Behind the "Bloomberg Government" paywall is a story about the Western Coal Traffic League's effort to prevent Warren Buffett's Berkshire Hathaway from building the premium cost of its acquisition of the Burlington Northern and Santa Fe Railroad into BNSF's government-approved shipping rates. Not behind any paywall, though, is the Western Coal Traffic League's actual filing with the Surface Transportation Board, which tells the story from its perspective. That filing references a letter from Senator Thune: "I have discrete concems regarding the acquisition premium paid by Berkshire to BNSF shareholders, and the potential it could indirectiy influence rail rates for a number of shippers...Westem Fuels and Basin Electric should not be subject to higher rates than they would have been in the absence ofthe BNSF acquisition by Berkshire."
Some of the rural electric companies wrote to Mr. Buffett on May 12, warning, "Higher transportation rates caused by the acquisition premium mean lower net prices to farmers and higher production costs, and can significantly impact the economic livelihood of rural America."
The chairman of the Surface Transportation Board, Daniel R. Elliott, III, wrote to Senator Franken in March: "I understand your concerns that our accounting regulations not be manipulated to permit an investor to pay an inflated price for railroad assets, and then try to pass that inflated cost back to captive shippers in the form of higher transportation rates."
Mr. Franken had written, along with nine other senators: "Berkshire Hathaway could pay an inflated price for BNSF, and then pass that cost on to its captive customers in the form of higher rates."
I don't have any objection to Mr. Buffett's railroad charging whatever it wants — if the utilities don't like it, they can have their coal arrive via truck or horse-drawn-wagon, or switch to some other means of generating electricity. But it's interesting that Mr. Buffett has made such a big investment in a railroad whose price increases are subject to a review — even if the review is subject to some accounting adjusting based on the acquisition price — by a government agency. It could be that using merger-related accounting to get a rate increase past the government regulator was a reason the acquisition made sense for Berkshire. How'd we ever manage without a Surface Transportation Board?