(The Associated Press circulated the following article by Dale Wetzel on September 16.)
BISMARCK, N.D. — Surcharges intended to defray rising fuel costs are turning large profits for the BNSF Railway, a spokesman for North Dakota’s grain elevators believes. A railroad official says the claim is mistaken.
“The reason for all this ruckus is ample evidence that railroad fuel surcharges are considerably more than what’s needed to compensate the railroad for its increased fuel costs,” said Steve Strege, executive vice president of the North Dakota Grain Dealers Association.
Strege spoke Thursday at a meeting of the Legislature’s interim Agriculture and Natural Resources Committee, which is studying railroad fuel surcharges. North Dakota lawmakers have almost no regulatory power over BNSF, but backers of the study are hoping it will prod the railroad to overhaul its practices.
BNSF has already announced one major change: Beginning Jan. 1, its surcharges will be figured according to how many miles each shipment travels. At present, the surcharge is a percentage of the shipper’s freight bill.
Strege said the railroad deserved praise for the reform, but said the surcharges were still too onerous.
“They’re moving in the right direction with us on wheat. In some cases, it’s pretty giant steps,” he said. “But it still should be a little bit more.”
Brian Sweeney, legislative counsel for BNSF, said the railroad’s own data showed its fuel surcharges barely covered its increased expenses, when revenues are coupled with savings for hedging on fuel costs. The railroad buys 1.4 billion gallons of diesel fuel annually, he said.
“We’re not making money on it. It traditionally has not covered the entire increase in fuel costs,” he said.
Sweeney said he had spoken to a company official who runs the fuel surcharge program to obtain his information. Strege and Sen. Aaron Krauter, D-Regent, challenged his statements, using information culled from BNSF documents.
During June, July and August of this year, Strege said, a 110-car shuttle train from Berthold to Portland, Ore., paid an average surcharge of $44,375.
In 2002, when the railroad was not levying a surcharge, its regular shipping rate covered a fuel cost of 74 cents a gallon, Strege said. He estimated the surcharge for June, July and August for a Berthold-to-Portland train was $26,173 more than was justified.
North Dakota’s principal railroads are BNSF and CP Rail, which has more limited reach in the state. Strege said CP Rail assesses lower fuel surcharges.
Krauter said the surcharges, and other added railroad shipping expenses, were wiping out farmers’ profit margins.
“When you ship out a bushel of wheat or durum, and it’s over a buck to get it out of here, it really makes you scratch your head and say, when those prices are down to $3.10 (a bushel) or $3.30 … you just say, ‘Why am I farming?'” Krauter said.