(This article first appeared in Multinational Monitor in 1992 and also appears in my book The Grateful Unrich: Revolution in 50 Countries. The article remains timely as Burlington Northern has gotten yet more powerful, swallowing up Sante Fe RR to become BNSF – the largest railroad corporation in the US)
Burlington Northern (BN) gave pink slips to 190 out of 250 workers at its locomotive repair shop in Havre, Montana. Eight percent of the locomotive repair workers at BN’s Glendive, Montana shop were also given notice. Similar job cuts occurred at BN facilities in Minnesota, Nebraska, Illinois and Washington – saving the company about $9 million a year. The cuts were made in the wake of General Electric’s production of new high-technology locomotives that are able to traverse the entire High Line between Chicago and Seattle without any en route servicing.
Job insecurity is nothing new to railroad workers, and certainly not to BN employees. Over the last decade, the company’s payroll has plummeted from 52,000 to below 30,000, despite protracted campaigns waged by rail unions – including the United Transportation Union (UTU), the International Association of Machinists, the International Brotherhood of Electrical Workers and the International Brotherhood of Boilermakers and Blacksmiths. Since deregulation of the railroads via passage of the 1980 Staggers Rail Act – which removed government controls on rail shipping rates – the industry has undergone massive changes. With BN leading the pack, the industry has experienced a flurry of mergers, the shutdown of smaller depots and spur lines (lines that branch off from main tracks) and rapid replacement of human labor with technological innovation. The consequences have been devastating for dozens of communities and thousands of workers.
When BN merged with San Francisco/Santa Fe Railroad in 1980, it became the largest of the remaining rail oligopolies in North America – with over 26,000 miles of track stretching from Pensacola, Florida to Vancouver, British Columbia. That same year, Milwaukee Road Railroad went bankrupt, leaving BN with a virtual monopoly over rail traffic from the Midwest to the Pacific Ocean. Scores of Midwestern towns like Eureka, South Dakota – which had depended on the railroad to haul their bountiful wheat harvests – saw their steel rails abandoned, even torn up, by BN workers. BN regarded stops not located on the High Line as inefficient.
BN has been aided and abetted by the U.S. federal government in undertaking the activities which have cruelly dislocated workers and communities. There is a strange logic to the federal government’s role. It helped create and continues to subsidize BN, despite the company’s dismal social and environmental record.
All of organized labor has been under attack from management since Ronald Reagan gave striking PATCO air traffic controllers the ultimatum to return to work or be fired in 1981. Since then, rail workers have had to fight not only their corporate employers, but also federal regulators.
In 1987 BN transferred its southern Montana main line – which connects Sandpoint, Idaho with Huntley, Montana – to Montana RailLink. RailLink was resurrected from obscurity by Missoula-based business mogul Dennis Washington. The spin-off came during pending contract negotiations between the UTU and BN. Washington hired scabs, eliminated the job of caboose engineer and sent thousands of union workers packing. UTU members from North Dakota to Washington went on strike, but just five hours into the picket, U.S. District Court Judge Dennis Steart issued BN a restraining order to force an end to the strike. Although RailLink is not a legal subsidiary of Burlington Northern, BN retains control over the main line, since it owns and operates all connecting lines.
In 1991 UTU and the International Machinists union called a strike against BN in response to the company’s foot-dragging on the workers’ contract, which would ultimately cut crew sizes. On April 17, 1991 Congress issued Joint Resolution 222, which curtailed workers’ right to strike, ordering unionists back to work while federally appointed special mediators arbitrated between the unions and BN. The arbitrators approved all recommendations made by Presidential Emergency Board (PEB) 219, an ad hoc group created by the Bush administration which advised industry to streamline operations by cutting jobs, and urged the federal government to grant huge tax breaks to companies that followed PEB prescriptions.
