The mining and rail companies are battling in both legal and regulatory arenas. Oxbow, owned by businessman Bill Koch and operator of the Elk Creek underground mine in Gunnison County, Colo., has filed a federal antitrust suit against UP and BNSF in U.S. District Court for the District of Columbia. They also sparred at a federal Surface Transportation Board hearing on railroad competition in late June.
In the lawsuit, Oxbow accuses the railroads of fixing prices and monopolizing and/or attempting to monopolize the shipments of coal and other rail freight in various parts of the U.S. “The unlawful and overreaching actions of the railroads have suppressed and reduced competition, increased costs to the railroads’ customers, burdened consumers throughout the United States and imposed broad adverse effects on the national economy,” the suit alleges. “The illegal conduct…has increased the cost to consumers when paying electric bills and purchasing virtually every other commodity they use.”
According to the suit, prior to 1980 railroad operations in the U.S. were conducted by a large number of federally regulated railroads with rates for shipment of freight required to be published in tariffs filed with the Interstate Commerce Commission. In 1980, Congress passed the Staggers Rail Act, which deregulated the railroads and allowed them to set market rates.
Among specific allegations in the complaint, Oxbow accuses UP and BNSF of engaging in price fixing by “the joint adoption and uniform imposition of a charge that the railroads wrongfully described as a ‘fuel surcharge,’ but actually calculated as a percentage of base rates, unrelated to actual fuel costs incurred.” That surcharge yielded “enormous revenues for the railroads, far in excess of the actual costs for fuel incurred by the railroads.” UP boasted to its shareholders its revenues from this surcharge exceeded $1 billion in 2005, the suit says.
Oxbow also claims UP violated the Sherman Act and combined and/or conspired unlawfully with BNSF to monopolize and/or attempt to monopolize railroad freight services for coal and petroleum coke in several markets. Oxbow says it has been harmed by its inability to sell coal and other products efficiently. The railroads’ alleged conduct “distorted efficient allocation of the market by artificially preventing Oxbow from shipping coal and other products; dictating the locations to which Oxbow could sell its coal; reducing the prices Oxbow received for coal; dampening coal sales; and increasing Oxbow’s costs to sell coal.”
Oxbow says it has paid more than $30 million in “wrongly imposed fuel charges” is seeking three times the damages it says it can prove during a jury trial.
Spokesmen for UP and BNSF both denied Oxbow’s allegations. In response to a request by the railroads, they were given until August 15, 2011, to submit formal responses to court on the complaint.