SURFACE TRANSPORTATION BOARD DECISION DOCUMENT
    Decision Information

Docket Number:  
EP_552_15

Case Title:  
RAILROAD REVENUE ADEQUACY - 2010 DETERMINATION

Decision Type:  
Decision

Deciding Body:  
Entire Board

    Decision Summary

Decision Notes:  
DECISION FINDS THAT ONE CLASS I RAILROAD (UNION PACIFIC RAILROAD COMPANY) WAS REVENUE ADEQUATE FOR THE YEAR 2010, MEANING THAT ONE 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.

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    Full Text of Decision

XX

43498                                    SERVICE DATE – JANUARY 2, 2014

EB

 

SURFACE TRANSPORTATION BOARD

 

UPDATED DECISION

 

Docket No. EP 552 (Sub-No. 15)

 

RAILROAD REVENUE ADEQUACY—2010 DETERMINATION

 

Digest:[1]  Taking into consideration BNSF Railway Company’s refiled 2010 R-1 data, the Board finds that one Class I railroad (Union Pacific Railroad Company) was revenue adequate for the year 2010, meaning that one 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:  December 31, 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—2010, EP 558 (Sub-No. 14) (STB served Oct. 3, 2011), we determined that the 2010 railroad industry cost of capital was 11.03%.  By comparing this figure to the 2010 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, 2010.[2]

 

            A summary of the ROIs for all Class I railroads is set forth in Appendix A to this decision.  Appendix B provides the railroads’ R-1 Schedule 250 data that was used to compute the ROIs.  We find one carrier (Union Pacific Railroad Company) to be revenue adequate for 2010.  Our findings with respect to the Class I carriers 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 January 2, 2014.

 

2.  Notice of this decision will be published in the Federal Register.

 

            By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey.


APPENDIX A

 

 

                                            Railroad

 

                    

             ROI  

BNSF Railway Company[3]

10.28%

CSX Transportation, Inc.

10.85%

Grand Trunk Corporation Consolidated (Including all Canadian National U.S. affiliates)

9.21%

Kansas City Southern Railway Company

9.77%

Norfolk Southern Combined Railroad Subsidiaries[4]

10.96%

Soo Line Railroad Company (Including all Canadian Pacific U.S. affiliates)

8.01%

Union Pacific Railroad Company

11.54%

           


Railroad

BNSF

CSX

GT Corp

KCS

NS

SOO

UP

 

 

 

 

Consolidated

 

 

 

 

 

Combined/Consolidated Net Railway Operating Income For Reporting Entity

2,481,841

1,741,030

604,011

198,094

1,599,947

209,736

3,007,423

 

Add:  Interest Income from Working Capital Allowance – Cash Portion

0

0

0

126

1,643

2,768

0

 

Add:  Income Taxes Associated with Non-Rail Income and Deductions

29,161

5,266

165

50

39,618

158

24,047

 

Add:  Gain or (loss) from transfer/reclassification to nonrail-status (net of income taxes)

53,663

(2,217)

799

1,090

26,767

429

14,112

 

** Adjusted Net Railway Operating Income **

2,564,665

1,744,079

604,975

199,360

1,667,975

213,091

3,045,582

 

** Calculating the Adjusted Investment in Railroad Property for The Reporting Entity**

 

 

 

 

 

 

 

 

Combined Investment in Railroad Property Used in Transportation Service – Ending Balance

33,766,455

22,927,514

9,433,123

2,572,767

22,141,872

3,703,035

36,912,303

 

Combined Investment in Railroad Property Used in Transportation Service – Beginning Balance

32,703,496

22,480,486

9,194,395

2,454,152

21,619,944

3,641,226

35,995,999

 

Combined Investment in Railroad Property Used in Transportation Service – Average

33,234,976

22,704,000

9,313,759

2,513,460

21,880,908

3,672,131

36,454,151

 

Other Elements of Investment – Ending Balance

0

0

1,863

0

0

1,135

0

 

Other Elements of Investment – Beginning Balance

0

0

1,863

0

0

1,135

0

 

Other Elements of Investment – Average

0

0

1,863

0

0

1,135

0

 

Interest During Construction – Ending Balance

0

0

2,113

4,320

2,580

21,504

43,309

 

Interest During Construction – Beginning Balance

0

0

2,113

4,187

2,580

19,085

43,373

 

Interest During Construction – Average

0

0

2,113

4,254

2,580

20,295

43,341

 

Net Rail Assets of Rail Related Affiliates – Ending Balance

318,021

0

200,443

0

0

0

0

 

Net Rail Assets of Rail Related Affiliates – Beginning Balance

304,353

0

41,957

0

0

0

0

 

Net Rail Assets of Rail Related Affiliates – Average

311,187

0

121,200

0

0

0

0

 

Working Capital Allowance – Ending Balance

662,693

218,469

51,939

65,931

649,032

86,135

900,106

 

Working Capital Allowance – Beginning Balance

652,172

215,072

41,582

68,370

592,919

64,312

735,086

 

Working Capital Allowance – Average

657,433

216,771

46,761

67,151

620,976

75,224

817,596

 

Accumulated Deferred Income Tax Credits – Ending Balance

9,613,174

7,010,537

2,985,545

558,326

7,489,154

1,105,164

11,092,135

 

Accumulated Deferred Income Tax Credits – Beginning Balance

8,885,297

6,689,339

2,825,863

513,261

7,071,020

1,025,981

10,577,315

 

Accumulated Deferred Income Tax Credits – Average

9,249,236

6,849,938

2,905,704

535,794

7,280,087

1,065,573

10,834,725

 

Tax Adjusted Net Investment Base – Ending Balance

25,133,995

16,135,446

6,695,984

2,076,052

15,299,170

2,661,367

26,676,965

 

Tax Adjusted Net Investment Base – Beginning Balance

24,774,724

16,006,219

6,448,095

2,005,074

15,139,263

2,659,337

26,110,397

 

* Tax Adjusted Net Investment Base *

24,954,360

16,070,833

6,572,040

2,040,563

15,219,217

2,660,352

26,393,681

 

TAX ADJUSTED RETURN ON INVESTMENT

10.28%

10.85%

9.21%

9.77%

10.96%

8.01%

11.54%

 

 

 

 

 

 

 

 

 

 

The line item descriptions in this schedule are defined in the instructions to the Schedule 250 appearing in Supplemental Reporting of Consolidated Information for Revenue Adequacy Purposes, 5 I.C.C. 2d 65, 80-82 (1988).  The Schedule 250 form and instructions are not published in the Code of Federal Regulations.

                                                                                                            Appendix B



[1]  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).

[2]  The Board determined the revenue adequacy for 2010 of each Class I railroad in a previous decision served in this docket on November 3, 2011.  Now that BNSF Railway Company (BNSF) has refiled its R-1 reports for 2010-2012 in compliance with Western Coal Traffic League—Petition for Declaratory Order, FD 35506 (served July 25, 2013), this decision reflects that filing and includes a revised determination of BNSF’s revenue adequacy for 2010.  This updated decision also replaces the name “Norfolk Southern Railway Company” with “Norfolk Southern Combined Railroad Subsidiaries” and adds a footnote to accompany that change.  The November 3, 2011 decision remains unchanged in all other respects.

[3]  See n. 2.

[4]  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.