Freight railroads continue to take heat on pricing issues
New studies add to evidence of price gouging, lack of competition in railroad market
By Dave Hannon -- Purchasing, 9/20/2007 9:28:00 AM
A study released last week commissioned by the American Chemistry Council found that five major freight railroads overcharged rail shippers by more than $6.5 billion between 2005 and the first quarter of 2007 through the use of fuel surcharges.
The study was based on regulatory filings and other estimates for Union Pacific Corp., Burlington Northern Santa Fe Corp., Norfolk Southern Corp., Kansas City Southern and CSX Corp. “This is the greatest train robbery of the 21st century," said Jack Gerard, president and CEO of the American Chemistry Council in an Associated Press report.
In January, the Department of Transportation’s Surface Transportation Board issued a final rule defining how railroads should—and should not--calculate fuel surcharges. 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.”
And in June, DustPro Inc., a small privately-owned Phoenix-based manufacturer of soil stabilizers filed a federal lawsuit in New Jersey seeking class action status, claiming that five U.S. railroads colluded on prices of fuel surcharges.
Also adding fuel to the flames, last week the Surface Transportation Board said it is spending $1 million to commission an independent study that will assess the current state of competition in the freight railroad industry. The study will focus on competition, capacity, and the interplay between the two and is expected to be ready in fall 2008.
In other railroad news, a new report from the Association of American Railroads says the U.S. will need to invest $148 billion in its rail infrastructure over the next three decades to meet the demand for rail capacity.
“If needed investment isn't made, most of the increase in freight will move on the highways, further stressing overburdened roads and bridges,” a statement from AAR said.
The entire study will be submitted to the National Surface Transportation Policy and Revenue Study Commission, established by Congress to report on the nation's future transportation needs and how to finance them.
On Monday, United Pacific said it will spend $8.2 million this year on track improvements between Des Moines and Kansas City, Mo.
WHAT DO YOU THINK? Have railroads been unfair in their use of fuel surcharges? Use the READERS RANT/Post a comment tool at the bottom of this page to express your views.
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