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Surface Transportation Board Adopts Final Rule Amending Thresholds for Classifying Rail Carriers

04/05/2021 (Monday) [PDF Version]
No. 21-16

Michael Booth
FedRelay 1 (800) 877-8339

The Surface Transportation Board (Board) today announced the adoption of a final rule to amend the operating revenue thresholds for classifying rail carriers.  The final rule will raise the Class I revenue threshold to $900 million and round the current Class II/Class III threshold to $40.4 million.  The final rule will also use 2019 dollars as the baseline for revenue calculations going forward.

This rulemaking follows a petition filed by Montana Rail Link, Inc. (MRL), on February 14, 2020, requesting the Board increase the revenue threshold for Class I carriers.  MRL contended that it was likely in the near-term to be re-classified as a Class I railroad under the existing threshold – operating revenues of $504,803,294 or more – despite its historical status as a “regional railroad” with a comparatively smaller footprint and revenue base than the current Class Is.  As a Class I railroad, MRL would have been subject to additional regulatory requirements, in particular, extensive reporting of financial and economic information.

On May 14, 2020, the Board initiated a rulemaking proceeding to consider MRL’s petition and issues related to the rail carrier classification regulations.  On September 30, 2020, the Board issued a Notice of Proposed Rulemaking proposing to modify the existing rules.

After careful consideration of all comments, the Board found that it was appropriate to modify the revenue classification standard to maintain a meaningful distinction between Class I railroads and regional carriers such as MRL.  The final rule raises the Class I threshold to $900 million and thereby preserves an appropriate balance between the Board’s need for financial and economic information and the imposition of additional requirements on regional railroads.  Accordingly, today’s action advances many of the goals of the Board’s rail transportation policy at 49 U.S.C. § 10101.

Commenting on the final rule, Chairman Martin J. Oberman noted, “This action represents a common-sense modification of our regulations to reflect the real-world distinction between the largest railroads in the freight rail network and the comparatively smaller regional and short line carriers, and the balance the agency needs to set with respect to reporting requirements that differ based on this distinction.”

The final rule, EP 763, is effective on June 4, 2021.

The Board’s decision in Montana Rail Link, Inc.—Petition for Rulemaking—Classification of Carriers, Docket No. EP 763, may be viewed and downloaded here.