Notice2025-13094
Railroad Revenue Adequacy; and Joint Petition for Rulemaking-Annual Revenue Adequacy Determinations
Primary source
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Published
July 14, 2025
Issuing agencies
Surface Transportation Board
Full Text
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<title>Federal Register, Volume 90 Issue 132 (Monday, July 14, 2025)</title>
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[Federal Register Volume 90, Number 132 (Monday, July 14, 2025)]
[Notices]
[Pages 31561-31562]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-13094]
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SURFACE TRANSPORTATION BOARD
[Docket No. EP 722 and Docket No. EP 766]
Railroad Revenue Adequacy; and Joint Petition for Rulemaking--
Annual Revenue Adequacy Determinations
In April 2014, the Board instituted a proceeding in Docket No. EP
722 and invited interested persons to comment on ``the Board's
methodology in fulfilling its statutory mandate to determine railroad
revenue adequacy, as well as the revenue adequacy component of the
Board's standard for judging the reasonableness of rail freight rates,
with a view to what, if any, changes the Board can and should
consider.'' See R.R. Revenue Adequacy, EP 722, slip op. at 4 (STB
served Apr. 2, 2014). The Board held a public hearing on those issues
in 2015 and then again in 2019. See R.R. Revenue Adequacy, EP 722 (STB
served May 8, 2015); R.R. Revenue Adequacy, EP 722 (STB served Sept.
12, 2019). The Board allowed parties to supplement their testimony
through February 13, 2020. R.R. Revenue Adequacy, EP 722, slip op. at 1
(STB served Dec. 16, 2019).
On September 1, 2020, in Docket No. EP 766,\1\ Union Pacific
Railroad Company (UP), Norfolk Southern Railway Company (NS), and the
U.S. rail operating affiliates of Canadian National Railway Company
(CN, and collectively, Joint Carriers) filed a joint petition for
rulemaking to modify the Board's procedures for determining whether
each Class I rail carrier is earning adequate revenues under 49 U.S.C.
10704(a)(3). By decision served on December 30, 2020, the Board
initiated a rulemaking proceeding to allow it to further consider the
issues raised by the petition. Joint Pet. for Rulemaking--Annual
Revenue Adequacy Determinations, EP 766, slip op. at 3 (STB served Dec.
30, 2020). The decision also invited comments on the Joint Carriers'
proposal and several related issues. Id. at 3-5. The Board did not
propose regulations or indicate that it would do so.
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\1\ These proceedings are not consolidated. A single decision is
being issued for administrative efficiency.
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For the reasons stated below, the Board will discontinue these
proceedings.
Background
Pursuant to 49 U.S.C. 10704(a)(3), the Board annually determines
which Class I rail carriers are earning adequate revenues, most
recently in Railroad Revenue Adequacy--2023 Determination, EP 552 (Sub-
No. 28) (STB served Sept. 6, 2024). Adequate revenues are defined as
those ``that are adequate, under honest, economical, and efficient
management, for the infrastructure and investment needed to meet the
present and future demand for rail services and to cover total
operating expenses, including depreciation and obsolescence, plus a
reasonable and economic profit or return (or both) on capital employed
in the business.'' 49 U.S.C. 10704(a)(2). The Board has adopted, and
periodically revised, revenue adequacy standards and procedures.
To make the annual revenue adequacy determination, the Board
compares a carrier's return on net investment (ROI) with the rail
industry's after-tax cost of capital for that year. Ass'n of Am.
R.Rs.--Pet. Regarding Methodology for Determining R.R. Revenue
Adequacy, EP 679, slip op. at 1 (STB served Oct. 24, 2008). If its ROI
exceeded the cost of capital, the carrier is considered to have been
revenue adequate for that year; if its ROI was less than the cost of
capital, the railroad is considered to have been revenue inadequate.
Id.
Procedural History
Docket No. EP 722
On September 5, 2014, the Board received opening comments in
Railroad Revenue Adequacy, EP 722, and replies were filed on November
4, 2014. After holding an initial hearing on July 22 and 23, 2015, the
Board received additional comments from stakeholders on August 6, 2015.
In January 2018, the Board established a Rate Reform Task Force (RRTF)
to recommend improvements to the Board's rate review processes and to
propose new rate review methodologies. The RRTF issued a report on
April 25, 2019, which included, among other things, recommendations
that the Board consider policy changes regarding revenue adequacy.
Therefore, the Board solicited written testimony and held a second
hearing in this docket on December 12 and 13, 2019, to seek input from
stakeholders on revenue adequacy issues raised by the report. The
hearing record was kept open through February 13, 2020. R.R. Revenue
Adequacy, EP 722, slip op. at 1 (STB served Dec. 17, 2019).
