BNSF Hit with $345 Million Penalty in Captive Shipper Case

In a high-profile complaint with the largest award to a captive rail shipper, the Surface Transportation Board (STB) ordered an estimated $345 million in reparations and rate reductions to Western Fuels Association, Inc. and Basin Electric Power Cooperative, Inc. from BNSF. The agency ruled that that the railroad charged unreasonable rates to haul 8 million tons of coal each year from mines in Wyoming's Powder River Basin to Moba Junction, Wyo.

The STB found the transportation rates BNSF charged Western Fuels Association, Inc. and Basin Electric Power Cooperative, Inc. to be roughly six times more than the variable cost of providing that service. After the STB's stand-alone cost test demonstrated that in 2009 the maximum lawful rate for this traffic cannot exceed a revenue-to-variable cost ratio of 240 percent, the STB ordered BNSF to lower its transportation rates by approximately 60 percent and capped the rates through 2024.

BNSF must promptly reimburse Western Fuels and Basin Electric Power $100 million in overcharges from 2004 to 2008. The $100 million awarded to the shipper along with the capped rates for the next 16 years results in the $345 million award.

BNSF strongly opposes the STB's decision on its merits and believes the process used to arrive at this result is unfair. BNSF said that when Western Fuels challenged their rates in 2004, the STB determined the rates were reasonable. Since then, the STB substantially revised its large rate case rules, allowing the shipper to submit a reconfigured new case. BNSF believes that this case is a manipulation of the new rules and intends to pursue all legal remedies. If the ruling stands, it would be the largest award for any shipper in the history of coal rate litigation.

The decision was issued in STB Docket No. 42088.