TOPEKA — Attorneys accusing Union Pacific and Kansas and Oklahoma railroads of anticompetitive business tactics say their case has far-reaching consequences for farmers who are being forced to pay higher prices to transport their products.
Tom Ajamie and Courtney Scobie, attorneys for Ajamie LLP, filed a case in January saying the two railroads are attempting to “stifle competition.” Court filings accuse the railroads of charging high fees for farmers that switched to using a shorter rail transportation route from western Kansas and eastern Colorado to the western United States.
Their clients are Weskan Grain and its dedicated rail line, Colorado Pacific Railroad, as well as Kansas and Colorado farmers affected by higher costs Union Pacific and Kansas and Oklahoma Railroad have caused for moving grain to the western United States, Ajamie said.
At issue is 122 miles of railroad track called the Towner Line that shortens the number of miles agricultural products must travel to go west from western Kansas and eastern Colorado, the lawsuit said.
The Towner Line was in bad condition and unusable for years, so Weskan and its farmer customers paid to transport grain miles out of the way to the east before connecting with a Union Pacific line where the grain would then be transported back to the west, the lawsuit said.
The added miles and convoluted route increased transportation costs, Ajamie told Kansas Reflector.
The Towner Line
In 2018, Colorado Pacific Railroad acquired the Towner Line, invested a large amount of money and renovated it, he said. In Surface Transportation Board filings, Colorado Pacific said it bought the line for $10 million and spent $3.5 million in renovations. The STB is a federal agency that regulates surface transportation nationwide, primarily railroads.
Once open, Weskan Grain and other customers in Kansas had a straight-through option to transport its products to the west, Ajamie said.
“But we’ve been held up by Union Pacific for quite a few years now, and the Kansas Oklahoma Railroad, and they’ve been doing everything they can to block it because they want (Weskan) to keep running on their lines,” Ajamie said.
In an email, Union Pacific spokeswoman Jill Micek said the lawsuit’s accusations were untrue.
“Union Pacific denies the allegations of the lawsuit and will present the facts to the court and Surface Transportation Board who handles these issues,” she said.
Ajamie said Union Pacific set up what the industry refers to as “paper barriers,” meaning they placed charges on the junction where the Towner Line connects to the next rail line to move the grain west that make it financially unfeasible to use the route.
“This is a case about a multibillion-dollar behemoth in the railroad industry (UP) secretly agreeing and conspiring with a short-line railroad owner-operator (K&O) to stifle competition from a newly rehabilitated rail line and preserve control over westward shipments of grain from Lane, Scott, Wichita, and Greeley Counties in Kansas and in Kiowa County, Colorado,” the lawsuit said.
When Weskan was forced to transport grain to the east to connect with a railroad that headed west, there was no competition, Ajamie said. The railroad was owned by Union Pacific and leased to the Kansas and Oklahoma Railroad, he said.
But when the Towner Line reopened, the grain could move west to a junction where both BNSF Railway Co. and Union Pacific have rights, “meaning BNSF and UP must compete for rail traffic continuing west,” the lawsuit said.
“Therefore, by rehabilitating the Towner Line, CXR (Colorado Pacific Railroad) transformed the westbound shipment of grain from a market completely controlled by Defendants to one in which Defendants and others had to compete at multiple stages,” it said. “But for Defendants’ misconduct, this increase in competition for rail traffic would have benefitted Plaintiffs and other market participants.”
Ajamie’s clients allege that Union Pacific and Kansas and Oklahoma Railroad began charging interchange fees in excess of $500 per car to connect from the Towner Line to the Union Pacific-Kansas and Oklahoma Railroad line.
“Rather than accept this new reality and compete for rail traffic on the merits, Defendants agreed and conspired to eliminate the Towner Line as an option for westbound shipments of commodities altogether,” the lawsuit said.
Scobie, a plaintiff attorney, said that as far she can tell most farmers are continuing to use the route that goes east before going west because the interchange fees are too high to use the Towner Line.
Federal authorities
Weskan and other lawsuit parties contend that Union Pacific and Kansas and Oklahoma Railroad amended the lease agreement to include the higher interchange fee without getting approval from the Surface Transportation Board, as required by federal law.
The Surface Transportation Board agreed in a decision on March 20, saying it “came to the Board’s attention” that the lease agreement between Union Pacific and Kansas and Oklahoma Railroad was renewed and amended in 2018 and 2019, the years when Colorado Pacific Railroad bought Towner and began renovations.
The federal regulator is requiring the Kansas and Oklahoma Railroad to submit the lease for approval.
Ajamie said the lawsuit will continue even if the board determines the two railroads have set the interchange fee too high. The federal agency doesn’t determine antitrust issues, he said.
Agricultural challenges
The case is important for Weskan’s business and for the excess fees Kansas and Colorado farmers have been charged, Ajamie said.
“Farmers have been under serious economic pressure for the past few years,” he said in an email.
He listed challenges facing farmers: Drought, tariffs that affect international trade and have caused trading partners to buy elsewhere, spiking operating costs to include high fuel and fertilizer costs, among others.
Allowing Union Pacific and Kansas and Oklahoma Railroad to force farmers to ship grain in “convoluted” ways doesn’t make sense, Ajamie said.
“None of this makes sense except that it enriches Union Pacific to the economic detriment of farmers, further burdening them with economic costs that are unnecessary,” he said.