Rail shipper's lawsuit alleging U.S. Class Is conspired to fix fuel surcharge rates adds to ongoing shipper/railroad surcharge dispute

By Jeff Stagl, Managing Editor

Motorists aren’t happy about skyrocketing gasoline prices and railroads aren’t thrilled with escalating diesel costs, either. As railroads have continued to increase their fuel surcharges the past few years to keep up with rising crude oil prices, rail shippers have become increasingly rankled, too. Now, one shipper is trying to take matters into its own hands.

Last month, Dust Pro Inc. filed a lawsuit in the U.S. District Court of New Jersey against the five U.S. Class Is for allegedly “moving in uniform lockstep” to fix fuel surcharge rates.

The suit claims BNSF Railway Co., CSX Transportation, Kansas City Southern Railway Co. (KCSR), Norfolk Southern Corp. and Union Pacific Railroad since mid-2003 have “participated in a conspiracy to fix the prices of rail fuel surcharges applied to freight shipped at unregulated rates,” according to a statement released by law firm Quinn Emanuel Urquhart Oliver & Hedges L.L.P., which is representing Dust Pro. The suit seeks class action status on behalf of other shippers and unspecified monetary damages from the Class Is.

The railroads’ surcharges bore no direct relationship to their actual fuel cost increases, claims Dust Pro, a Phoenix manufacturer that ships soil stabilizers via rail. As a result, the Class Is “restrained competition in the market for unregulated rail freight transportation services” and “realized billions of dollars in revenues,” the suit claims.

Rates draw complaints
The railroads have “acknowledged that their fuel surcharge program is not a cost recovery mechanism, but a revenue enhancement measure intended to achieve across-the-board increases in the prices charged by defendants,” according to the complaint.

Although the Surface Transportation Board in January ruled that Class Is’ fuel surcharge practices were unreasonable, the decision addressed only rate-regulated traffic, which comprises a minority of all rail traffic, the suit claims. Dust Pro’s complaint addresses unregulated private rail-freight transport contracts and other unregulated rail traffic.

KCSR officials reviewed a copy of the complaint and believe the allegations are without merit, says Doniele Kane, assistant vice president of corporate communications and community affairs for KCSR parent Kansas City Southern.

CSX Corp. officials are certain the railroad’s fuel surcharge practices “comply with applicable laws and regulations,” says spokesman Garrick Francis.

As of press time, NS officials were reviewing the complaint and declined to comment, says spokesman Robin Chapman. BNSF and UP officials also declined to comment.

Shreveport shift
On May 21, Norfolk Southern Railway and Union Pacific Railroad shifted eastbound domestic container train traffic from a Memphis, Tenn., corridor to a new Shreveport, La., gateway, shaving 150 miles off the route. Westbound traffic will be transferred to the Shreveport gateway in the third quarter.

Turning up the volume
In the first quarter, North American intermodal volume totaled a record 3.4 million units, up 1.1 percent compared with first-quarter 2006, according to the Intermodal Association of North America. Domestic container volume increased 8.3 percent to 850,147 units and international container volume rose 2.5 percent to 2 million units.

Put to the test
The U.S. Department of Homeland Security established a Rail Test Center at the Port of Tacoma, Wash., to scan cargo for radiation while freight is transferred from ship to rail.

Groundbreaking event
The Regional Transportation District of Denver’s FasTracks program got under way last month. The agency began removing old trolley tracks for the 12.1-mile West Corridor light-rail line, which is scheduled to open in 2013. FasTracks calls for building six light- and commuter-rail lines, and extending three corridors.

State of affairs
The state of New Jersey plans to contribute an additional $1 billion for New Jersey Transit’s $7.5 billion Access to the Region’s Core (ARC) project. The state would fund a total of $1.5 billion over 10 years for ARC, which includes two new single-track tunnels under the Hudson River and a new Manhattan station below 34th Street that will connect with Penn Station.

By invitation only
The Federal Transit Administration formally invited Northstar Corridor officials to apply for federal matching funds for their $307 million commuter-rail line. Expected to open in late 2009, the Minneapolis-to-Big Lake, Minn., line will stretch 40 miles.