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Outrage Over Railroad Fuel Fees

Chemical industry study says freight railroads are overcharging customers

by Glenn Hess
October 1, 2007 | A version of this story appeared in Volume 85, Issue 40

Credit: Shutterstock
Credit: Shutterstock

The nation's five largest freight railroads overcharged their customers by more than $6.4 billion during the past four years through aggressive fuel surcharges, the chemical industry and other major rail shippers contend in a new study.

"Never have so few stolen so much from so many and with so little being done about it," says Jack N. Gerard, president and CEO of the American Chemistry Council. "This truly is the Great Train Robbery of the 21st century." The study, he says, demonstrates "just how badly broken our national railroad system is today."

The Association of American Railroads labeled the report a "duplicitous accounting sham" and denied its claims. "I don't know how much the chemical industry paid for the study, but they should ask for their money back," says AAR President Edward R. Hamberger. "This is an extraordinarily misleading report."

The analysis, prepared by the consulting firm Snavely King Majoros O'Connor & Lee, found that Union Pacific, CSX, Norfolk Southern, Kansas City Southern, and Burlington Northern Santa Fe collected $11.7 billion in fuel surcharges from 2003 through the first quarter of 2007 as their fuel costs increased by $5.3 billion.

"While the U.S. Class I railroads saw dramatic increases in their fuel costs during the study period, they used fuel surcharges aggressively, transforming cost-recovery mechanisms into profit centers," the report states.

AAR says individual railroads established separate, varying fuel surcharge programs, which were not considered in the study. The group maintains that since 2002, freight railroads incurred $12.1 billion in additional fuel costs but recovered less than that in fuel surcharge revenues.

"The chemical industry is taking manipulation and misuse of data to the extreme," says Hamberger. "This study fails to take into account the cumulative effect of rising fuel costs."

ACC and Consumers United for Rail Equity, an umbrella group that includes electric utilities and forest products companies, commissioned the report. The shippers support a bill passed by the Senate Judiciary Committee on Sept. 20 that would remove the railroads' long-standing exemptions from federal antitrust laws.



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