Docket No. EP 766
In Joint Petition for Rulemaking--Annual Revenue Adequacy
Determinations, EP 766, Joint Carriers propose two changes to the
Board's procedures for the annual revenue adequacy determination.
First, Joint Carriers propose that the Board determine whether a
railroad is revenue adequate by comparing the extent by which its ROI
exceeds the rail industry's cost of capital to the extent by which the
ROI of companies in the S&P 500 exceeds their cost of capital. (Pet. 3,
8, EP 766.) Second, Joint Carriers propose that the Board change its
treatment of deferred taxes by implementing a flow-through approach by
which annual deferred taxes and accumulated deferred taxes would not be
removed from net operating income and the investment base,
respectively. (Id. at 38.)
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On September 21, 2020, the Board received replies to the petition
from CSXT and the Western Coal Traffic League (WCTL), and a joint reply
from the American Chemistry Council, Corn Refiners Association,
American Fuel & Petrochemical Manufacturers, the National Industrial
Transportation League, the Chlorine Institute, and the Fertilizer
Institute (collectively, Joint Shippers). CSXT supports the petition,
while WCTL and Joint Shippers oppose it. On October 13, 2020, Joint
Carriers responded to WCTL's and Joint Shippers' arguments against
their petition.
After initiating the proceeding, the Board received opening
comments on May 17, 2021, from the Association of American Railroads
(AAR), Dow, Inc., Industrial Minerals Association, Joint Carriers,
Joint Shippers, Olin Corporation, the United States Department of
Agriculture (USDA), and jointly from WCTL and Seminole Electric
Cooperative, Inc. (Seminole Electric), and replies on August 16, 2021,
from AAR, Joint Carriers, Joint Shippers, and jointly from WCTL and
Seminole Electric.
Discussion and Conclusions
The Board appreciates the effort undertaken by stakeholders in
these exploratory dockets to provide additional information and
arguments for the Board's consideration. While the Board continues to
explore ideas related to revenue adequacy, at this time, the Board has
determined that the public interest would be better served by the Board
devoting its limited resources to other reform and potential rulemaking
matters. For example, the agency recently initiated a reform initiative
aimed at streamlining its processes and procedures, including those
used in rate, service, and other cases. See Press Release, STB, STB
Gathers More Than 100 Ideas from Legal Practitioners to Streamline
Board Processes, No. 25-22 (STB posted June 10, 2025). The Board is
also undertaking a review of its regulations implementing environmental
laws, including the National Environmental Policy Act (42 U.S.C. 4321-
4370m-11), conducting a comprehensive review of its regulations and
policies related to competition, and considering issues related to
class exemptions and preemption.
The Board's docket prioritization is guided in part by the fact
that revenue adequacy issues have been raised in individual matters.
See, e.g., Consumers Energy Co. v. CXS Transp., Inc., NOR 42142, slip
op. at 2 (STB served June 15, 2015). For example, at present, the ideas
proposed by Joint Carriers regarding benchmarking railroad return on
investment and cost of capital to companies in the S&P 500 could be
offered by a carrier (or a complainant) in a rate reasonableness
dispute. As such, the Board is discontinuing the proceedings in Docket
No. EP 722 and Docket No. EP 766 in the interest of administrative
efficiency.\2\ This action, however, does not foreclose the possibility
of the Board exploring revenue adequacy issues in the future in a new
docket.
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\2\ Under the Board's practice, information-gathering
proceedings are automatically discontinued once the record closes.
Rev. of the Surface Transp. Bd.'s Gen. Costing Sys., EP 431 (Sub-No.
3) et al., slip op. at 3 (STB served Jan. 19, 2010). Therefore,
another revenue adequacy-related docket, Hearing on Revenue
Adequacy, Docket No. EP 761, was discontinued as of February 13,
2020. While Docket No. EP 722 could also have been considered
discontinued that day (see R.R. Revenue Adequacy, EP 722 et al.,
slip op. at 1 (STB served Dec. 17, 2019) (setting February 13, 2020,
as the deadline to submit evidence on the record)), there continued
to be activity in and related to that docket after February 13,
2020. See In re: W. Coal Traffic League, 108 F.4th 905 (D.C. Cir.
2024). Accordingly, the Board is discontinuing Docket No. EP 722 in
this decision.
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This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
It is ordered:
1. Docket No. EP 722 and Docket No. EP 766 are discontinued.
2. This decision is effective on its date of service.
By the Board, Board Members Fuchs, Hedlund, Primus, and Schultz.
Decided: July 7, 2025.
Tammy Lowery,
Clearance Clerk.
[FR Doc. 2025-13094 Filed 7-11-25; 8:45 am]
BILLING CODE 4915-01-P
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