Glossary of Terms

A railroad customer’s physical ability to place freight on a railroad; also a rail customer’s ability to receive “service” from a railroad. (See also “commercial access,” “open access” and “terminal access” below.)

The “captive” portion of an otherwise competitive rail movement.

When a “captive” rail customer creates “rail-to-rail competition” by building a new rail line out to a second railroad.  A “build-in” occurs when a railroad builds a new line to reach one or more rail customers that are captive to another railroad.

When railroad serves a customer at multiple locations, with at least one location “captive,” the railroad sometimes quotes very high rates at the captive location.  Then, the railroad may offer to reduce the rate at the captive location if the customer will also contract with the railroad at its competitive locations at higher than market rates.

Captive Rail Customer
A rail customer who has no competitive transportation alternative to a single railroad serving its location.  A rail customer may be captive at the facility where traffic originates (for example, a mine that ships coal to an electric generating plant), or at the destination where traffic terminates (the plant that burns the coal), or both or on a segment in-between.  Captivity may exist over an entire rail route or only over a “bottleneck” portion.  A rail customer that is physically served by only one railroad would not be considered captive if it has access to effective transportation other than rail.

Class I Railroad
A railroad with at least $250 million in operating revenue in 1991 dollars.  Affiliated railroads may report separately but be operated as a single “system” under common control.  The seven Class I railroads in 2006 are:

  • Burlington Northern Santa Fe Railway(BNSF)
  • CSX Railway
  • Canadian National Railway (CN)
  • Kansas City Southern Railway (KCS)
  • Norfolk Southern Railway(NS)
  • Canadian Pacific Railway (CP)
  • Union Pacific Railroad (UP)

The four “major” Class I railroads are BNSF, CSX, NS and UP and handle more than 95 percent of the nation’s traffic.

Commercial Access
Access by the railroad that owns the tracks serving the rail customer’s facility, as well as by any other railroad that can effectively provide service through arrangements, such as:

  • a neutral short-line, switching or terminal railroad
  • reciprocal switching agreements
  • haulage agreements
  • trackage rights

“Commercial access” requires real competition for the rail customer’s traffic without undue control by the railroad that owns the tracks serving the rail customer’s facility. For example, there is no effective commercial access if the track-owning railroad precludes or frustrates competition by canceling reciprocal switching agreements, providing discriminatory and inferior service to haulage customers, charging excessive rates for trackage rights, and other such anti-competitive conduct.

Competitive Traffic
Shipments between origins and destinations that can be served by more than one railroad.

Confidential Rates
Rail rates established by contracts containing a confidentiality provision.  Most rail transportation contracts contain confidential rates.

The rail customer’s total cost for rail transportation, including:

  • Rates the rail customer pays to railroads
  • Minus allowances received for private car mileage, volume discounts, etc.
  • Plus all of the rail customer’s other rail-related expenses, such as supplying private rail cars (purchase or lease, plus maintenance and fleet management), demurrage charges or other penalties,  construction and maintenance of rail customer-owned rail track, loading/unloading facilities, fuel surcharges and other such costs.

Costed Waybill File
An annual compilation by the Surface Transportation Board of confidential revenue and cost data relating to a sample of rail traffic based on terminating shipments on carriers that terminate more than 4,500 carloads annually.  The data contained in the Costed Waybill File is available only by permission of STB under strict confidentiality requirements.  Data from the Costed Waybill File can be publicly disclosed only if STB determines that the data is sufficiently aggregated to protect the confidentiality of the reporting railroads.

A charge levied by railroads for the use or retention of railcars, generally beyond a minimum “free time” for which there is no charge.
Department Of Transportation (“DOT”)
Primary federal agency dealing with transportation issues (see “Surface Transportation Board” and “Federal Railroad Administration”).

Emergency Service Order (“ESO”)
STB order directing railroad(s) to provide service under emergency circumstances.  The maximum duration of an ESO is 270 days.

A rulemaking by the STB that eliminated “product” and “geographic” competition from the “market dominance” guidelines in rate cases.

Expense Per Gross Ton Mile
A measurement of the cost to a railroad of moving one gross ton of cargo and equipment over a mile of track.

Federal Railroad Administration (“FRA”)
DOT agency that deals with rail safety and other rail industry issues other than economic regulatory issues.

An interchange point between railroads.

Geographic Competition
Constraints on rail pricing stemming from the ability of a rail customer or receiver to source the product to which the rate applies from another location, or ship it to another destination.

When one railroad carries traffic on its own line for the account of another railroad.  The second railroad pays a fee to obtain commercial access to the rail customer’s traffic, but does not operate its own trains on the first railroad’s tracks, which is the primary distinction between “haulage” and “trackage rights.”

Interchanging Traffic
Shipments that pass from one railroad system to another railroad system through an interchange point.

Intermodal Competition
Competition between rail carriers and other modes of transportation (e.g., truck, water carriage, or pipeline) of a particular product between the same origin and destination.

Interstate Commerce Commission (“ICC”)
Agency established in 1887 to regulate railroads.  Congress sunset the ICC in 1995 under the Interstate Commerce Commission Termination Act (see “ICCTA” below).  The STB continued the rules, policies and precedents of the ICC, except as changed by the ICCTA.

Intramodal Competition
Competition between two or more railroads between the same origin and destination.

ICCTA (“Interstate Commerce Commission Termination Act “)
1995 federal law that sunset the ICC and created the STB at the beginning of 1996.

Line-Haul Railroad
A railroad that performs “line-haul” service between cities or between terminal areas (generally a Class I or regional railroad).

