[Federal Register Volume 79, Number 103 (Thursday, May 29, 2014)]
[Proposed Rules]
[Pages 30790-30791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12434]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
49 CFR Chapter X
[Docket No. EP 661 (Sub-No. 2)]
Rail Fuel Surcharges (Safe Harbor)
AGENCY: Surface Transportation Board (Board or STB), DOT.
ACTION: Advance Notice of Proposed Rulemaking.
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SUMMARY: The Board is instituting this advance notice of proposed
rulemaking proceeding to give shippers, rail carriers, and other
interested persons the opportunity to comment on whether the safe
harbor provision of the Board's current fuel surcharge rules should be
modified or removed.
DATES: Comments are due by July 14, 2014. Reply comments are due by
August 12, 2014.
ADDRESSES: Comments and replies may be submitted either via the Board's
e-filing format or in the traditional paper format. Any person using e-
filing should attach a document and otherwise comply with the
instructions at the E-FILING link on the Board's Web site, at http://www.stb.dot.gov. Any person submitting a filing in the traditional
paper format should send an original and 10 copies to: Surface
Transportation Board, Attn: EP 661 (Sub-No. 2), 395 E Street SW.,
Washington, DC 20423-0001. Copies of written comments and replies will
be available for viewing and self-copying at the Board's Public Docket
Room, Room 131, and will be posted to the Board's Web site.
FOR FURTHER INFORMATION CONTACT: Marc Lerner at 202-245-0390.
Assistance for the hearing impaired is available through the Federal
Information Relay Service (FIRS) at 1-800-877-8339.
SUPPLEMENTARY INFORMATION: In Rail Fuel Surcharges (Fuel Surcharges),
EP
[[Page 30791]]
661 (STB served Jan. 26, 2007), the Board inquired into and made
findings regarding rail carrier practices related to fuel surcharges,
i.e., a separately identified component of the total rate that is
charged for the transportation involved and is designed to recoup
increases in the carrier's fuel costs. The Board prohibited rate-based
fuel surcharges as an unreasonable practice and, as to the matter at
issue here, established as a ``safe harbor'' an index upon which
carriers could rely to measure changes in fuel costs for purposes of a
fuel surcharge program. Id., slip op. at 11. That index was the Energy
Information Administration's (EIA) \1\ U.S. No. 2 Diesel Retail Sales
by All Sellers (Cents per Gallon), which was and continues to be
referred to as the Highway Diesel Fuel Index (HDF Index).\2\ Id.
Although the HDF Index tracks retail fuel prices, which include taxes
not paid by wholesale buyers like the Class I railroads, the Board was
persuaded that the HDF Index ``accurately reflects changes in fuel
costs in the rail industry.'' Id. (emphasis added). The Board noted
that alternative indexes could be used but that they could be
challenged as unreasonable on a case-by-case basis.\3\
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\1\ The EIA is an independent arm of the U.S. Department of
Energy.
\2\ In the notice of proposed rulemaking issued in Fuel
Surcharges, the Board had proposed to mandate use of the HDF Index
to measure incremental fuel costs.
\3\ In a separate proceeding, the Board amended its regulations
at 49 CFR 1243.3 to require Class I rail carriers to report on a
quarterly basis certain data concerning fuel costs and fuel
surcharges billed. See Rail Fuel Surcharges, EP 661 (Sub-No. 1) (STB
served Aug. 14, 2007).
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The changes in a rail carrier's fuel costs are reflected in its
``incremental fuel costs'' by which we mean those fuel costs, not
embedded in the base rate, that the rail carrier seeks to recover
through a fuel surcharge mechanism. A critical issue that arose in a
complaint brought against BNSF Railway Company (BNSF) by Cargill,
Incorporated (Cargill), a major shipper of agricultural products, was
``how to measure BNSF's incremental fuel costs.'' Cargill, Inc. v. BNSF
Ry. (Cargill), NOR 42120, slip op. at 7 (STB served Aug. 12, 2013.)
Cargill argued that BNSF's mileage-based fuel surcharge program
constituted an unreasonable practice, asserting that it extracted
substantial profits on the traffic to which it applied. Cargill sought
to show that BNSF's fuel surcharge revenues exceeded BNSF's incremental
fuel costs by comparing BNSF's fuel surcharge revenue to its internal
fuel costs.