The key PEB 219 recommendation was that crew sizes on trains be cut from 3.65 persons to 2.25 persons. Six months after the recommendations were issued, Burlington Northern announced the elimination of brake operator jobs on 65% of its lines and additional ground service cuts – amounting to 5,100 jobs sacrificed. Backed into a corner by Congress, UTU was forced to swallow the dubious medicine or lose members’ jobs altogether. According to John Peter Paul, chair of the International Machinists Union, “Ninety percent of railroad workers did not accept the contract. It was shoved down their throats by PEB 219.”
The United Transportation Union is still trying to negotiate a new contract with BN. UTU General Chair Rick Marceau says that the union is “…of course most insistent that our members who are disadvantaged receive a level of protection. It has always been UTU’s stance that any jobs that are eliminated should be as a result of attrition – like when the numbers of firefighters were reduced during the 1960s.”
Burlington Northern was rewarded by the Bush administration with a $735 million second quarter 1991 special charge tax deferral which will go toward worker relocation, workers’ compensation claims and anticipated environmental cleanup. In other words, U.S. taxpayers will subsidize BN’s injuries against workers and the environment.
As for the May 1992 cuts, Roger Campbell – director of external communications at BN – says simply, “All affected employees were offered similar positions at other BN facilities in Minneapolis, Minnesota; Lincoln, Nebraska; and Seattle, Washington.” He adds that in the case of the UTU, BN offered “an opportunity for voluntary separation in return for severance payments of up to $60,000 per employee.” BN Chief Executive Officer William Greenwood said at the time of the lay-offs, “The decision was especially difficult for BN because of the exceptionally high quality work performed by all our shop’s employees. Their contributions to our locomotive and car operations have been superb.”
BN’s Family Tree
The history of the BN empire provides a textbook case of corporate welfare. The company became official in 1970 when Chief Justice Earl Warren – in a departure from his normally regulationist stance – declared legal a 1901 gentlemen’s agreement between James Hill and J.P. Morgan to consolidate their respective railroads – Great Northern and Northern Pacific (NP). Prior to the ruling the companies had functioned almost as a single entity, occupying the same headquarters despite the fact that an official merger had been disallowed on anti-trust grounds by the U.S. Supreme Court in 1904.
Under the 1864 Northern Pacific Land Grant, Morgan’s company had received 40 million acres of free land in return for NP promises to lay railroad track from Lake Superior to the Pacific Coast. NP did not deliver on its promises, but kept the land, winning a lawsuit brought against it by the U.S. government in 1880. When NP went belly-up in 1893, J.P. Morgan stepped in to prop up the company with 100 and 150-year bonds secured by Land Grant property.
The Morgan liens were retired in 1988 when then-BN chair Richard Bressler unhitched the railroad from its Land Grant properties by creating Burlington Resources (BR). With bondholders paid off, Burlington Resources was able to fully exploit the mineral, oil and gas deposits on the Land Grant properties which have made BN one of the U.S. West’s largest landholders. Properties that had no resource value were liquidated by a BR subsidiary – Glacier Park Inc. – which was formed as a real estate company to market unwanted BN Land Grant properties. As of December 31, 1991 proceeds from these sales totaled over $400 million – most of which has been invested in coal, oil and gas properties.
Since the spin-off of Burlington Resources, BN has engaged in a frenzy of limited partnerships and partial sales to take advantage of the 1987 tax reform law, which contains a loop-hole whereby resource companies which form limited partnerships do not have to pay any federal taxes. But while BN has spun off several companies, it has kept control of its empire through interlocking directorates and major stockholdings.
The BN Empire
Burlington Northern owns portions of most major railway terminals and also boasts trucking firms, real estate development companies in New Mexico and Arizona, a communications company in Virginia and a railroad car leasing unit – BN Leasing Corporation. Amtrak operates service on BN tracks, under contract with and heavily subsidized by the U.S. government. The company has offices throughout the world, with significant joint ventures in Japan with Sumitomo and Mitsubishi, and in South Korea with the Korea Electric Power Company. BN also operates the only foreign-owned railroad in the former Soviet Union.
