[Federal Register Volume 78, Number 248 (Thursday, December 26, 2013)]
[Notices]
[Pages 78508-78512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30821]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[Docket No. EP 290 (Sub-No. 5) (2014-1)]


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 first quarter 2014 rail cost 
adjustment factor (RCAF) and cost index filed by the Association of 
American Railroads. The first quarter 2014 RCAF (Unadjusted) is 0.980. 
The first quarter 2014 RCAF (Adjusted) is 0.424. The first quarter 2014 
RCAF-5 is 0.400.

DATES: Effective Date: January 1, 2014.

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

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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 five-year moving average 
had been applied consistently from the productivity adjustment's 
inception in 1989.
    In EP 290 (Sub No. 5) (2013-1), served December 20, 2012, the Board 
noted that AAR's proposed rebasing calculations were verified, and 
complied with the statute. Because the revisions calculated by AAR 
affected the fourth quarter 2012 basing factor, this decision contains 
the revised 2012 fourth quarter basing factor, from 297.5 to 297.6. The 
revised rebasing calculations are shown in Table C of the Appendix.
    The index of railroad input prices, RCAF (Unadjusted), RCAF 
(Adjusted), and RCAF-5 for the first quarter of 2014 are shown in Table 
A of the Appendix to this decision. Table B shows the restated third 
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.
    We have examined AAR's calculations and we find that AAR has 
complied with our procedures, as well as the Board's November 27, 2013 
decision directing AAR to restate the 2011, 2012, and 2013 RCAFs using 
BNSF Railway Company's (BNSF) and Union Pacific Railroad Company's (UP) 
revised R-1 reports. The restated RCAFs for the fourth quarter of 2011 
through the fourth quarter of 2013 were recalculated as if AAR had made 
the revisions in 2013 for the original filings.\1\ We find that the 
first quarter 2014 RCAF (Unadjusted) is 0.980, an increase of 0.5% from 
the restated fourth quarter 2013 RCAF of 0.975. The RCAF (Adjusted) is 
calculated, in part, using the RCAF (Unadjusted) and a five-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 that the RCAF 
(Adjusted) is 0.424, an increase of 0.2% from the restated fourth 
quarter 2013 RCAF (Adjusted) of 0.423.\2\
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    \1\ See Table D.
    \2\ The first quarter 2014 RCAF Adjusted (0.424) is calculated 
by dividing the first quarter 2014 RCAF Unadjusted (0.980) by the 
first quarter productivity adjustment factor of 2.3110. The first 
quarter 2014 productivity adjustment factor is calculated by 
multiplying the fourth quarter 2013 productivity adjustment of 
2.3059 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 2007-2011, which is 1.009 (0.9% per year). We find 
that the RCAF-5 for the first quarter of 2014 is 0.400, an increase of 
0.3% from the restated fourth quarter 2013 RCAF-5 of 0.399.\3\
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    \3\ The first quarter 2014 RCAF-5 (0.400) is calculated by 
dividing the first quarter 2014 RCAF Unadjusted (0.980) by the first 
quarter productivity adjustment factor-5 (PAF-5) of 2.4480. The 
first quarter 2014 PAF-5 is calculated by multiplying the fourth 
quarter 2013 PAF-5 of 2.4426 by the fourth root (1.0022) of the 
2007-2011 annual average productivity growth rate of 0.9%.
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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.

    Decided: December 19, 2013.

    By the Board, Chairman Elliott, Vice Chairman Begeman, and 
Commissioner Mulvey.
Jeffrey Herzig,
Clearance Clerk.

Appendix

              Table A--EP 290 (Sub-No. 5) (2014-1) All Inclusive Index of Railroad Input Costs \1\
                                          [Endnotes following Table D]
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                                                                                           Fourth       First
                                                                               2012       quarter      quarter
            Line No.                          Index component              Weights (in      2013         2014
                                                                             percent)     forecast     forecast
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1...............................  LABOR..................................         31.3        387.1        386.2
2...............................  FUEL...................................         22.4        399.6        377.9
3...............................  MATERIALS AND SUPPLIES.................          4.9        261.4        265.9
4...............................  EQUIPMENT RENTS........................          5.6        207.7        208.7
5...............................  DEPRECIATION...........................         11.9        221.0        217.8
6...............................  INTEREST...............................          2.0         76.6         76.6
7...............................  OTHER ITEMS \2\........................         21.9        220.0        220.5
8...............................  WEIGHTED AVERAGE.......................        100.0        311.1        306.0
9...............................  LINKED INDEX \3\.......................  ...........        297.8        292.9
10..............................  PRELIMINARY RAIL COST ADJUSTMENT FACTOR  ...........        100.1         98.4
                                   \4\.
11..............................  FORECAST ERROR ADJUSTMENT \5\..........  ...........       -0.026       -0.004
12..............................  RCAF (UNADJUSTED) (LINE 10 +LINE 11)...  ...........        0.975        0.980
13..............................  RCAF (ADJUSTED)........................  ...........        0.423        0.424
14..............................  RCAF-5.................................  ...........        0.399        0.400
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[[Page 78510]]


 Table B--EP 290 (Sub-No. 5) (2014-1) Comparison of Third Quarter 2013 Index Calculated on Both a Forecasted and
                                               an Actual Basis\6\
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                                                                                           Third
                                                                           2011 weight    quarter       Third
             Line No.                          Index component                 (in          2013       quarter
                                                                             percent)     forecast   2013 actual
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1.................................  LABOR................................         31.4        391.3        391.3
2.................................  FUEL.................................         22.6        375.6        376.0
3.................................  MATERIALS AND SUPPLIES...............          5.1        264.2        264.2
4.................................  EQUIPMENT RENTS......................          5.6        208.0        207.6
5.................................  DEPRECIATION.........................         11.5        218.9        217.8
6.................................  INTEREST.............................          2.3         87.3         87.3
7.................................  OTHER ITEMS..........................         21.5        221.4        218.8
8.................................  WEIGHTED AVERAGE.....................        100.0        307.7        307.0
9.................................  LINKED INDEX.........................  ...........        294.4        293.1
10................................  RAIL COST ADJUSTMENT FACTOR..........  ...........         98.9         98.5
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Table C--Rebasing the Denominator of the RCAF to the Fourth Quarter 2012
                           Level (Restated)\7\
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1.......................  Fourth Quarter 2012 Linked               299.1
                           Index.
2.......................  Second Quarter 2012 Linked               295.5
                           Index Calculated Using Actual
                           Data.
3.......................  Second Quarter 2012 Linked               297.0
                           Index Calculated Using
                           forecasted Data.
4.......................  Difference....................            -1.5
5.......................  Rounding adjustment to force               0.0
                           1.000.
6.......................  Fourth Quarter 2012 Linked               297.6
                           Index Adjusted for Second
                           Quarter 2012 Forecast Error
                           (Line 1 plus Line 4 plus Line
                           5).
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[FR Doc. 2013-30821 Filed 12-24-13; 8:45 am]
BILLING CODE 4915-01-P