NGFA urges STB to eliminate 'safe harbor' for rail fuel surcharge
The National Grain and Feed Association (NGFA) has urged the federal Surface Transportation Board (STB) to either eliminate or significantly modify a provision of its rules that currently immunizes railroads from being required to refund rail fuel surcharges that exceed their incremental internal fuel cost increases so long as they base their surcharges on a specific fuel-cost index.
In 2007, the agency prohibited rate-based rail fuel surcharges as an "unreasonable practice" by railroads. But when doing so, it established a so-called "safe-harbor" provision that carriers could "rely on" to measure changes in fuel costs that could be reflected in fuel surcharges, as long as such costs were not imbedded already in the underlying freight rate. Known as the highway diesel fuel (HDF) index, it is based on the Energy Information Agency's calculation of "U.S. No. 2 diesel retail sales by all sellers." When issuing its decision, the STB noted that alternative indices could be used by rail carriers to calculate fuel surcharges, but that doing so could expose them to unreasonable-practice rulings on a case-by-case basis.
Subsequently a major shipper of agricultural products challenged rail fuel surcharges imposed by the BNSF Railway, contending BNSF's mileage-based fuel surcharge program constituted an unreasonable practice because it extracted "substantial profits" on the affected traffic that far exceeded the actual increased cost of fuel. But in a decision issued on Aug. 12, 2013, the STB ruled that since BNSF had used the HDF index to measure changes in its internal fuel costs for purposes of calculating fuel surcharges, the agency also needed to rely on the same index given the existence of the safe-harbor provision. Thus, even though the STB found that BNSF's incremental fuel costs, as calculated under the HDF, exceeded its actual internal incremental fuel costs by $181 million, the agency ruled against the shipper.
In its 2013 decision, the STB said the result in the BNSF case "concerned" the agency, and that it had not "rejected...lightly" the shipper's allegation that BNSF had used its fuel surcharge program as a "profit center." At the time, the agency said it and others had not "foreseen a situation where the spread between a rail carrier's internal fuel costs and the HDF index would diverge" as much as it had in the BNSF case. The STB also said it was "unclear" whether the fuel-cost recovery by BNSF was a "unique situation" during a period of high fuel-price volatility, or "a more widespread phenomenon" that could give railroads an 'unintended advantage" by allowing them to recover "substantially more than (their) incremental internal fuel costs yet still be permissible under the safe harbor."
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