Soon after BN’s official formation in 1970, the company began swallowing up smaller resource companies, which became integrated components of its rail monopoly. BN has made important acquisitions, including El Paso Natural Gas – an oil and gas holding company which operates 20,000 miles of natural gas pipeline from Oklahoma to California. El Paso – purchased by BN in December 1991 – is 50% owner of the Mojave pipeline, the only gas pipeline to California. Another substantial subsidiary is Meridian Oil – a Houston-based company which holds title to ten million acres of proven oil and gas reserves from Alabama to North Dakota. In 1991 Meridian purchased off-shore Gulf of Mexico properties and is now the largest non-integrated oil company in the United States.
On December 31, 1992 Burlington Resources sold its general partnership interest and other remaining interests in what had been perhaps its most significant subsidiary – Plum Creek Timber. In 1989, only a year after BR was created as the resource branch of BN, Plum Creek – 11% of which was owned by BN – was spun off as a limited partnership. While Burlington Resources retained an 11% interest as one partner, it was able to transfer $325 million in long-term debt to Plum Creek, thereby avoiding a potential leveraged buyout. Since 1989 Plum Creek has paid nothing in federal taxes. The company owns more old-growth timber (1.4 million acres) and more grizzly bear habitat than any other private landholder in the United States.
Since BN bought the company in the early 1970s, Plum Creek has carved out 640-acre clearcuts from the Cascade Range to Montana’s Swan Valley, leading Rep. Rod Chandler (D-WA) to proclaim the company the “Darth Vader of the timber industry.”
Most of the trees which Plum Creek cuts in the Cascade Range are not processed locally. They are sent to the Pacific Rim in raw form for milling – primarily to Japan through BN’s joint venture with Sumitomo Forestry. After consummating its relationship with Sumitomo in early 1990, Plum Creek shut down all of its West Coast sawmills, putting thousands of mill workers out of their jobs. By way of justifying the job cuts, industry propagandists concocted the infamous spotted owl crisis, dividing timber workers and environmentalists despite the fact that over-cutting and raw log exports shut down mills before the owl was listed as an endangered species.
While Plum Creek shut down its coastal mills, it re-tooled mills in the intermountain region with high-tech capital-intensive equipment. Plum Creek’s Evergreen, Montana facility – which recently received the largest fine ever levied by Montana’s Department of Health and Environmental Sciences for air quality violations – provides a classic example of the costs associated with capital-intensive mills. In the past few years, the mill has slashed its workforce by over 30%. Nonetheless, more trees must be cut to keep pace with the new saws. It is this kind of short-term, cut-and-run corporate ethic which has created both a timber shortage and a job shortage in the region. In 1989 Plum Creek cut a record 597 million board feet of timber.
Loren Rose – financial officer for Pyramid Lumber of Seeley Lake, Montana – says, “If you drive up the Swan Valley, you get sick in a big hurry. It’s not that logging in itself is bad, but the way Plum Creek does it is intense.”
Plum Creek Director of Corporate Affairs Sharon Kanariss responds, “We disagree that we over-log. We are working to get our logging into a managed state. Currently in the Rocky Mountain area 80% of our logging is done through selective harvesting and only 12% by clear cutting.”
Through market manipulations, the company has ensured that there are no competitors to provide an alternative milling model. In 1989 Rep. Pat Williams (D-MT) accused Plum Creek of deliberately bidding the price of federal Forest Service timber beyond the reach of locally owned mills in order to eliminate future competition. Three years later mills such as Stoltze-Connor, WTD Industries and Intermountain Lumber are out of business in western Montana. Williams’s claim now seems beyond dispute.
Mike Bader, executive director of the Missoula, Montana-based Alliance for the Wild Rockies, says, “Plum Creek means environmental terrorism. The company epitomizes a colonial power coming in to extract resources, demonstrating blatant disregard for both the land and its people.”
