By MATTHEW BROWN

Associated Press

BILLINGS, Mont. (AP) -- BNSF Railway Co. says a federal court has already has resolved new accusations by Montana's attorney general that the company broke a grain shipping agreement with a state-backed rail line.

Attorney General Steve Bullock sued the railway in state district court in Fergus County last week.

The suit claimed BNSF violated a 1984 agreement with the state when it stopped making payments earlier this month to cover some grain shipping costs in central Montana.

Attorneys for the state say a regional monopoly could be created if BNSF prevails. They say the company wants to stamp out competition in one of the state's key grain producing areas -- a result that could drive up shipping costs and force farmers to drive long distances to unload their grain.

That would put new pressures on Montana's agriculture industry at a time when high fuel costs and widely fluctuating grain prices already are causing a strain.

The BNSF payments under the 1984 agreement at one point were worth about $1 million annually to the Central Montana Rail. That's the state-designated operator of the 87-mile Geraldine Line, which serves grain growers in Chouteau, Fergus, Cascade and Judith Basin counties

For the past four years, BNSF and Central Montana have been at odds in a U.S. District Court case involving many of the same issues. BNSF in May received approval from a court-approved arbitration panel to cancel its $884-per-railcar payments with 30 days notice, court documents show.

The company ended those payments this month.

"We believe that was resolved," said BNSF spokeswoman Suann Lundsberg.

That claim was disputed by Clifford Edwards, a Billings attorney who represented Central Montana Rail in the federal case and is now involved in the state court lawsuit.

Edwards said that under the 1984 agreement, none of the parties involved could compel arbitration over any disputes. He said state court is the proper place to address the dispute.

"They've struggled mightily to rid themselves of this 1984 agreement," Edwards said. "We're going to make them live up to their word."

Another issue raised in the state's lawsuit -- the construction of a grain unloading facility in Moccasin, Mont. -- is still pending in the federal case.

The state claimed BNSF unfairly subsidized the construction of a rail loop in Moccasin to give preference to a private unloading facility that competed with Central Montana Rail.

The state described that as a "predatory" action that could eventually give BNSF a shipping monopoly in central Montana.

As a result, state officials said, traffic along the Geraldine Line has dropped sharply -- from about 1,150 carloads a year on average to just over 500 in 2009.

Copyright 2009 The Associated Press.

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