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ABOUT FUEL SURCHARGE

Changes to Fuel Surchage Program

Beginning in 2004 the impact of increased fuel costs forced the Alaska Railroad Corporation (ARRC) to implement a fuel surcharge. While other railroads did the same, at that time their accounting systems did not allow them to apply surcharges to certain divisional moves for railcars originating on one railroad and terminating on another so in those cases we only applied our surcharge to the ARRC portion of your bill. For example, the fuel surcharge on a railcar originating in Houston only applied to the portion of the move from Seattle to the final destination in Alaska.

In 2005, lower 48 railroads altered their accounting systems to apply their fuel surcharge to their portion of the move (from Houston to Seattle, in the above example). We started absorbing those charges at first, however we could no longer afford to do so and began applying our fuel surcharge to the entire move on January 1, 2006. This did not affect pre-paid moves, those with rates broken at Seattle or in-state moves, which were always subject to fuel surcharges.

ARRC settles fuel surcharge on collect shipments at the ARRC surcharge index rate based on the origin Bill of Lading date. For prepaid shipments, ARRC will accept surcharge indexes of inbound carriers based on the origin Bill of Lading date.

We maintain the transparency of our fuel surcharge by tying it to the OPIS index for Seattle High Sulfur #2 Diesel, which is the most widely-accepted fuel price benchmark for supply contracts. The surcharge is adjusted monthly to reflect the average price on the first workday of the previous month, and is posted on our web site.

Fuel Surcharge Basics

Our current fuel surcharge program began in 2004. The surcharge is updated on a monthly basis, as the cost of fuel fluctuates - so the fuel surcharge will respond in a more flexible manner. You will note that it is similar to the fuel cost recovery programs of other major railroads.

The fuel surcharge is based on the level of an OPIS index; the average price for Seattle High Sulfur #2 Diesel. The surcharge IS updated monthly, based on the first (non-holiday) workday of the previous month. For example, the surcharge is applied to shipments in February is based on the OPIS average from the first workday in January.

The fuel surcharge will increase by 0.5% for each additional 0.050 increase in the OPIS index.