To address Cargill's ``Profit Center'' claim, the Board had to
decide how to calculate BNSF's incremental fuel costs. The Board
determined that the ``safe harbor'' language in Fuel Surcharges
dictated the answer. Specifically, the Board found, in part, that if
rail carriers use the HDF Index to measure changes in their fuel costs
for purposes of a fuel surcharge program then, under the safe harbor
provision adopted in Fuel Surcharges, they ``are entitled to rely on
the HDF Index as a proxy to measure changes in their internal fuel
costs.'' Id. at 14. Having created the safe harbor ``to encourage use
of the HDF Index'' to measure changes in rail carrier fuel costs, id.
at 9, the Board concluded that because BNSF had used the HDF Index in
the fuel surcharge program at issue, the Board had to use that index as
well to calculate BNSF's incremental fuel costs Id. (``what the safe
harbor means is that if a rail carrier uses the HDF Index [in its fuel
surcharge program] to measure changes in its fuel costs, then that is
how the Board will measure these changes as well, rather than by
looking at evidence of changes in the rail carrier's internal fuel
costs'').\4\
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\4\ The Board also rejected Cargill's claim that the general
formula used to calculate the fuel surcharges bore no reasonable
nexus to, and overstated, fuel consumption for the BNSF system
traffic to which the surcharge was applied.
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Performing its own examination of BNSF's month-to-month incremental
fuel costs over a five-year period, the Board determined that, as
measured by the HDF Index, BNSF's total incremental fuel costs for the
traffic subject to the challenged fuel surcharge program only narrowly
exceeded the fuel surcharge revenues BNSF collected on that traffic.
The Board observed, however, that if BNSF's incremental fuel costs were
instead measured by the rail carrier's internal fuel costs, BNSF's fuel
surcharge revenues would have exceeded its incremental fuel costs by
$181 million. Id. at 14. This occurred because changes in the HDF Index
did not precisely reflect changes in BNSF's internal fuel costs. In
particular, the ``spread''--i.e., the difference between the average
retail price per gallon as reflected in the HDF Index and the lower
wholesale price per gallon actually paid by BNSF--increased overall
significantly more than it decreased over the five-year analysis
period.
This result concerned the Board. Pointing out that it had not
rejected Cargill's Profit Center claim lightly, the Board noted that in
Fuel Surcharges neither it nor any commenting party had foreseen a
situation where the spread between a rail carrier's internal fuel costs
and the HDF Index would diverge as it had in Cargill and that it was
unclear if this recovery was a unique situation affecting BNSF during a
period of high fuel price volatility or if it was, or was likely to
have been, a more widespread phenomenon that could undermine the
usefulness of the safe harbor provision. The Board expressed concern
that the safe harbor provision could give rail carriers an unintended
advantage: if a rail carrier's internal fuel costs rise relative to HDF
Index prices, the rail carrier could revise its fuel surcharge level
upward to ensure that it fully recovers its incremental fuel costs; on
the other hand, if a rail carrier's internal fuel costs declined
relative to HDF Index prices (as happened to BNSF), the rail carrier
could leave its fuel surcharge level in place, creating a spread and
excessive revenues. Id. at 17. This could allow a rail carrier to
recover substantially more than its incremental internal fuel costs yet
still be permissible under the safe harbor.
The Board found no evidence to suggest that BNSF had intentionally
taken advantage of this aspect of the safe harbor. Nevertheless,
because of the possibility of future abuse, the Board stated that it
would give shippers, rail carriers, and other interested persons the
opportunity to file comments on the issue.
We are seeking comments from the public on whether the safe harbor
provision of Fuel Surcharges should be modified or removed. In
particular, we seek comments on: whether or not the phenomenon that we
observed in Cargill (a growing spread between a rail carrier's internal
fuel costs and the HDF Index) was likely an aberration; whether there
are problems associated with the Board's use of the HDF Index as a safe
harbor in judging the reasonableness of fuel surcharge programs;
whether any problems with the safe harbor could be addressed through a
modification of it; and whether any problems with the safe harbor are
outweighed by its benefits. Parties are also encouraged to comment on
any other matter that they believe bears on whether the safe harbor
should be modified or removed.
This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
Authority: 49 U.S.C. 721(a) and 10702.
Decided: May 22, 2014.
By the Board, Chairman Elliott, Vice Chairman Begeman, and
Commissioner Miller.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2014-12434 Filed 5-28-14; 8:45 am]
BILLING CODE 4915-01-P