[Federal Register Volume 78, Number 186 (Wednesday, September 25, 2013)]
[Notices]
[Pages 59093-59095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23338]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[Docket No. EP 290 (Sub-No. 5) (2013-4)]


Quarterly Rail Cost Adjustment Factor

AGENCY: Surface Transportation Board, DOT

ACTION: Approval of rail cost adjustment factor.

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SUMMARY: The Board has approved the fourth quarter 2013 rail cost 
adjustment factor (RCAF) and cost index filed by the Association of 
American Railroads. The fourth quarter 2013 RCAF (Unadjusted) is 0.975. 
The fourth quarter 2013 RCAF (Adjusted) is 0.423. The fourth quarter 
2012 RCAF-5 is 0.399.

DATES: Effective Date: October 1, 2013.

FOR FURTHER INFORMATION CONTACT: Pedro Ramirez, (202) 245-0333. Federal 
Information Relay Service (FIRS) for the hearing impaired: (800) 877-
8339.

SUPPLEMENTARY INFORMATION: In Railroad Cost Recovery Procedures, 1 
I.C.C. 2d 207 (1984), the Interstate Commerce Commission (ICC) outlined 
the procedures for calculating the all-inclusive index of railroad 
input prices and the method for computing the rail cost adjustment 
factor (RCAF). Under the procedures, the Association of American 
Railroads (AAR) is required to calculate the index on a quarterly basis 
and submit it to the agency on the fifth day of the last month of each 
calendar quarter. In Railroad Cost Recovery Procedures--Productivity 
Adjustment, 5 I.C.C. 2d 434 (1989), aff'd sub nom. Edison Electric 
Institute v. ICC, 969 F.2d 1221 (D.C. Cir. 1992), the ICC adopted 
procedures that require the adjustment of the quarterly index for a 
measure of productivity.
    The provisions of 49 U.S.C. 10708 direct the Surface Transportation 
Board (Board) to continue to publish both an unadjusted RCAF and a 
productivity-adjusted RCAF. In Productivity Adjustment--Implementation, 
1 S.T.B. 739 (1996), the Board decided to publish a second 
productivity-adjusted RCAF called the RCAF-5. Consequently, three 
indices are now filed with the Board: the RCAF (Unadjusted); the RCAF 
(Adjusted); and the RCAF-5. The RCAF (Unadjusted) is an index 
reflecting cost changes experienced by the railroad industry, without 
reference to changes in rail productivity. The RCAF (Adjusted) is an 
index that reflects national average productivity changes as originally 
developed and applied by the ICC, the calculation of which is currently 
based on a 5-year moving average. The RCAF-5 is an index that also 
reflects national average productivity changes; however, those 
productivity changes are calculated as if a 5-year moving average had 
been applied consistently from the productivity adjustment's inception 
in 1989.
    The index of railroad input prices, RCAF (Unadjusted), RCAF 
(Adjusted), and RCAF-5 for the fourth quarter of 2013 are shown in 
Table A of the Appendix to this decision. Table B shows the second 
quarter 2013 index and the RCAF calculated on both an actual and a 
forecasted basis. The difference between the actual calculation and the 
forecasted calculation is the forecast error adjustment.
    The weights for each major cost component of the all-inclusive cost

[[Page 59094]]

index, on which the RCAF is based, are updated annually in order to 
reflect the changing mix of index components. See 49 U.S.C. 10708. This 
includes rebenchmarking the wages and supplemental rates used in the 
labor index in the fourth quarter of each year. The weights used by AAR 
are based on the distribution of railway expenses for the year 2012. 
Similarly, AAR has used wage and supplemental rates for the year 2012 
to calculate hourly labor rates that reflect the changing mix of 
employees.
    In a decision served July 25, 2013,\1\ the Board directed BNSF 
Railway Company (BNSF) to refile its R-1 report for 2010, 2011, and 
2012, 60 days after the decision's August 24, 2013 effective date 
(October 23, 2013). In July 2013, Union Pacific Railroad Company (UP) 
submitted to the Board its own revised R-1 Schedules 210 and 510 for 
the years 2010, 2011, and 2012, to correct certain errors, yet AAR 
notes that it used only the corrected data from 2012 to calculate the 
new weights and interest index herein because BNSF's data were not yet 
available. This is not, however, our preferred approach, which is to 
use all available data to generate the most accurate calculation at any 
given time. While BNSF's anticipated R-1 resubmission may require 
further adjustments to the RCAF calculation, all known errors in the 
relevant data should have been addressed in the current filing. 
However, the Board understands that its publication of the RCAF figures 
in a timely fashion is important to a number of interested parties, and 
hence, in this instance, the Board will rely on the AAR for this 
calculation. While AAR states that it plans to examine the changes to 
all indexes once it has BNSF's revisions, AAR is directed to use all 
the data available to it at the time it submits its quarterly 
calculations. Therefore, we will direct AAR to make the adjustment for 
the UP 2010, 2011, and 2012 interest expense restatement, to the extent 
not already made, in its next quarterly submission.\2\
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    \1\ Western Coal Traffic League--Petition for Declaratory Order, 
FD 35506, slip op. at 2.
    \2\ Interested parties may submit a petition for reconsideration 
to propose alternative approaches for addressing the need to correct 
for restated data while awaiting further modifications.
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    We have examined AAR's calculations, including its reweighting and 
rebenchmarking calculations, and we find that AAR has complied with our 
procedures with respect to the available data for 2012. We find that 
the fourth quarter 2013 RCAF (Unadjusted) is 0.975, a decrease of 0.2% 
from the third quarter 2013 RCAF of 0.977. The RCAF (Adjusted) is 
calculated, in part, using the RCAF (Unadjusted) and a 5-year moving 
geometric average of productivity change for U.S. Class I railroads 
from 2007-2011, which is 1.009 (0.9% per year). We find the RCAF 
(Adjusted) is 0.423, a decrease of 0.5% from the previously reported 
third quarter 2013 RCAF (Adjusted) of 0.425.\3\
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    \3\ The fourth quarter 2013 RCAF Adjusted (0.423) is calculated 
by dividing the fourth quarter 2013 RCAF Unadjusted (0.975) by the 
fourth quarter productivity adjustment factor of 2.3059. The fourth 
quarter 2013 productivity adjustment factor is calculated by 
multiplying the third quarter 2013 productivity adjustment of 2.3008 
by the fourth root (1.0022) of the 2007-2011 annual average 
productivity growth rate of 0.9%.
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    In accordance with Productivity Adjustment--Implementation, 1 
S.T.B. at 748-49, the RCAF-5 for this quarter will use a productivity 
trend for the years 2006-2010, which is 1.008 (0.8% per year). We find 
the RCAF-5 for the fourth quarter of 2013 is 0.399, a decrease of 0.5% 
from the previously reported third quarter 2013 RCAF-5 of 0.401.\4\
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    \4\ The fourth quarter 2013 RCAF-5 (0.399) is calculated by 
dividing the fourth quarter 2013 RCAF Unadjusted (0.975) by the 
fourth quarter productivity adjustment factor-5 (PAF-5) of 2.4426. 
The fourth quarter 2013 PAF-5 is calculated by multiplying the third 
quarter 2013 PAF-5 of 2.4377 by the fourth root (1.0020) of the 
2006-2010 annual average productivity growth rate of 0.8%.
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    This decision will not significantly affect the quality of the 
human environment or the conservation of energy resources.

