U.S. railroads came under more fire recently for alleged collusion to fix fuel-price surcharges as overall rail volumes declined slightly in the first quarter.

Agricultural giant Archer Daniels Midland (ADM) filed a price-fixing case in Minneapolis in late March against all five major U.S. railroads, alleging the firms conspired to inflate fuel surcharges. According to a report in the Minneapolis Star Tribune, ADM alleges that the five Class I U.S. railroads used their membership in the Association of American Railroads “as an instrument to develop, organize and conduct their conspiracy.”

ADM has reportedly paid the railroads more than $250 million in fuel surcharges since 2003, and is seeking triple damages in the lawsuit, saying the triggers used by the railroads for increasing their fuel surcharges were nearly identical.

“Absent collusion, it is extremely unlikely that defendants operating in similar geographic areas would independently price their rail fuel surcharges to arrive at the identical percentage [trigger point] month after month, year after year, for a period of more than three years,” the suit says, according to the Star Tribune.

Also in March, a class-action suit in the District of Columbia that combines more than 25 shipper suits against the rail companies was being amended and is due to be filed in early April. Lawyers involved in the class-action case said ADM's suit could bring even more suits from other large shippers.

But despite the brouhaha over rail fuel surcharges, with truckload carriers being dramatically impacted by fuel costs, shippers still see rail and intermodal as a more-cost effective option. U.S. rail volumes declined in the first quarter due to a continued housing and automotive slowdown, but in a recent interview with National Public Radio's Marketplace, Tom White, spokesman for the Association of American Railroads, pointed out that “Our fuel efficiency is better than three-to-one advantage over highway. We can move a ton of freight 423 miles on a single gallon of fuel.”

And more and more, that's what shippers want to hear. In an informal survey, logistics buyers told Purchasing that although their total freight volumes may be declining, increasing fuel costs and surcharges in the trucking market are driving them to shift a higher percentage of their freight to rail and intermodal.

The majority of logistics buyers and shippers polled said they have increased the amount of freight they shipped via rail and intermodal in the past year, citing reduced fuel costs and (for at least a few) “increased environmental concerns” as the drivers for the jump to the rails. But rail service levels remain a concern, and shippers are more often taking a total cost perspective in their modal analysis, which includes the downstream impact of longer transit times.

“Longer railroad transit times and increased railroad pricing are closing the gap on the current alternative prices of shipping via truck,” said the director of carrier procurement at a major consumer products firm responding to Purchasing's survey. “Those longer leadtimes in rail produce increased inventory and the increased costs that come along with it.

Another logistics buyer at a metals firm said the rail industry's lack of communication and shipment visibility combined with the increased inventory requirements has him closely weighing the move to intermodal. “It's a lane-by-lane total cost vs. service level analysis,” he says.

In a recent brief, analysts Bear Stearns spoke with a consumer products rail shipper who has shifted about 15% of his traffic mix from over-the-road to rail intermodal. “We believe this freight decision reflects lower rail intermodal costs, particularly with the recent surge in oil prices and fuel surcharges,” Bear Stearns analysts said.