On July 25, 2013, the Surface Transportation Board (“STB”) granted the petition for declaratory order that Slover & Loftus LLP client Western Coal Traffic League (“WCTL”) filed regarding the $8.1 billion regulatory acquisition premium that Berkshire Hathaway, Inc. (“Berkshire”) paid to acquire BNSF Railway Company (“BNSF”) in 2010. Western Coal Traffic League – Petition for Declaratory Order, FD 35506 (STB served July 25, 2013). BNSF had sought to write-up the book value of its assets to reflect the full premium starting 2010, and the STB order prevents BNSF from doing so.
The STB’s decision directly benefits two Slover & Loftus LLP clients and WCTL members that had previously obtained rate prescriptions against BNSF, Western Fuels Association, Inc., and Basin Electric Power Cooperative (“WFA/Basin”) and Arizona Electric Power Cooperative, Inc. (“AEPCO”). The STB ruled that BNSF must hold WFA/Basin harmless from the markup. Western Fuels Ass’n, Inc. & Basin Elec. Power Coop. v. BNSF Ry., NOR 42088 (STB served July 25, 2013). The STB explained: “If we do not adjust the rate prescription, BNSF would be able to charge higher rates to WFA based on a revaluation of fixed costs that we already recognized in our rate prescription.”
The STB also ordered BNSF to confer with AEPCO regarding how to apply AEPCO’s rate prescription ordered in Ariz. Elec. Power Coop., Inc. v. BNSF Ry. & Union Pac. R.R., NOR 42113 (STB served July 25, 2013).
WFA/Basin and AEPCO – both of which had successfully challenged their respective rail transportation rates and obtained favorable rate prescriptions – petitioned the STB to reopen their cases pending resolution of the acquisition premium issue.
While WCTL’s petition was pending, Berkshire discovered that its subsidiaries owned two Class III railroads at the time Berkshire purchased BNSF, which meant that Berkshire had been required – but failed – to obtain STB authorization before purchasing BNSF. In its July 25 decision, the STB decided to delay the revaluation of BNSF’s assets, in part because of Berkshire’s unauthorized purchase of BNSF, in order to “protect captive shippers who may find their rates suddenly outside of our purview.” The STB prohibited BNSF from including the markup during the term of Berkshire’s unauthorized control (2010-2013). It declined to eliminate the markup entirely for most BNSF shippers, however, authorizing BNSF to engage in a four-year transition period after 2013, although WFA/Basin are protected from any premium-related increase.