Creating Burlington Northern
The history of Burlington Northern began nearly 70 years before its creation. In 1893, James Hill completed his transcontinental Great Northern Railway (GN) between the Puget Sound and St. Paul/Minneapolis although he wasn't the first to do so. Another, the Northern Pacific Railway (NP), had accomplished the very same feat five years earlier in 1888. In spite of this, Hill was a cunning and effective railroader who commanded the resources and shrewdness to dominate the Pacific Northwest. When NP entered receivership on August 15, 1893, following that year's financial panic, he gained a considerable stake in the property. In 1901, the Empire Builder also grabbed the Chicago, Burlington & Quincy (CB&Q), which provided him with a direct route into Chicago. It was at this time that a fight broke out with another noted tycoon, Edward Harriman, who wanted control of the CB&Q. To do this, he acquired a considerable stake in Northern Pacific. On May 3, 1901 Harriman established the "Northern Pacific Corner" and briefly accomplished his objective. Hill quickly countered by forming the Northern Securities Company which effectively placed GN, NP, and Burlington under common control. This was the first attempt to merge the properties but proved short-lived. A Supreme Court order in 1904 broke up Northern Securities and it was forced to divest control of all three. However, by then, Harriman and had already sold his interest in NP.
According to the book "The Great Northern Railway, A History" by authors Ralph W. Hidy, Muriel E. Hidy, Roy V. Scott, and Don L. Hofsommer, he tried to reacquire his stock following the Supreme Court order but was denied in 1905. After the Hill's death in 1917 another merger was attempted during the 1920's but was, again, blocked by the ICC. With little hope of seeing the union occur at that time the idea was dropped altogether. The proposal was not renewed until after World War II when many railroads contemplated merger to combat declining market share. While the industry remained heavily regulated the ICC realized its monopolistic nature had long since passed. As early as the 1920's the idea of creating three or four major eastern trunk lines was considered but later shelved when the stock market crashed in 1929. The process that eventually created Burlington Northern began quietly in 1955 when the presidents of NP and GN launched informal discussions on the matter. In his book, "Burlington Northern Railroad: Historical Review, 1970-1995," Robert C. Del Grosso notes this mega-railroad was originally to be called the Great Northern Pacific & Burlington Lines. It was believed the giant system could raise profits through capacity reductions and more fluid, point-to-point operations.
Following the talks, a series of studies was conducted leading to a formal application filed with the Interstate Commerce Commission on February 17, 1961. The merger would officially bring together the Northern Pacific, Great Northern, and Chicago, Burlington & Quincy into the previously-named conglomerate. It would comprise a network of 24,500 miles and lease the Spokane, Portland & Seattle for a period of 10 years before absorbing this property into the parent company. In typical ICC fashion the process moved forward very slowly. Finally, on March 31, 1966 the agency surprisingly voted against the merger in a 6-5 decision. Undeterred, the three railroads continued pressing for the union. A great hurdle was cleared when an agreement was reached with the Chicago, Milwaukee, St. Paul & Pacific (the "Milwaukee Road") stipulating that their only transcontinental competitor would be granted eleven new western gateways. This strategic opportunity garnered the Milwaukee bountiful new sources of interchange business, particularly with the Southern Pacific at Portland, Oregon. With this issue resolved the ICC reopened hearings on January 4, 1967. Later that year, on November 30th, the merger was approved by an 8-2 vote. As the process moved forward the new railroad's name was changed to Burlington Northern, Inc. (BNI) during April of 1968. After a bit more legal work and other objections were overcome the four systems became one at 12:01 AM on March 2, 1970.
25 Years Of Burlington Northern
The new Burlington Northern dominated the West, dwarfing all other western carriers by several thousand miles. Along with its four primary railroads, several smaller subsidiaries also comprised BN including Pacific Coast Railroad (GN); Minneapolis, Anoka & Cuyuna Range Railroad (GN); Walla Walla Valley Railroad (An NP-owned interurban); Colorado & Southern (CB&Q); Fort Worth & Denver (CB&Q); Winona Bridge Railway (CB&Q); Oregon Electric Railway (An SP&S-owned interurban); Oregon Trunk Railway (SP&S); Lake Superior Terminal & Transfer (A joint GN/NP property); and the Midland Railway Company (A joint GN/NP property). BN's total mileage was never larger than the year it was formed. At that time it possessed a network of 25,879 miles although this excluded the Colorado & Southern and Fort Worth & Denver. As the years passed it greatly reduced superfluous capacity, particularly following passage of 1980's Staggers Act. As it turns out the merger's timing proved quite fortuitous. While the 1970's were a difficult decade for many, BN weathered these troubled times better than most. Not only did it bring together four strong carriers but the merger also occurred only a few years before two important pieces of legislation became law.
