|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|RAILROAD REVENUE ADEQUACY--2012 DETERMINATION|
|DECISION FOUND THAT TWO CLASS I RAILROADS ARE REVENUE ADEQUATE FOR THE YEAR 2012, MEANING THAT TWO OF THE CLASS I RAILROADS ACHIEVED A RATE OF RETURN EQUAL OR GREATER THAN THE BOARD'S CALCULATION OF THE AVERAGE COST OF CAPITAL TO THE FREIGHT RAIL INDUSTRY.|
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|Full Text of Decision|
43299 SERVICE DATE – OCTOBER 17, 2013
SURFACE TRANSPORTATION BOARD
Docket No. EP 552 (Sub-No. 17)
RAILROAD REVENUE ADEQUACY—2012 DETERMINATION
Digest: The Board finds that two Class I railroads (Norfolk Southern Combined Railroad Subsidiaries and Union Pacific Railroad Company) are revenue adequate for the year 2012, meaning that two of the Class I railroads achieved a rate of return equal to or greater than the Board’s calculation of the average cost of capital to the freight rail industry.
Decided: September 30, 2013
This annual determination of railroad revenue adequacy under 49 U.S.C. § 10704(a)(3) is made in accordance with the standards and procedures developed in Standards for Railroad Revenue Adequacy (Standards I), 364 I.C.C. 803 (1981), Standards for Railroad Revenue Adequacy (Standards II), 3 I.C.C. 2d 261 (1986), and Supplemental Reporting of Consolidated Information for Revenue Adequacy (Supplemental Reporting), 5 I.C.C. 2d 65 (1988). Pursuant to those procedures, which are essentially mechanical, a railroad is considered revenue adequate under 49 U.S.C. § 10704(a) if it achieves a rate of return on net investment (ROI) equal to at least the current cost of capital for the railroad industry.
In Railroad Cost of Capital—2012, EP 558 (Sub-No. 16) (STB served Aug. 30, 2013), we determined that the 2012 railroad industry cost of capital was 11.12%. By comparing this figure to the 2012 ROI data obtained from the carriers’ Annual Report R-1 Schedule 250 filings, we have calculated a revenue adequacy figure for each of the Class I freight railroads that were in operation as of December 31, 2012, other than for BNSF Railway Company (BNSF).
A summary of the ROIs for all Class I railroads except for BNSF is set forth in Appendix A to this decision. Appendix B provides those railroads’ R-1 Schedule 250 data that was used to compute the ROIs. We find two carriers (Norfolk Southern Combined Railroad Subsidiaries and Union Pacific Railroad Company) to be revenue adequate for 2012. Our findings will be final on the effective date of this decision.
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
It is ordered:
1. This decision is effective on October 17, 2013.
2. Notice of this decision will be published in the Federal Register.
By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey.
 The digest constitutes no part of the decision of the Board but has been prepared for the convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010).
 The Board has not calculated BNSF’s 2012 revenue adequacy in this decision, because BNSF is due to refile its R-1 reports for 2010, 2011, and 2012 by October 23, 2013, in compliance with the Board’s order in Western Coal Traffic League—Petition for Declaratory Order, FD 35506 (STB served July 25, 2013). Following receipt and verification of BNSF’s revised R-1 reports, the Board will reissue BNSF’s 2010 and 2011 revenue adequacy calculations, and will issue its 2012 calculation.
 Pursuant to Standards I, Standards II, and Supplemental Reporting, revenue adequacy determinations for Class I carriers are made on a system-wide basis, which includes certain railroad affiliates.
 See n. 2.