Berkshire unloads one of two railroads kicking up fuss at the STB

Berkshire Hathaway, through subsidiary BNSF Railway, told the U.S. Surface Transportation Board in a Nov. 16 letter that it has sold one of two problem railroads.

“I write on behalf of Berkshire Hathaway Inc. (Berkshire) and Berkshire’s wholly-owned subsidiary, BNSF Railway Company (BNSF), to update you on Berkshire’s progress in divesting the WCTU Railway LLC (WCTU) and CBEC Railway Inc. (CBEC) short line railroads,” said the letter from a BNSF attorney. “I am pleased to inform you that yesterday, November 15, 2012, MidAmerican Energy Company closed on the sale of its interest in the CBEC, thereby completing the divestiture. The purchasers are the other two owners of the CBEC, Central Iowa Power Cooperative, which now owns 94 percent after closing, and Corn Belt Power Cooperative, which now owns 6 percent post-closing. Neither of these two entities is a rail carrier nor does either entity own or control another rail earner.”

The letter added: “Regarding the December 31, 2012 deadline for Berkshire to complete its divestiture of the WCTU, negotiations to sell the railroad continue to progress, and I anticipate that a sale will close before December 31, 2012. Of course, I will further update you on the status of this divestiture on December 1, 2012.”

The STB had in recent months been looking at complaints from coal-consuming power generators that they should not have to pay, through haul rates, the $8.1bn “acquisition premium” that Berkshire paid when it bought the BNSF in 2010. Then those coal shippers launched a new round of criticism when they found out that Berkshire had controlled the two short-line railroads before the BNSF buy, something that would have triggered a mandatory STB review of the BNSF buy had it been known at the time. Berkshire has said it never considered these short-lines to be jurisdictional railroads that would have triggered the STB review mechanism and that it moved to sell them when it found out that they were covered under board rules. MidAmerican Energy is a Midwest utility subsidiary of Berkshire.

Said the Iowa Department of Transportation website about the CBEC: “The CBEC Railway was formed in 1992 by the MidAmerican Energy Company in Council Bluffs. … The CBEC owns six miles of track in the Council Bluffs area, which were installed in 1997. The track is primarily used by BNSF Railway and Union Pacific Railroad to haul coal to the utility plant located south of Council Bluffs. Administrative services are provided by MidAmerican Energy. The Great Western Railway performs the maintenance functions. The main product handled by the CBEC is coal.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.