Commentary: Price of rail fuel

   The U.S. Surface Transportation Board is gearing up for a heated discussion related to rail fuel surcharges, asking for comments about its safe harbor provision and if it should be removed.
   EP 661, which lays out the board’s fuel surcharge methodology, prohibits the use of rate-based fuel surcharges and instead ties the surcharge to a safe-harbor index, which in theory, would be more transparent. The board basically wanted to know if there is a widening gap between what a railroad pays for fuel and what the index, which is put out by the Department of Energy, establishes as a fair surcharge.
   Comments were originally to be filed by July 14 with reply comments due Aug. 4, but a number of industry groups — including Highroad Consulting and the American Chemistry Council — requested more time to look into the debate. The new deadline of Aug. 4 for initial comments and mid-September for replies should give all parties a chance to thoroughly form an opinion on the issue.
   One group that has already provided comments, though, is the energy study firm Mercury Group, which seeks to have the STB change the way it looks at the fuel surcharge.
   “Simply stated, fuel surcharge programs built on general indices or tables do not reflect the cost or consumption of the fuel used on any particular shipment and, thus, create economic distortion,” the group wrote. “When embedded into the market place, this economic distortion causes waste and inefficiencies that are entirely avoidable in today’s marketplace, using available alternatives to traditional fuel surcharge programs.”
   The group came to the conclusion that phasing out the safe-harbor provision over the next five years and enacting fuel-efficiency requirements to bring the rail industry up to speed with advancements in the trucking and ocean sectors would be a better way to look at the fuel-surcharge issue.
   These comments only represent one view, and the STB will surely be flooded with additional opinions and responses to those opinions in the next month and a half. Shippers should keep a watchful eye over the proceedings.

This commentary was published in the August 2014 issue of American Shipper.