• MRL to rejoin BNSF

  • Montana Rail Link (reporting mark MRL) is a privately held Class II railroad in the United States. MRL, which operates on trackage originally built by the Northern Pacific Railway, is a unit of the Washington Companies, and is headquartered in Missoula, Montana. Website: montanarail.com
Montana Rail Link (reporting mark MRL) is a privately held Class II railroad in the United States. MRL, which operates on trackage originally built by the Northern Pacific Railway, is a unit of the Washington Companies, and is headquartered in Missoula, Montana. Website: montanarail.com
  by Shortline614
 
Ok. Montana Rail Link. Here’s my analysis.

BN sold the line in 1987 for a number of reasons. These include but are not limited to:

  • Mullan Pass was very expensive to operate compared to Marias Pass.
  • Montana heavily taxes railroads.
  • The Montana portion of Burlington Northern had a heavy degree of union influence.
  • After the Frisco merger, the only lines BN focused on were those that carried Power River Coal to the detriment of the rest of the railroad.
One thing to point out is MRL’s structure. The construction of the Northern Pacific was funded using government-issued bonds which are not scheduled to be paid off until 2047. The NP or its successors are not allowed to sell any part of the railroad whose construction was financed using those bonds, so the MRL mainline is leased not owned. The branchlines, having been built using private capital much later, are owned. Most thought that when those bonds are finally paid off in 2047, MRL would either buy it's mainline outright or sell to BNSF. So this came as quite a surprise to everyone.

Now of course why would MRL sell and BNSF buy now?

For one thing, Dennis Washington, owner of MRL, is 87 years old. He might want to cash out on his railroad so he can spend his remaining years in relaxing splendor. MRL is extremely profitable. While we don’t have exact figures, we can be sure it generates a profit of over $500 million. We know this because back in 2020 MRL had the STB raise the Class I profitability threshold from $500 million to $900 million. MRL easily fetches a price of $2-$5 billion.

BNSF can easily afford MRL. Mr. Buffet is BNSF’s owner after all and he could easily afford to buy the entire railroad industry and have plenty left over. Now, despite having sold the railroad, BN/BNSF never truly packed up and left. They kept haulage right to facilitate the movement of trains from the Upper Midwest to the Pacific Northwest. Anything that can’t go over the ex-GN line though Northern Montana goes via MRL. The number of BNSF haulage rights trains has steadily increased over the years and now they account for the vast vast vast majority of trains polishing MRL rails. BNSF sends between 25 and 30 trains a day over MRL, accounting for 90% of traffic over the line.

Taking back control of MRL also makes sense when you put today’s stressed supply chains into view. BNSF now fully controls one of its key mainlines. Having to stop and “change railroad” so to speak will always slow down travel time and make it harder to grow traffic. It’s why railroads stress single-line service as much as possible.

So in conclusion, Mr. Washington realized that MRL wasn’t what it used to be and could snatch a pretty penny from Mr. Buffet, who was willing to buy, and the two made a deal.

Can’t say I'm surprised.
Last edited by Shortline614 on Tue Jan 11, 2022 10:48 am, edited 1 time in total.
  by eolesen
 
Letter sent to employees
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  by NHV 669
 
Shortline614 wrote: Mon Jan 10, 2022 8:30 pm Ok. Montana Rail Link. Here’s my analysis.

BN sold the line
You should have stopped right there; this was never more than a long term lease.
  by Shortline614
 
NHV 669 wrote: Tue Jan 11, 2022 6:37 am You should have stopped right there; this was never more than a long term lease.
Yes, leased. That is what I meant. Should have proof read beforehand. The rest of the post communicates that the mainline is leased while the branchlines are owned. This is due to some legal technicalities that stem from the original government bonds that were used to finance the Northern Pacific.

It is a long-term lease but MRL would have had the chance to buy the line outright when the NP bonds are paid off in 2047; however, It was common option that come 2047, BNSF would simply take the lines back rather than sell them.

My post was more about why is this happening 25 years early and what I think the motivations behind it are. The simple fact is that 90% of MRL's traffic is BNSF haulage rights trains. MRL really has no reason to exist anymore separate from BNSF. Dennis Washington could use that money for his retirement or other ventures and BNSF can make far more money operating the line themselves.
  by eolesen
 
Curious to see if this impacts the pipe dreams of reviving the North Coast Hiawatha....

MRL as a non-signatory Amtrak operator would have been a much different set of negotiations than BNSF as a signatory. Amtrak would have paid more in access fees prior to this.

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  by Engineer Spike
 
When NP lines were leased o MRL Hunter Harrison was the VP Operations. He made many cuts across the system. I believe he was behind getting out of the NP. Back in 1987 BN was just getting back on its feet following the early 1980s recession. I believe that they were still in cut mode. Just as an example of how BN was coming out of tough times, my former CB&Q seniority roster had a big gap in hiring between about 1979-80, through to the late 1980s. Some guys that I worked with both in Aurora and Galesburg were cut off. Many bumped into Wyoming coal fields for the interim.