News Releases for January 2003
January 2, 2003
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Hoeven Budget Includes Funding To Begin Federal Complaint Against Railroad Pricing And Shipping Practices
News Conference Participants 
(152kb pdf)
Rail Rate Relief Puts Money in Farmers Pockets & North Dakota’s Economy (42kb pdf)
North Dakota Grain Shipments: A Captive Market (52kb pdf)
The North Dakota Dilemma: Ship Less Distance = Pay More (7kb pdf)
BISMARCK, N.D. - Gov. John Hoeven today said that he has included $250,000 in his executive budget to enable the Public Service Commission (PSC) to lay the groundwork for a formal rail-rate complaint with the federal Surface Transportation Board (STB). The complaint will seek to remedy the monopolistic pricing practices of railroads serving North Dakota, and recover millions of dollars in revenues lost to exploitative rates.
Although the action would likely affect all rail companies, Hoeven has been sharply critical of Burlington Northern Santa Fe Railroad (BNSF) in particular for its monopolistic practices. BNSF ships roughly half of all North Dakota grain.
“We have spoken with BNSF officials on numerous occasions and presented a reasonable case for reforming its shipping rates for North Dakota farmers,” Hoeven said. “It appears now that the only effective means for promoting a change in rate policy is a federal complaint. We will put the full weight of state government behind the effort to win a fair deal for our producers and shippers.”
Hoeven and others last year pushed for repeal of BNSF’s inverse rate structure, which charged elevators in western North Dakota up to 40 percent more than Minnesota elevators for shipping grain to the Pacific Northwest. Last week, the Governor again pressed BNSF to allow joint loading of railcars to enable groups of small elevators to cooperatively load large 110-car shuttle trains. Typically, the large shuttle trains are available only to large shippers, who receive discounted rates.
“These are the first steps in a meaningful effort to bring much needed rail rate relief to North Dakota’s ag sector,” said PSC Commissioner Tony Clark. “The reductions possible in a successful rate action have the potential to put tens of millions of dollars back into farmers’ pockets each year.”
Harlan Klein, Elgin farmer and vice chairman of the North Dakota Wheat Commission, said, “North Dakota is extremely dependent on railroads to move grain to market. During the last crop year, 83 percent of all wheat shipped by North Dakota grain elevators went by rail, and this action can help make sure that rates are fair to farmers and shippers. In addition, the inverse rates and shuttle shipments risk the loss of hard-won and important Asian markets for North Dakota wheat. This action should allow us to remain competitive in the world market.”
Historically, shippers have been considered “captive” to a railroad if they ship more than 70 percent of their products by railroad. Because North Dakota has no direct access to water transportation, and long distances make trucking impractical, rail is effectively the only way to move grain to markets, giving railroads a virtual monopoly in the state.
Typically, North Dakota producers pay significantly more in shipping rates than producers in other plains states. For example, Nebraska producers pay about $2.64 per mile to ship a rail car to the Pacific Northwest, whereas North Dakota producers pay $3.07 per mile from Minot - even though Alliance, Nebraska is 154 rail miles farther from the market.
A twenty-cent reduction in rates would pump an additional $50 million into the state’s economy, according to Hoeven.
Steve Strege, executive vice president of the North Dakota Grain Dealers Association, said he testified in Washington, D.C. about railroad shipping and pricing practices in July. “Chemical, electric utility and lumber interests were there right beside grain with much the same story of abusive pricing when railroads hold the customer captive,” he said. “The railroads seek to consolidate the grain industry into something that serves the railroads, not the origin and destination customers.”
The PSC will take the lead on the investigation, but the complaint may involve the attorney general’s office, the Upper Great Plains Transportation Institute, the grain industry and farm and commodity organizations.
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