|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|CARGILL, INCORPORATED V. BNSF RAILWAY COMPANY|
|DECISION GRANTED BNSF RAILWAY COMPANY'S (BNSF) MOTION TO DISMISS CARGILL, INC.'S CLAIM THAT BNSF IS DOUBLE RECOVERING REVENUE FROM A FUEL SURCHARGE, AND DENIED BNSF'S MOTION TO DISMISS CARGILL'S CLAIM THAT BNSF IS EARNING EXCESSIVE PROFITS FROM THE SURCHARGE.|
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|Full Text of Decision|
SURFACE TRANSPORTATION BOARD
Docket No. NOR 42120
CARGILL, INCORPORATED v. BNSF RAILWAY COMPANY
Digest: BNSF Railway Company (BNSF) imposes a fuel surcharge on the rates it charges one of its customers, Cargill, Inc. Cargill has filed a three-part complaint against BNSF, alleging that it has violated the Board’s fuel surcharge rules. This decision grants BNSF’s motion to dismiss Cargill’s claim that BNSF is double recovering revenue from the surcharge, but denies BNSF’s motion to dismiss Cargill’s claim that BNSF is earning excessive profits from the surcharge.
Decided: January 3, 2011
On April 19, 2010, Cargill, Incorporated (Cargill), filed a complaint under 49 U.S.C. § 11701(b), challenging fuel surcharges collected by BNSF Railway Company (BNSF) as an unreasonable practice under 49 U.S.C. § 10702(2). Cargill requests that the Board: (1) find the surcharge practices to be unreasonable and order BNSF to cease and desist from such practices; (2) prescribe reasonable fuel surcharge practices; and (3) under 49 U.S.C. § 11704(b), award monetary damages with interest for all unlawful fuel surcharge payments made. In this decision, we are granting in part and denying in part BNSF’s motion to dismiss portions of the complaint and issuing a procedural schedule.
In Rail Fuel Surcharges (Fuel Surcharges), EP 661 (STB served Jan. 26, 2007), the Board adopted its earlier proposals to prohibit both rate-based fuel surcharges and “double-dipping.” These guidelines arose out of a proceeding that the Board commenced in 2006 to examine rail practices related to fuel surcharges. In Fuel Surcharges Proposed, EP 661 (STB served Aug. 3, 2006), the Board sought comment on specific proposals to require that rail fuel surcharges “be tied not to the level of the base rate but to those attributes of a movement that directly affect the amount of fuel consumed,” such as mileage or mileage and weight. Id., slip op. at 5. The Board also addressed “double dipping,” described as “charging for the same increases in fuel costs for the same shipment both through a fuel surcharge and through application of a rate escalator that is based on an index such as the Board’s Railroad Cost Adjustment Factor (RCAF) without first subtracting out any fuel cost component from that index.” Id. at 1.
In the January 26, 2007 decision, the Board explained that, consistent with the rail
transportation policy “to encourage honest and efficient management of
railroads,” 49 U.S.C. § 10101(9), its new rules were “only addressing the
manner in which railroads apply what they label a fuel surcharge.” Fuel Surcharges at 7. The Board reemphasized that it was not
limiting the total rate a carrier could charge, and that, if the carriers wished
to raise their rates, they were free to do so, subject to the statutory rate
reasonableness standard, but that they could not impose rate increases on the
basis of a misrepresentation.
The Board’s new fuel surcharge rules were designed to
conform to the holding in Union Pacific Railroad v. ICC (Union
Pacific), 867 F.2d 646 (D.C. Cir. 1989).
There the government and utility shippers complained before our
predecessor, the Interstate Commerce Commission (ICC), that certain railroads
were charging excessive rates for the transportation of spent nuclear fuel and
other radioactive waste. Although the
parties had argued the matter as a rate case, the railroads had justified the
high rates for the transportation of these materials by citing the extra costs
they necessarily incurred due to special government regulations and the
inherent risks associated with carrying those dangerous commodities. Finding most of the railroads’ asserted
justifications for the higher rates unwarranted, the ICC addressed the matter
under the statutory provision requiring that rail carrier “practices” be
reasonable and concluded that charging elevated rates for these materials was
an unreasonable practice in violation of 49 U.S.C. § 10701(a). See Union Pacific, 867 F.2d at
Cargill has now brought the second complaint challenging a specific rail fuel surcharge program under the Board’s fuel surcharge rules. Cargill is an international producer and marketer of food, agricultural, financial, and industrial products and services. It ships various agricultural and other commodities over BNSF in common carrier service under a number of BNSF pricing authorities. In addition to the assessed linehaul rate, BNSF charged, and Cargill paid, a fuel surcharge under BNSF Rules Book 6100-A, Item 3375L, Section B, which is incorporated by reference in BNSF's common carrier pricing authorities applicable to Cargill's traffic. The challenged fuel surcharge is “calculated by multiplying the applicable fuel surcharge per mile times the number of miles per shipment.” Complaint, Exhibit A at 41, BNSF Rules Book 6100-A, Item 3375L, Section B. The amount of the fuel surcharge per mile varies monthly. It is determined based upon a fuel index, the U.S. Average Price of Retail On-Highway Diesel Fuel (HDF), which is published by the U.S. Department of Energy. The surcharge per mile to be applied in any given month is based on the average monthly HDF published 2 months prior to the month of assessment. According to BNSF, this time lag is the minimum necessary to permit publication of an entire month's worth of HDF figures. Average HDF prices for the immediately preceding month cannot be assessed because they would not be published in time.
