WASHINGTON — The U.S. Surface Transportation said today it believes it’s time to review a contentious metric used by the agency to rule on pricing challenges brought by shippers against railroads.
The rail regulatory agency is seeking comment from the industry ahead of a hearing that will examine the rail revenue adequacy standard, which was established in 1981. The STB noted in an announcement that in the last decade “the structure of the rail industry and flow of commerce have continued to change substantially.”
Some railcar shippers have said the metric — gauged by measuring the rate of return on net investment to at least the current cost of capital for the industry — underestimates the financial strength of the railroads. The STB determined Norfolk Southern Railway, Union Pacific Railway and BNSF Railway were revenue adequate in 2012. UP and NS were the only Class I-based railroads found to be revenue adequate by the STB in the prior year.
Sen. Jay Rockefeller, D-W.Va., a long-time critic of railroad’s pricing power, released a report in October concluding that NS, UP, BNSF and CSX Transportation were financially strong enough to be considered revenue adequate. The rail industry criticized the Rockefeller report, saying it doesn’t take into account the nearly $70 billion in railroads have invested into their networks in recent years.