WASHINGTON—An economic analysis on railroad fuel surcharge practices commissioned by the American Chemistry Council (ACC) released last month revealed that five Class I railroad carriers—Union Pacific, Burlington Northern Santa Fe, Norfolk Southern, Kansas City Southern, and CSX—overcharged rail shippers by more than $6.5 billion. The study said that these charges occurred between 2005 and the first quarter of this year, and its findings were based on regulatory filings and other estimates from the railroads in question of overcharging.

The topic of fuel surcharges—and how railroads apply them to shippers—has been highly contested over the past several years. In January, the Surface Transportation Board (STB) issued a final rule which may have a major impact on how railroads calculate and apply fuel surcharges in the future.

The STB declared it an unreasonable practice for railroads to compute fuel surcharges in a manner that does not correlate with actual fuel costs for specific rail shipments. In the ruling, the STB prohibited assessing fuel surcharges that are based on a percentage calculation of the base rate charged to freight railroad customers. The ruling also banned the practice of “double-dipping,” or charging a fuel-cost increase for a shipment both through a fuel surcharge and through the application of a rate escalator based on an index.

While this ruling is a step in the right direction to curtail overcharging for fuel surcharges, the Associated Press reported that the STB does not have the authority to enforce refunds for shippers (because they lack the regulatory means to do so) or seek penalties against railroad carriers.

Some shippers, however, including Phoenix-based Dust Pro Inc., filed an antitrust suit in May that seeks class-action status on behalf of parties that shipped goods on various Class I railroads that allegedly fixed prices for fuel surcharges that did not relate to actual fuel costs.

Logistics Management reported in May that these fuel surcharges were a result of rail carriers imposing fuel surcharges on regulated freight under private contracts. And Quinn Emmanuel, a New York-based law firm representing Dust Pro and other shippers, told LM that the “ultimate relief we’re seeking is for the shippers who were victims of these fuel surcharges to get back the amount they overpaid.”

While the STB’s January ruling on how fuel surcharges are applied and the Dust Pro case may be viewed as a positive for shippers, it does not necessarily mean that the era of excessive fuel surcharges is over, said Jay Roman, president of Escalation Consultants, an energy and railroad consultancy.

“I don’t think you can conclude that [those types of charges] will just go away,” said Roman. “Looking at what the railroads are doing, some are still basing their fuel costs from the 2001-2002 timeframe, although some have updated to the present. But the farther you are going back with your fuel costs the greater this dollar amount [for fuel surcharges] will be. What was a small problem at $25 per barrel is an enormous problem at $70 or more per barrel, in terms of the subsequent surcharges,” added Roman.

However, the $6.5 billion fuel surcharge figure from the ACC-commissioned study remains a staggering sum, one which Roman said leaves many shippers with no other option but to try and get their money back.

“[Rail shippers and transportation concerns] were pushing for a long time to get the STB to hold a fuel surcharge hearing before they did, and it took a number of years and a lot of clamoring and media attention,” said Roman. “The railroads have a lot of discretion over the practices that they follow…[but] once a dollar amount gets so large it is difficult for major shippers, because with so much money tied up in this it’s hard not to try and recoup these charges.”

Whether or not shippers end up getting restitution for overpaying, it’s important that Congress knows exactly how this $6.5 billion price tag came about, and that the public is aware of it as well, stated Bob Szabo, executive director and counsel for the shipper action group Consumers United for Rail Equity (CURE).

“The railroads,” said Szabo, “have illegally been putting money in their own pockets. And everyone in the public pays the price for this because nearly everything the public buys or consumes moves through the rail system at some point.” Szabo contends that the ACC study also makes the case that the STB is not doing its job. “One of the silly aspects of this whole case is that with the entire rail system at full capacity, the railroads have the ability to dictate terms to all who use the system, and everybody was paying these prices.”