2023: How does Berkshire ensure that it fulfills its ethical responsibilities?

BECKY QUICK: This question comes from Don Glickstein in Seattle. He says, “Warren has criticized Norfolk Southern’s handling of its train derailment, yet has been silent about BNSF’s conduct. A federal judge ruled in March that BNSF intentionally and illegally violated an easement agreement on tribal land in Washington State by transporting long trains of crude oil.

“The same money the judge made his ruling a BNSF train derailed on tribal land, spilling oil in an environmentally sensitive area” What is Warren doing to ensure that BNSF and the Berkshire subsidiaries fulfill their ethical responsibilities? He says he’s been a Berkshire owner for more than two decades and he’s concerned that Berkshire has no systems to identify and address what he calls reprehensible behavior at BNSF and other subsidiaries?

WARREN BUFFETT: Greg?

GREG ABEL: Sure. It is a valid issue that our team obviously has been dealing with at BNSF. We did move crude across that tribal land. We had an agreement that allowed us to move X number of units per day. And we did breach it. We went over it. There were some fundamental breakdowns there that our team didn’t understand the number of trains that they could move.

We have had significant discussions with the tribe looking to resolve the issues, recognizing we obviously benefited from moving those trains. And those type discussions will continue. I would say there’s lessons learned there that we have to, when we make a commitment, understand what that commitment is and live by it.

Or don’t assume we can just move our trains as we wish or the cargo as we wish. We have to respect those agreements. There’s been a moment learned there. But at the same time, we’ve taken it very seriously and attempted to reach a resolution. And at some point, I hope we do come to a true resolution that’s fair both to the tribe and to BNSF.

On the derailment side, we did have an issue around the track derailed. We worked very closely with the tribe to mitigate that issue instantly or at least over a very reasonable period of time. They were very responsive. Our team was very responsive. And there were really no long-term environmental impacts to that spill.

And as our teams highlighted in other comments, obviously derailments do occur in the industry. We take them incredibly seriously. They’re not all hazardous, but irrespective of that, we’re constantly looking at how do we prevent them. How do we detect them when we potentially have one that’s going to occur? And what do we do with our trains? And then ultimately it comes down responding properly. Because they will occur. And I think we have an incredibly dedicated team that’s always ready to respond to the communities they’re impacting.

WARREN BUFFETT: There are derailments. How many a year?

GREG ABEL: Yeah, well, there’s a thousand-plus in the industry.

WARREN BUFFETT: Yeah, yeah. You know, you start hauling freight, and we’re a common carrier. And we take very heavy freight. And we take them in 100° weather. And we take it at 0° and we go around curves. And we have grades. (Laugh) And even a 1% grade, if you’re going down a hill with, I don’t know how much weight behind you, I mean, railroading is not an easy business.

And of course, the systems were designed, you know, basically in the late 1800s, amid the late 1800s. And we have 22,000, I think it is, miles of track. And that doesn’t count sidings and some other things. It is not an easy business. We’ll make mistakes.

We’re not making a mistake because we have a derailment. We will have derailments ten, 20 years, or 30 years from now. And we have to carry certain products we wish we didn’t have to carry. We’re a common carrier. Do we like carrying chlorine and ammonia and all? No.

But they’re going to move from one place to another in this society. And we are a common carrier. And we load them if they select our railroad.

But we are better than we used to be. But we’ve got a long way to go. Is that a fair enough statement?

GREG ABEL: Absolutely.