    Authority: 49 U.S.C. 10708.

    By the Board, Chairman Elliott, Vice Chairman Begeman, and 
Commisioner Mulvey.

    Decided: September 19, 2013.
Derrick A. Gardner,
Clearance Clerk.

Appendix

                Table A--EP 290 (Sub-No. 5) (2013-4)--All Inclusive Index of Railroad Input Costs
                                          [Endnotes following Table B]
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                                                                    2012 Weight    Third quarter  Fourth quarter
           Line No.                      Index component             (percent)     2013 forecast   2013 forecast
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1.............................  LABOR...........................            31.2         390.4           385.8
2.............................  FUEL............................            22.4         375.6           399.6
3.............................  MATERIALS AND SUPPLIES..........             4.9         264.2           261.4
4.............................  EQUIPMENT RENTS.................             5.6         208.0           207.7
5.............................  DEPRECIATION....................            12.1         218.9           221.0
6.............................  INTEREST........................             1.9          92.9            73.5
7.............................  OTHER ITEMS \i\.................            21.9         221.4           220.0
8.............................  WEIGHTED AVERAGE................           100.0         307.3           310.6
9.............................  LINKED INDEX \ii\...............  ..............         294.3           297.5
10............................  PRELIMINARY RAIL COST ADJUSTMENT  ..............          98.9           100.0
                                 FACTOR \iii\.
11............................  FORECAST ERROR ADJUSTMENT \iv\..  ..............          -0.012          -0.025
12............................  RCAF (UNADJUSTED) (LINE 10 +      ..............           0.977           0.975
                                 LINE 11).
13............................  RCAF (ADJUSTED).................  ..............           0.425           0.423
14............................  RCAF-5..........................  ..............           0.401           0.399
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  Table B--EP 290 (Sub-No. 5) (2013-4)--Comparison of Second Quarter 2013 Index Calculated on Both a Forecasted
                                               and an Actual Basis
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                                                                    2011 Weight   Second quarter  Second quarter
           Line No.                      Index component             (percent)     2013 forecast    2013 actual
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1.............................  LABOR...........................            31.3           384.9           384.9

[[Page 59095]]

 
2.............................  FUEL............................            22.5           404.3           373.1
3.............................  MATERIALS AND SUPPLIES..........             5.1           261.0           261.0
4.............................  EQUIPMENT RENTS.................             5.6           206.9           207.0
5.............................  DEPRECIATION....................            11.6           219.6           218.8
6.............................  INTEREST........................             2.5            92.9            92.9
7.............................  OTHER ITEMS.....................            21.4           220.2           219.4
8.............................  WEIGHTED AVERAGE................           100.0           311.3           304.0
9.............................  LINKED INDEX....................  ..............           298.5           290.9
10............................  RAIL COST ADJUSTMENT FACTOR.....  ..............           100.3            97.8
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Endnotes:

    \i\ ``Other Items'' is a combination of Purchased Services, 
Casualties and Insurance, General and Administrative, Other Taxes, 
Loss and Damage, and Special Charges, price changes for all of which 
are measured by the Producer Price Index for Industrial Commodities 
Less Fuel and Related Products and Power.
    \ii\ Linking is necessitated by a change to the 2012 weights 
beginning in the fourth quarter of 2013. The following formula was 
used for the current quarter's index:
[GRAPHIC] [TIFF OMITTED] TN25SE13.001

    \iii\ The first quarter 2013 RCAF was rebased using the October 
1, 2012 level of 297.5 in accordance with the requirements of the 
Staggers Rail Act of 1980 (10/1/2012 = 100).
    \iv\ The fourth quarter 2013 forecast error adjustment was 
calculated as follows: (a) Second quarter 2013 RCAF using forecasted 
data equals 100.3; (b) second quarter 2013 RCAF using actual data 
equals 97.8; (c) the difference equals the forecast error (b - a) of 
-2.5. Because the actual second quarter value is less than the 
forecast value, the difference is subtracted from the Preliminary 
RCAF.

[FR Doc. 2013-23338 Filed 9-24-13; 8:45 a.m.]
BILLING CODE 4915-01-P