The first took place in 1970 when Congress passed the Rail Passenger Service Act, later signed into law by President Richard Nixon. It created the National Railroad Passenger Corporation on October 30th that year; originally known as Railpax it was renamed Amtrak on April 17, 1971. This new carrier took over most intercity passenger services and relieved many railroads from this money-losing burden. The second occurred only months later when the Clean Air Act was signed into law on December 31st. According to the U.S. Environmental Protection Agency the act, in summary, addressed the following: "The Clean Air Act is the comprehensive federal law that regulates air emissions from stationary and mobile sources. Among other things, this law authorizes EPA to establish National Ambient Air Quality Standards (NAAQS) to protect public health and public welfare and to regulate emissions of hazardous air pollutants. One of the goals of the Act was to set and achieve NAAQS in every state by 1975 in order to address the public health and welfare risks posed by certain widespread air pollutants. The setting of these pollutant standards was coupled with directing the states to develop state implementation plans (SIPs), applicable to appropriate industrial sources in the state, in order to achieve these standards. The Act was amended in 1977 and 1990 primarily to set new goals (dates) for achieving attainment of NAAQS since many areas of the country had failed to meet the deadlines."
One of its most important goals was to reduce particulates released by coal-fired generating stations, which had traditionally used bituminous coal. This highly abundant resource is traditionally found east of the Mississippi River and, in particular, within the Southern Appalachian Mountains. It was also relatively cheap to extract although its high levels of sulfur produced significant acid rain when burned. Powder River Basin coal, predominantly found in southern Montana and northeastern Wyoming, was also abundant but generated far less pollution. It had never been mined in a great quantities until the 1970's. In his article, "The Empire Of BNSF: The Railroad That Would Be King" from the June, 2001 issue of Trains Magazine, historian Fred Frailey notes that BN garnered only $42 million from hauling coal during its first year (by comparison, Norfolk & Western at the time enjoyed four times the revenue from black diamonds). This business was primarily handled from bituminous coal mines located in southern Illinois. That all changed with the Clean Air Act. In 1970, BN moved just 4 million tons of coal, a number which jumped to 7.2 million just two years later (ranking it behind only lumber and grain as the railroad's top commodity). It then exploded to 31.4 tons in 1974. More than any other freight, coal was responsible for not only BN's renaissance but also its eventual rise into the nation's second most profitable railroad.
All of BN's Powder River Basin (PRB) coal was handled over its Orin Subdivision, the former Burlington line running through northeastern Wyoming and southern Montana. In 1977 the Black Thunder Mine opened here and quickly became the region's largest by volume (today it can produce near, or more than, 100 million tons annually). After struggling somewhat during its first few years (a result of high inflation, the oil embargo, and general economic downturn) it posted much stronger numbers as 1980 neared. In 1970 it carried operating revenues of $800 million but by 1974 this had increased to $1.52 billion. The early 1980's brought three other major events which greatly improved BN's position; passage of the Staggers Act (1980), Milwaukee Road's abandonment of its western extension (1980), and merger with the St. Louis-San Francisco Railway (1981). The Staggers Act (signed into law by President Jimmy Carter on October 14, 1980) was a boon for the industry as it made it far easier for railroads to reduce/abandon/sell excess capacity, carry out mergers, and enjoy greater freedoms in setting freight rates.
BN was also awarded sole possession of the West in 1980 when the Milwaukee Road, having entered bankruptcy proceedings on December 19, 1977, elected to abandon its Pacific Extension west of Miles City, Montana. The company's failure to challenge for transcontinental traffic was as much its own doing as any competition from BN. Finally, the St. Louis-San Francisco Railway (Frisco) joined its network on June 8, 1981. It was a 5,000+ mile regional serving the states of Kansas, Missouri, Oklahoma, Texas, Arkansas, Alabama, Mississippi, and Memphis, Tennessee. BN saw great value in the property thanks to Frisco's lucrative and growing petrochemical business along the Gulf Coast. As mergers continued throughout that decade the railroad continually focused on traffic growth. With the Staggers Act's passage, total traffic, nationally, had jumped 10% from 1980 to 1988, and 40% by 1995's merger with Santa Fe. On July 20, 1983, BN implemented point-to-point scheduled intermodal service within dedicated unit trains between major markets, marking its start in this arena. During BN's last year of independence (1994), it enjoyed gross revenues of $4.995 billion.
When the last round of mergers took place and Union Pacific grew even larger by adding the Southern Pacific/Denver & Rio Grande Western and Chicago & North Western (largely for its Powder River Basin traffic) Burlington Northern knew it must find a partner. After launching informal talks with the legendary Atchison, Topeka & Santa Fe the two carriers announced their merger intentions on June 30, 1994. The plan was approved by shareholders on February 7, 1995 and the Interstate Commerce Commission consented to the union on August 23, 1995. From that point the process moved forward relatively quickly as the Burlington Northern Santa Fe Corporation was formed to acquire each railroad's holding company (Burlington Northern, Inc. and the Santa Fe Pacific Corporation), a process made official on September 22, 1995. The last piece of the puzzle included merging the actual railroads; on December 31, 1996 Santa Fe and its iconic "Warbonnet" livery was dissolved into Burlington Northern, subsequently renamed as the Burlington Northern and Santa Fe Railway Company. Today, what is known as BNSF Railway earns nearly the highest profits in the industry, has one of the
lowest operating ratios, and derives a significant earnings
from COFC (Container On FlatCar) shipments.
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