Buffett’s Burlington Northern Deal Is Focus of U.S. Hearing

Berkshire Hathaway Inc. (BRK/A)’s 2010 acquisition of Burlington Northern Santa Fe (BNI), the second-largest U.S. railroad by revenue, will be the subject of a hearing on railroad shippers’ concerns that they will be asked to cover the deal’s costs.

Burlington Northern has asked the U.S. Surface Transportation Board to include the amount of money that Berkshire Hathaway paid over book value for the railroad when calculating the minimum freight rate that shippers can contest. Including the $8.1 billion premium would raise the minimum rate that the board would consider unreasonable for the railroad’s customers to pay.

The hearing will be March 22 in Washington, the board said today in an e-mailed statement. The fact that the hearing has been scheduled may indicate the agency wants to help shippers, said Chip Nottingham, a former board chairman.

“I think the board wants to grant some type of relief to the shipper community,” Nottingham, who served as chairman from 2006 to 2009, said in a phone interview. It will have to “figure out how do we make sure that the rate dispute- resolution process is still open and available and functioning to everybody.”

The hearing will be used to gather information, Dennis Watson, a spokesman for the board, said in an e-mail.

Suann Lundsberg, a spokeswoman for Burlington Northern, didn’t immediately respond to a phone call requesting comment.

Warren Buffett is chairman and chief executive officer at Berkshire Hathaway.

Suing the Board

No matter what the board decides, it will probably be sued, said Nottingham, a partner in the federal affairs group of the Richmond, Virginia-based law firm Williams Mullen.

The Western Coal Traffic League charges that Fort Worth, Texas-based Burlington Northern is trying to make customers cover Berkshire’s acquisition costs through its rates, and make it more difficult for them to challenge rates with the U.S. board. The group represents coal-fired electric plants west of the Mississippi River.

The group urged the Washington-based railroad regulator to examine the matter in May 2011.

“This is all being done to set the stage and make things better for future battles that we don’t know about,” Tony Hatch, a New York-based railroad analyst, said of the shippers’ challenge.

To contact the reporter on this story: Lisa Caruso in Washington at lcaruso7@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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