[Federal Register Volume 87, Number 247 (Tuesday, December 27, 2022)]
[Notices]
[Pages 79413-79415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28110]


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SURFACE TRANSPORTATION BOARD

[Docket No. EP 290 Sub-No. 5; 2023-1]


Quarterly Rail Cost Adjustment Factor; Decision

    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 five-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.
    As required by statute, the denominator of the RCAF is to be 
rebased every five years. See 49 U.S.C 10708(a). The Board has verified 
AAR's proposed rebasing calculations, and they comply with the statute. 
The 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 2023 are shown in Table 
A of the Appendix to this decision. Table B shows the third quarter 
2022 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.
    AAR's calculations have been examined by the Board's Office of 
Economics, and the Board finds that AAR has complied with agency 
procedures. The Board finds that the first quarter 2023 RCAF 
(Unadjusted) is 1.010, an increase of 1.0% from the fourth quarter 2022 
RCAF (Unadjusted) of 1.000. 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 2016-2020, which is 
1.025 (2.5% per year). The first quarter 2023 RCAF (Adjusted) is 0.408, 
an increase of 0.2% from the fourth quarter 2022 RCAF (Adjusted) of 
0.407.\1\
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    \1\ The first quarter 2023 RCAF Adjusted (0.408) is calculated 
by dividing the first quarter 2023 RCAF Unadjusted (1.010) by the 
first quarter productivity adjustment factor (PAF) of 2.4740. The 
first quarter 2023 PAF is calculated by multiplying the fourth 
quarter 2022 productivity adjustment of 2.4588 by the fourth root 
(1.0062) of the 2016-2020 annual average productivity growth rate of 
2.5%.
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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 2016-2020, which is 1.025 (2.5% per year). The 
RCAF-5 for the first quarter of 2023 is 0.390, an increase of

[[Page 79414]]

0.3% from the fourth quarter 2022 RCAF-5 of 0.389.\2\
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    \2\ The first quarter 2023 RCAF-5 (0.390) is calculated by 
dividing the first quarter 2023 RCAF Unadjusted (1.010) by the first 
quarter productivity adjustment factor-5 (PAF-5) of 2.5898. The 
first quarter 2023 PAF-5 is calculated by multiplying the fourth 
quarter 2022 PAF-5 of 2.5738 by the fourth root (1.0062) of the 
2016-2020 annual average productivity growth rate of 2.5%.
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    This action is categorically excluded from environmental review 
under 49 CFR 1105.6(c).
    Authority: 49 U.S.C. 10708.
    It is ordered:
    1. The Board finds that the first quarter 2023 RCAF (Unadjusted) is 
1.010, RCAF (Adjusted) is 0.408, and RCAF-5 is 0.390.
    2. Notice of this decision will be published in the Federal 
Register.
    3. The effective date of this decision is January 1, 2023.

    Decided: December 20, 2022.

    By the Board, Fuchs, Hedlund, Oberman, Primus, and Schultz.
Kenyatta Clay,
Clearance Clerk.

                Table A--EP 290 (Sub-No. 5) (2023-1) All Inclusive Index of Railroad Input Costs
                                          [Endnotes following Table C]
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                                                                                      Fourth
            Line No.                      Index component          2021 Weights    quarter 2022   First  quarter
                                                                     (percent)       forecast     2023  forecast
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1...............................  LABOR.........................            31.4           479.6           546.0
2...............................  FUEL..........................            14.2           475.2           467.1
3...............................  MATERIALS AND SUPPLIES........             4.5           335.3           328.9
4...............................  EQUIPMENT RENTS...............             4.9           253.8           250.1
5...............................  DEPRECIATION..................            17.5           233.3           234.8
6...............................  INTEREST......................             2.4            50.1            50.1
7...............................  OTHER ITEMS \1\...............            25.1           290.6           280.0
8...............................  WEIGHTED AVERAGE..............           100.0           360.6           377.4
9...............................  LINKED INDEX \2\..............  ..............           331.3           346.7
10..............................  PRELIMINARY RAIL COST           ..............            96.8           101.3
                                   ADJUSTMENT FACTOR \3\.
11..............................  FORECAST ERROR ADJUSTMENT \4\.  ..............           0.032          -0.003
12..............................  RCAF (UNADJUSTED) (LINE 10 +    ..............           1.000           1.010
                                   LINE 11).
13..............................  RCAF (ADJUSTED)...............  ..............           0.407           0.408
14..............................  RCAF-5........................  ..............           0.389           0.390
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                   Table B--EP 290 (Sub-No. 5) (2023-1) Comparison of Third Quarter 2022 Index
                              [Calculated on both a forecasted and an actual basis]
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                                                                   2020 Weights   Third  quarter  Third  quarter
               Line No.                      Index component            (%)       2022  forecast   2022  actual
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1.....................................  LABOR...................            32.4           472.4           472.4
2.....................................  FUEL....................             9.7           459.6           484.4
3.....................................  MATERIALS AND SUPPLIES..             4.5           305.0           305.0
4.....................................  EQUIPMENT RENTS.........             5.2           256.0           251.4
5.....................................  DEPRECIATION............            18.5           233.2           233.7
6.....................................  INTEREST................             2.7            51.1            51.1
7.....................................  OTHER ITEMS.............            27.0           302.4           289.7
8.....................................  WEIGHTED AVERAGE........           100.0           350.8           349.7
9.....................................  LINKED INDEX............  ..............           328.7           327.7
10....................................  RAIL COST ADJUSTMENT      ..............            96.0            95.7
                                         FACTOR.
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Table C--Rebasing the Denominator of the RCAF to the Fourth Quarter 2022
                                  Level
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1...........................  Fourth Quarter 2022 Linked           331.3
                               Index.
2...........................  Second Quarter 2022 Linked           324.8
                               Index Calculated Using
                               Actual Data.
3...........................  Second Quarter 2022 Linked           313.8
                               Index Calculated Using
                               Forecasted Data.
4...........................  Difference................            11.0
5...........................  Rounding Adjustment to                 0.0
                               Force 1.000.
6...........................  Fourth Quarter 2022 Linked           342.3
                               Index Adjusted for Second
                               Quarter 2022 Forecast
                               Error (Line 1 plus Line 4
                               plus Line 5).
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Endnotes:

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[GRAPHIC] [TIFF OMITTED] TN27DE22.035

[FR Doc. 2022-28110 Filed 12-23-22; 8:45 am]
BILLING CODE 4915-01-P