In a statement submitted on Oct. 15, the National Grain and Feed Association (NGFA) reiterated its call on the federal Surface Transportation Board (STB) to either eliminate or significantly modify a provision of its current rules that effectively immunizes railroads from being required to refund rail fuel surcharges that exceed the incremental internal fuel cost increases they actually incur.

In reply comments to the STB in its rail fuel surcharge proceeding [STB Ex Parte No. 661 (Sub-No. 2)], the NGFA opposed the contention of rail carriers urging that the agency retain the status quo that effectively gives railroads the freedom when setting fuel surcharges to rely on a national fuel index - known as the highway diesel fuel (HDF) index, calculated by the U.S. Energy Information Agency based on the price of U.S. No. 2 diesel retail sales by all sellers - as a surrogate for the fuel cost changes they actually incur.  In contrast, the NGFA reiterated its view that railroads still should be required to demonstrate that a "reasonable nexus" exists between their fuel surcharge formulas and the internal incremental fuel costs actually incurred so such charges do not become a "profit center" for the carriers. 

"We believe that retaining the HDF index, but also requiring rail carriers to provide additional information to the (STB) and the public on their actual internal incremental fuel costs, is a reasonable safeguard...," the NGFA stated.  "Simply put, the NGFA believes requiring additional information could provide a reasonable and appropriate check-and-balance to monitor whether carriers are instituting fuel surcharges that over-compensate them for the incremental fuel costs they actually incur."

To help ensure that does not occur, the NGFA again urged the STB to require railroads to report the following additional, more granular information as part of their Quarterly Reports of Rail Fuel Surcharges:  1) total fuel costs already recovered through their respective base-rate structures; 2) the difference between internal fuel costs recovered through base-rate structures and the amount collected through fuel surcharge revenues; and 3) any other relevant information that would limit, if not circumvent, the need to file a complaint under 49 U.S.C. § 10702(2) in order to ascertain whether a fuel surcharge formula that relies on the HDF Index "safe harbor" is enabling the carrier to recover no more than its incremental fuel costs. 

Further, since rail carriers already closely track their fuel expenses and publish fuel prices quarterly, the NGFA encouraged the STB to require such reporting on a monthly basis and to disclose their internal strike prices in their updated fuel surcharge formulas to improve the transparency of such charges.

The NGFA noted that railroads already submit the following data to the STB:  1) total fuel cost; 2) total gallons of fuel used; 3) total increase or decrease in the cost of fuel; 4) total revenues from fuel charges; and 5) revenue from fuel charges on regulated traffic.   But the NGFA urged the STB to add an additional requirement that such data be aggregated for each major commodity group, such as agricultural products, chemicals, coal, etc.

Finally, the NGFA urged that any future use of the HDF Index should be subject to the STB's paramount objective of preventing fuel surcharges from becoming profit centers for railroads or from sanctioning over-recovery of net incremental additional fuel costs actually incurred by carriers.  If the latter occurs, the Board should be empowered to direct railroads to promptly refund overcharges to their rail user customers, the NGFA said.

For more information, see the five-page NGFA statement..