|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|RAILROAD REVENUE ADEQUACY--2016 DETERMINATION|
|DECISION FOUND THAT FOUR CLASS I RAILROADS (BNSF RAILWAY COMPANY, NORFOLK SOUTHERN COMBINED RAILROAD SUBSIDIARIES, SOO LINE CORPORATION, AND UNION PACIFIC RAILROAD COMPANY) ARE REVENUE ADEQUATE FOR THE YEAR 2016, MEANING THAT THOSE 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.|
|Approximate download time at 28.8 kb: 40 Seconds|
If you do not have Acrobat Reader, or if you have problems reading our files with your current version of Acrobat Reader, the latest version of Acrobat Reader is available free at www.adobe.com.
|Full Text of Decision|
45962 SERVICE DATE – SEPTEMBER 6, 2017
SURFACE TRANSPORTATION BOARD
Docket No. EP 552 (Sub-No. 21)
RAILROAD REVENUE ADEQUACY—2016 DETERMINATION
Digest: The Board finds that four Class I railroads (BNSF Railway Company, Norfolk Southern Combined Railroad Subsidiaries, Soo Line Corporation, and Union Pacific Railroad Company) are revenue adequate for the year 2016, meaning that those 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 5, 2017
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 Purposes (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—2016, EP 558 (Sub-No. 20) (STB served Aug. 7, 2017), the Board determined that the 2016 railroad industry cost of capital was 8.88%. By comparing this figure to the 2016 ROI data obtained from the carriers’ Annual Report R-1 Schedule 250 filings, a revenue adequacy figure has been calculated for each of the Class I freight railroads that were in operation as of December 31, 2016.
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. The Board finds four carriers (BNSF Railway Company, Norfolk Southern Combined Railroad Subsidiaries, Soo Line Corporation, and Union Pacific Railroad Company) to be revenue adequate for 2016. The Board’s findings will be final on the effective date of this decision.
It is ordered:
1. This decision is effective on its service date.
2. Notice of this decision will be published in the Federal Register.
By the Board, Board Members Begeman, Elliott, and Miller.
 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).
 Pursuant to Standards I, 364 I.C.C. 803, Standards II, 3 I.C.C.2d 261, and Supplemental Reporting, 5 I.C.C.2d 65, revenue adequacy determinations for Class I carriers are made on a system-wide basis, which includes certain railroad affiliates.