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Rail News Home Federal Legislation & Regulation

10/2/2020



Rail News: Federal Legislation & Regulation

STB: Five Class Is were 'revenue adequate' in 2019


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The Surface Transportation Board (STB) announced yesterday that BNSF Railway Co., CSX, Norfolk Southern Railway's combined subsidiaries, Canadian Pacific's Soo Line Corp. and Union Pacific Railroad achieved "revenue adequacy" in 2019.

A railroad is considered to be revenue adequate if it achieves a rate of return on net investment equal to at least the current cost of capital for the railroad industry in a given year. Congress directs the STB to conduct revenue adequacy determinations every year.

For 2019, the board determined the rate of return figure to be 9.34 percent. The five Class Is' rate of return exceeded the STB's calculation of the industry's cost of capital.

Meanwhile, the board also announced it is seeking public comments on a proposed approach developed by the STB's Office of Economics for possible use in considering class exemption and revocation issues. The office developed the new approach to help the STB evaluate market conditions using a variety of metrics related to rail competition.

The new approach would serve as a potential tool for evaluating market conditions governing a commodity, including changes in conditions over time. However, they would not serve as a mechanical test for determining whether the commodity exemptions at issue should be revoked or whether a new exemption should be issued, STB officials said in a press release.

Initial comments on the new approach are due to the board by Dec. 4 and replies to initial comments are due by Jan. 4, 2021.



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