportation Union and for thirty-five years I have been employed as a brakeman-conductor for the Soo Line Railroad.

Mr. Conrad, thank you for this opportunity to appear today in order that the United Transportation Union may express publicly its concerns over the proposed plans of the Burlington Northern railroad company.

We are opposed to the Burlington plan to abandon many of its branch lines and create holding companies as a means of sheltering some integrally related interests of the railroad company.

The abandonment of the railroad's branch lines will have an immediate and permanent adverse effect upon the citizens of North Dakota.

The long term effect of the move to shelter its mineral interests will also be catastrophic to the business climate of this state.

Before I enumerate the various adverse effects which will result from the Burlington Norther proposals, it may be advantageous to remind ourselves of the railroad companies history. Northern Pacific Railroad Company (now a part of the Burlington Northern, Inc.) was a land grant company. The United States granted to the railroad vast acres in the State of North Dakota. The railroad company in turn used the land as an inducement to immigrants to settle in this state. A large number of our ancestors were enticed into North Dakota by the promise of land and reliable railroad transportation. In these land transactions the railroad retained the mineral rights. The settlers who bought the land gave up these valuable rights in the expectation they would continue to receive railroad transportation services.

Today the descendants of those early settlers will be deprived of basic railroad transportation services under the proposed plans to abandon many of the southern branch lines.

The railroads decision to eliminate transportation services is not due to any decrease in the need for the services, but rather is the inevitable result of its own early decisions regarding deferred maintenance and availability of box car units. Over the years the decision of the railroad which appear to have been motivated by the lure of short term profits have worked to decrease its contribution as a transportation carrier. As few box cars and grain hoppers were available farmers and shippers were forced to use trucks to haul their commodities. In short the railroad chose not to be competitive in the transportation market; a market which was their original corporate purpose. Testimony received before the North Dakota Public Service Commission and the Federal Interstate Commerce Commission over the past years verifies that the railroad's transportation services were and are needed and could and would have been profitable but for the conscious decision of the railroad company not to compete for the business.

Today Burlington Northern seeks to abandon branch line routes as being unprofitable - routes which were made by the conscious decisions of the company itself. As a result many employees will lose their jobs. But it is not only the present maintenance right-of-way crews, clerks, agents and train and engine employees who will be adversely affected. Such a decision also means a loss of future employment opportunities in this state which affects the business economy of the state. At a time when the state is seeking to encourage development of new businesses in this state it should also endeavor to save existing business and employment opportunities.

The beneficiaries of available transportation services are also adversely affected. The farmers and shippers will be forced to increase their use of trucks. The farmers will bear the brunt of increased shipping costs necessitated by greater distances which trucks will cover in order to reach the elevators and warehouses

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