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Benefits of Northern Lines merger.
Letters re to the obligation of the land grant railroads
Resolution adopted by the Five-State Legislative Conference..
RAIL MERGERS AND FORMATION OF THE BURLINGTON NORTHERN HOLDING COMPANY
FRIDAY, MARCH 26, 1982
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.