WASHINGTON –Three Class I railroads, the BNSF Railway Co., the Norfolk Southern Railway Co., and the Soo Line Railroad Co. (a subsidiary of Canadian Pacific Railway Co., were revenue adequate for 2006. All other Class I freight railroads were found to be revenue inadequate for that year.
The Surface Transportation Board made its determinations of revenue adequacy for the seven Class I freight railroads (the Nation’s largest) for 2006.
A railroad is considered to be revenue adequate if it achieves a rate of return on net investment (ROI) equal to at least
the current cost of capital (i.e., the cost of borrowing) for that railroad. Congress directed the Board to conduct such revenue adequacy determinations on an annual basis.
In its April 15, 2008, decision in the Board proceeding entitled Railroad Cost of Capital, the agency determined that the 2006 rail industry cost of capital was 9.94 percent.
By comparing that figure to 2006 ROI data filed with the agency by the Class I railroads in their Annual Report R-1 Schedule 250 filings, the Board made revenue adequacy calculations for each railroad operating as of Dec. 31, 2006.
