BNSF announces first mileage-based fuel surcharge program

BNSF Railway Company announced that it will assess fuel surcharges on a mileage basis effective January 1, 2006. BNSF’s mileage-based fuel surcharge will be the first in the railroad industry. It will replace BNSF’s current fuel surcharge, which is assessed as a percentage of a customer’s freight transportation bill.

“In this era of tight transportation capacity, rapidly rising fuel prices and fuel-price volatility, we believe a mileage-based fuel surcharge program is the most direct and accurate method of reflecting the impact of fuel price changes on BNSF and our valued customers,” said John Lanigan, BNSF’s executive vice president and chief marketing officer.

The mileage-based fuel surcharge will apply to movements that originate and terminate on BNSF, and to the BNSF portion of Rule 11 shipments, a type of interline shipment where each carrier bills the customer separately for their services. The mileage fuel surcharge also will apply to certain movements involving BNSF and one or more short lines.

These movements account for about 75% of BNSF’s volume. The remaining 25% represent joint-rate interline movements with other Class I railroads and will continue to be covered by BNSF’s existing percentage fuel surcharge due to current interline billing systems and practices.

The change will require significant modifications to BNSF’s computer systems. Some customers will need to make certain systems modifications to verify mileage-based fuel surcharges. The effective date was set to allow customers and BNSF adequate time to implement and test systems changes.

“We will be working through a number of implementation issues in coming months, but we have heard our customers’ concerns and we recognize their preference for a mileage-based system,” said Lanigan. “Our goal is to implement a straightforward fuel surcharge program that can be administered without disrupting existing agreements and relationships. Many of our customers already participate in mileage-based fuel surcharge programs that the trucking industry initiated in the early 1990s.”

Mileage calculations will be based on the Household Goods Carriers’ (HHG) Mileage Guide (Rand McNally) and the surcharge tables will reflect the fuel use intensity of four types of rail movements: coal and taconite; carload and agricultural products; intermodal trailers; and intermodal doublestack containers.

The surcharge tables will be based on the On-Highway Retail Diesel Fuel (HDF) prices published by the Energy Information Administration of the US Department of Energy.