BN’s Big Appetite
While BN reaches into numerous industries, rail transport remains its bread and butter. One third of BN’s cargo is coal. The company currently hauls all coal from Wyoming’s Powder River Basin and will be the exclusive transporter of coal from the Bull Mountains Mine north of Roundup, Montana where mining activity will begin early this year.
After coal, the railroad’s second biggest money-maker is grain. In 1986, San Antonio’s Public Service Board filed a complaint against Burlington Northern for excessive freight charges during the height of the Texas wheat harvest. A number of Montana elected officials – including Rep. Pat Williams and Public Utilities Commissioner John Driscoll – also accused the company of hiding freight cars – that is, lying about their grain-hauling capacity – to create the illusion of a rail car shortage to justify its exorbitant rates.
In 1989 the Interstate Commerce Commission (ICC) – after receiving numerous complaints from farmers – ordered BN to repay $9 million to Great Plains farmers whom the railroad overcharged for hauling their grain to Pacific ports. On February 9, 1993, the District of Columbia Court of Appeals overruled the ICC decision.
Many farmers can testify to BN’s outlandish hauling charges. Randy Johnson, former president of the Montana Graingrower’s Association, claims that BN takes 20-34% off the top of the state’s wheat crop each year. Ted Schye, a Glasgow, Montana wheat farmer, says “I feel almost like a sharecropper to BN…,” because the company takes “…a third of my crop every year.”
Former Montana Public Service Commissioner John Driscoll blames BN for many of Montana’s economic woes. “We’re being made economically anemic by this parasite,” says Driscoll. BN’s monopoly over rail traffic puts it in an extraordinarily powerful position in rail-dependent Montana. Here the company services 98% of all grain elevators. In Texas and Oklahoma, BN controls 90% of grain transportation.
Cheating on Public Land
Like the titans of numerous U.S. industries, BN is heavily subsidized by U.S. taxpayers, harms the environment, exploits its workers and hurts small business. Critics wonder why the company is given such free rein.
Like any successful business rogue, Burlington Northern is a major player in the game of Washington influence peddling. Its various political action committees contribute almost $1 million a year to a cross-section of the Congress and Senate, with the largest donations going to representatives from states with a major BN presence. Last year, for example, BN’s railroad political action committee contributed $10,000 to Sen. James Exxon (D-NE) and $9,000 to Sen. Larry Pressler (R-SD). Burlington Resources has its own political action committee, as do several of its subsidiaries. BN’s efforts are supplemented by the industry group Association of American Railroads, which gives generous donations at election time, and which is supported by Burlington Northern.
Over the past twelve years, BN has been given federal encouragement to mechanize people out of jobs and export valuable resources tax-free to foreign countries, while the Bush administration and industry hammered spotted owls and “jobs vs. the environment” arguments into the public psyche. Many people are no longer buying this rhetoric.
Don Driscoll – mayor of Havre, Montana – has seen his community devastated by BN job cuts. Driscoll says bluntly, “Jobs are not being created [by increased logging] and don’t let anybody tell you they are. Corporate America needs to examine its soul. All I see inside [BN officers’] heads is numbers jumping over numbers. What about American workers and their families?”
Dr. John Osborne – President of Spokane, Washington-based Inland Empire Public Lands Council – thinks he has the solution to the problem of Burlington Northern. “If BN has not lived up to the letter and spirit of [its] Land Grant, [Burlington Northern] should forfeit [its] lands,” he says. By law, Congress can force Burlington Northern to do just that, as soon as it finds the courage to do so.
Dean Henderson is the author of five books: Big Oil & Their Bankers in the Persian Gulf: Four Horsemen, Eight Families & Their Global Intelligence, Narcotics & Terror Network, The Grateful Unrich: Revolution in 50 Countries,Das Kartell der Federal Reserve, Stickin’ it to the Matrix & The Federal Reserve Cartel. You can subscribe free to his weekly Left Hook column @www.hendersonlefthook.wordpress.com