Cargill claims the surcharge is an unreasonable
practice because: (1) the general
formula “bears no reasonable nexus to, and overstates, the fuel consumption”
for the relevant traffic; (2) BNSF uses the surcharge to “extract substantial
profits over and above its incremental fuel costs for the BNSF system traffic
to which the surcharge is applied;” and (3) BNSF is “double recovering the same
incremental fuel cost increases BNSF has incurred in providing service to
Cargill by (i) setting its base rates on Cargill traffic to include recovery of
fuel prices higher than the BNSF fuel strike price of $0.73 per gallon implicit
in the [fuel surcharge]
and (ii) by increasing the Cargill base rates (including the fuel component in
the base rates) [while] requiring Cargill to pay . . . the fuel
surcharge.” We refer to the second and
third claims as the “
BNSF filed a motion to dismiss the complaint, in part,
on May 28, 2010, arguing that, under the principles established in Union
Pacific, Fuel Surcharges, and Dairyland, the Board should
Motions to dismiss are disfavored and rarely granted. Under 49 U.S.C. § 11701(b), the Board may dismiss a complaint that “does not state reasonable grounds for investigation and action.” In ruling on motions to dismiss, the Board assumes that all factors be viewed in the light most favorable to the complainant, including all factual allegations. AEP Texas North Co. v. Burlington Northern and Santa Fe Ry., NOR 41191 (Sub-No. 1), slip op. at 2 (STB served
Mar. 19, 2004).
We find that Cargill’s
the Board clarified the types of claims that properly could be brought under Fuel
Surcharges. The Board explained that
Dairyland could not base its case only on the level of the fuel surcharge as
applied to Dairyland. Dairyland, slip op. at 5.
First, it would be unreasonable to require railroads to incorporate
every factor that affects fuel costs into their fuel surcharge formulas, and
thus, for practical reasons, the Board cannot expect a precise match between
fuel surcharge revenues and increased fuel costs for any one shipper.
We also have practical concerns about trying to deconstruct a base rate. Costs—including fuel costs—can be among the factors that carriers consider in setting their base rates. But there are many other factors as well—such as general market conditions, carrier-specific financial condition, product demand and the competitive options available to particular shippers—all of which could influence how a carrier structures its pricing. The Board does not attempt to attribute values to each component of rail pricing actions or rule on a carrier’s rate on a component-by-component basis.
1. BNSF’s motion to dismiss in part is granted in part, and denied in part as discussed
3. This decision is effective on the service date.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and Commissioner Nottingham.
 The digest constitutes no part of the decision of the Board but has been prepared for the convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement on Plain Language in Decisions, EP 696 (STB served Sept. 2, 2010).
 Dairyland ultimately reached a settlement with UP, and the Board at Dairyland’s request dismissed the complaint with prejudice in a decision served on December 12, 2008.
 The fuel surcharge table in Item 3375L, Section B, of the BNSF Rules Book 6100-A shows the applicable surcharge rate per mile based on the appropriate time period average price of HDF.
 In the Fuel Surcharges proceeding, BNSF identified the “strike price” as the “entry point” for its fuel surcharge, BNSF Comments at 16, which we take to mean the fuel price level at which the fuel surcharge begins to accrue.
 The Board at Cargill’s request issued a protective order in a decision served on May 26, 2010, which was corrected on June 24, 2010.
 Entergy Ark., Inc. v. Union Pac. R.R., NOR 42104, slip op. at 3 (STB served Dec. 30, 2009); Garden Spot & N. Ltd. P’ship & Ind. Hi-Rail Corp.—Purchase & Operate—Ind. R.R. Line Between Newton & Browns, Ill., FD 31593, slip op. at 2 (ICC served Jan. 5, 1993).