SURFACE TRANSPORTATION BOARD DECISION DOCUMENT
    Decision Information

Docket Number:  
EP_552_14

Case Title:  
RAILROAD REVENUE ADEQUACY-2009 DETERMINATION

Decision Type:  
Decision

Deciding Body:  
Entire Board

    Decision Summary

Decision Notes:  
DECISION FOUND THAT NO CLASS I RAILROAD HAS ACHIEVED REVENUE ADEQUACY FOR THE YEAR 2009, IN ACCORDANCE WITH THE BOARD'S STANDARDS AND PROCEDURES DEVELOPED TO MAKE THAT DETERMINATION.

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    Full Text of Decision

XX

41189 SERVICE DATE – NOVEMBER 10, 2010

EB

This decision will be included in the bound volumes of the STB

printed reports at a later date.

 

SURFACE TRANSPORTATION BOARD

 

Docket No. EP 552 (Sub-No. 14)

 

RAILROAD REVENUE ADEQUACY—2009 DETERMINATION

 

Digest:[1] The agency finds that no Class I railroad is revenue adequate for the year 2009, meaning none 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: November 9, 2010

 

BY THE BOARD:

 

This annual determination of railroad revenue adequacy is made in accordance with the standards and procedures developed in Standards for Railroad Revenue Adequacy, 364 I.C.C. 803 (1981), Standards for Railroad Revenue Adequacy, 3 I.C.C. 2d 261 (1986), and Supplemental Reporting of Consolidated Information for Revenue Adequacy Purposes, 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. We perform the annual revenue adequacy exercise because we have been directed to do so by Congress.

In Railroad Cost of Capital—2009, EP 558 (Sub-No. 13) (STB served Sept. 30, 2010), we determined that the 2009 railroad industry cost of capital was 10.43%. By comparing this figure to the 2009 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, 2009.

 

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 no carrier to be revenue adequate for 2009. 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 November 10, 2009.

 

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


 

 

APPENDIX A

 

 

Railroad

 

ROI

BNSF Railway Company

8.67%

CSX Transportation, Inc.

7.30%

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

6.04%

Kansas City Southern Railway Company

6.51%

Norfolk Southern Railway Company

7.69%

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

6.28%

Union Pacific Railroad Company

8.62%


Railroad

BNSF

CSX

GT Corp

KCS

NS

SOO

UP

 

 

 

 

Consolidated

 

 

 

 

 

Combined/Consolidated Net Railway Operating Income for Reporting Entity

2,057,795

1,157,969

374,260

124,296

1,137,416

162,784

2,098,871

 

Add: Interest Income from Working Capital Allowance – Cash Portion

0

0

0

515

2,136

1,850

0

 

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

(1,080)

1,165

2,362

66

23,939

(171)

28,877

 

Add: Gain or (Loss) from Transfer/Reclassification to Nonrail-Status (net of income taxes)

14,895

5,158

950

2,479

12,294

3,135

98,623

 

** Adjusted Net Railway Operating Income **

2,071,610

1,164,292

377,572

127,356

1,175,785

167,598

2,226,371

 

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

 

 

 

 

 

 

 

 

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

32,007,171

22,480,486

9,194,395

2,454,152

21,619,944

3,641,226

36,205,298

 

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

30,735,750

21,981,626

8,705,976

2,299,961

21,368,898

3,603,149

34,607,013

 

Combined Investment in Railroad Property Used in Transportation Service – Average

31,371,461

22,231,056

8,950,186

2,377,057

21,494,421

3,622,188

35,406,156

 

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

4,187

2,580

19,085

43,373

 

Interest During Construction – Beginning Balance

0

0

2,113

2,910

2,580

8,790

43,422

 

Interest During Construction – Average

0

0

2,113

3,549

2,580

13,938

43,398

 

Net Rail Assets of Rail Related Affiliates – Ending Balance

304,353

0

41,957

0

0

0

0

 

Net Rail Assets of Rail Related Affiliates – Beginning Balance

295,567

0

43,809

0

0

0

0

 

Net Rail Assets of Rail Related Affiliates – Average

299,960

0

42,883

0

0

0

0

 

Working Capital Allowance – Ending Balance

652,172

215,072

41,582

68,370

592,919

64,312

735,086

 

Working Capital Allowance – Beginning Balance

732,481

279,983

43,651

68,328

693,388

47,677

742,881

 

Working Capital Allowance – Average

692,327

247,528

42,617

68,349

643,154

55,995

738,984

 

Accumulated Deferred Income Tax Credits – Ending Balance

8,885,297

6,689,339

2,825,863

513,261

7,071,020

1,025,981

10,657,037

 

Accumulated Deferred Income Tax Credits – Beginning Balance

8,074,698

6,362,122

2,727,841

454,967

6,634,807

966,769

9,872,580

 

Accumulated Deferred Income Tax Credits – Average

8,479,998

6,525,731

2,776,852

484,114

6,852,914

996,375

10,264,809

 

Tax Adjusted Net Investment Base – Ending Balance

24,078,399

16,006,219

6,448,095

2,005,074

15,139,263

2,659,337

26,239,974

 

Tax Adjusted Net Investment Base – Beginning Balance

23,689,100

15,899,487

6,061,619

1,910,412

15,424,899

2,674,132

25,433,892

 

* Tax Adjusted Net Investment Base *

23,883,750

15,952,853

6,254,857

1,957,743

15,282,081

2,666,735

25,836,933

 

 

 

 

 

 

 

 

 

 

TAX ADJUSTED RETURN ON INVESTMENT

8.67%

7.30%

6.04%

6.51%

7.69%

6.28%

8.62%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The line item descriptions contained 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).