The Board Adopts a Final Rule Amending the Thresholds for Classifying Rail Carriers

In a decision served on April 5, 2021, the Surface Transportation Board (Board) adopted a final rule amending the thresholds for classifying rail carriers.  Mont. Rail Link, Inc.—Pet. for Rulemaking—Classification of Carriers, EP 763 (STB served April 5, 2021).  Under 49 C.F.R. Part 1201, rail carriers are grouped into one of three classes for purposes of accounting and reporting.  Id., slip op. at 1.  This classification affects the degree to which rail carriers must file annual, quarterly, and other operational reports, and it is used in various other contexts, including differentiating the legal standards and procedures that apply to certain transactions subject to Board licensing, and prescribing labor protection conditions.  Id. 

            This rulemaking stems from a petition for rulemaking filed on February 14, 2020 by Montana Rail Link, Inc. (MRL).  MRL requested that the Board increase the revenue threshold for Class I carriers to $900 million.  Id., slip op. at 2.  Currently, when adjusted for inflation, Class I carriers have annual operating revenues of $504,803,294 or more, Class II carriers have annual operating revenues of less than $504,803,294 and more than $40,384,263, and Class III carriers have annual operating revenues of $40,384,263 or less.  Id.  In its petition, MRL stated that “it continues to be a regional carrier operationally and economically but may exceed the Class I revenue threshold within two years.”  Id.  MRL asked the Board to address “whether a regional carrier such as MRL should be treated as a Class I carrier, taking into account (1) the financial and operational differences between MRL and existing Class I carriers, and (2) the cost-benefit analysis of imposing Class I requirements on MRL.”  Id.

            The Board initiated a rulemaking proceeding on May 14, 2020 and invited comment on whether it should amend 49 C.F.R. Part 1201 to increase the threshold for Class I carriers, and if, so, whether $900 million or another amount would be appropriate.  Mont. Rail Link, Inc.—Pet. for Rulemaking—Classification of Carriers, EP 763 (STB served May 14, 2020).  Subsequently, the Board issued a notice of proposed rulemaking (NPRM) on September 30, 2020 to amend its rail carrier classification regulations.  Mont. Rail Link, Inc.—Pet. for Rulemaking—Classification of Carriers, EP 763 (STB served Sept. 30, 2020).  The Board received comments in support of and in opposition to MRL’s petition and the NPRM.

After considering the record, the Board issued a final rule on April 5, 2021.  The Board stated that “regional carriers, such as MRL, do not possess the comparative attributes of Class I carriers,” and “it is appropriate to continue to classify these railroads as Class II carriers.”  Mont. Rail Link, Inc.—Pet. for Rulemaking—Classification of Carriers, EP 763, slip op. at 5 (STB served April 5, 2021).  Thus, 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.”  Id., slip op. at 7.  The final rule will also amend 49 C.F.R. Part 1201, § 1-1 Note A “to replace the 1991 Average Index with the 2019 Average Index, as the new threshold levels will be calculated in 2019 dollars.”  Id.  The rule is effective June 4, 2021.

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