Market Dominance
The absence of effective competition from other rail carriers or modes of transportation for the transportation to which a rate applies.  The STB must find that a rail carrier is market dominant on traffic subject to a rate protest before it has jurisdiction to consider whether the rate at issue is unreasonable.

Mileage Allowance
An allowance or credit paid by a railroad to the owner of a railcar for the use of that railcar on the railroad system.

Not controlled by another railroad.  Some switching or terminal railroads are jointly owned by line-haul railroads but are operated in a neutral manner.

One-To-One Rail Customer
In the context of a rail merger, a rail customer that is already “captive” to one of the two railroads that have applied to merge (see “two-to-one rail customer”).  The STB considers that a merger of two major railroads cannot harm a customer that is already served by a single railroad.

Open Access
Allowing any railroad to have access to a rail customer’s facility (also called “forced access”).

Originating Traffic
Shipments that start on a particular railroad’s system.

Prescribed Rates
Rail rates prescribed by the STB upon a finding that the railroad is market dominant on the challenged routes and the challenged rates are unreasonably high.

Product Competition
Constraints on rail pricing that arise when a receiver or rail customer can use a substitute for the product covered by the rail rate.

Public Use Waybill File
A database comparable to the Costed Waybill File, except that it contains no cost information and the origins and destinations are aggregated by areas rather than individual points.  This database is not confidential and is made available for public use by the STB.

Rail-To-Rail Competition
“Intramodal” competition between railroads.

Rail Transportation Policy
Fifteen factors and objectives prescribed by federal law to be considered by the STB in regulating the commercial aspects of the rail industry.

The price a rail customer pays to the railroad for transportation service (often only part of the rail customer’s overall “cost” of rail transportation).

RCAF-A Index
The Rail Cost Adjustment Factor-Adjusted Index calculated by the STB to measure changes in the cost of providing rail service over time, but which is adjusted to reflect changes in rail productivity.

RCAF-U Index
The Rail Cost Adjustment Factor-Unadjusted Index calculated by the STB to measure only changes in the price of materials and services purchased by railroads over time.

Reciprocal Switching
Transferring traffic between railroads at an interchange point under a tariff or other agreement.

Regional Railroad
A railroad with operating revenue below the Class I threshold that is larger than a short-line railroad (generally operating several hundred miles of rail line).

Damages recoverable in a rate proceeding at the STB, including the difference between the challenged rail rate and the STB-prescribed rail rate, and applicable interest.

Revenue-To-Variable Cost (“R/VC”) Ratio
The revenue earned on a specific rail movement divided by the variable cost of providing the service.  Variable cost, sometimes called direct cost, includes the cost of fuel, labor and a portion of the locomotives and rail cars used in the movement, but not the cost of track and right-of-way, railroad overhead and other such costs.  This ratio is a commonly used measure of the profitability of railroad traffic and is used to determine if a “captive” rate is high enough to be jurisdictional to the STB for a rate reasonableness case.

In the context of rail competitiveness, synonymous with “access” and not relating to the quality of the service that the rail customer receives.

Shared Assets Areas (“SAA”)
Certain areas previously “captive” to Conrail, where NS and CSX created competition between each other (Detroit, Northern NJ, and Southern NJ/Philadelphia).

A small railroad with fewer track miles than a “regional” railroad.  A short-line may be “neutral” or independent, owned by a larger railroad, a rail customer, a government agency, or controlled by a major railroad through a “paper barrier.”

Small Railroads
Operating revenue between $20 million and $250 million (Class II) or less than $20 million (Class III) in terms of 1991 dollars (see “Class I railroads”).

Staggers Rail Act
1980 federal legislation that deregulated competitive activities of the major railroads and directed the ICC, now the STB, to protect rail customers without access to transportation competition.

Stand-Alone Cost (“SAC”) Analysis
The rate standard used by the STB to calculate the maximum rate a hypothetical efficient railroad would charge on a challenged rail movement.

Stand-Alone Cost (“SAC”) Rate
The maximum rate, as determined by SAC analysis, that a monopoly railroad can charge to serve a captive rail customer.

Standard Transportation Commodity Code (“STCC”)
A commodity classification code generally used in the rail industry to describe similar types of commodities.

STB Jurisdictional Threshold
Minimum “R/VC” ratio at which the STB has jurisdiction to review rail rates.  The threshold is set by law at 180 percent.  The STB has no jurisdiction over rail rates with R/VC ratios of less than 180 percent.  In a rate case, the STB can not reduce a rail below a level that yields an R/VC ratio of 180 percent — even if the rail customer proves the SAC rate would be below 180 percent R/VC.

Surface Transportation Board (“STB”)
Three-member federal agency that regulates the commercial aspects of the rail industry (see also “Interstate Commerce Commission”). The STB deals with issues including rates, service, mergers, construction of new lines, and abandonment of tracks.  The STB is part of the DOT for administrative purposes, but the STB’s decisions are not subject to review by the DOT.

The process by which a rail car is moved onto or off of a railroad that provides line-haul service.  Switching is roughly comparable to pick-up and delivery.  Switching fees may be “absorbed” by the line-haul railroad that carries the traffic or paid separately by the rail customer.

Switching or Terminal Railroad
A small railroad that provides pick-up and delivery to rail customers and/or makes up trains for line-haul railroads in a terminal area.

Tariff Rates
Non-contract rail rates unilaterally established by a railroad.  Only tariff rates may be reviewed for reasonableness by the STB.

Terminating Traffic
Shipments that end on a particular railroad’s system.

Terminal Access
The right of a captive rail customer (or its carrier) to obtain in a terminal area competitive service from another railroad through trackage rights or reciprocal switching.  Under either form of terminal access, compensation is provided to the railroad that owns the tracks into the captive rail customer’s facility.

Terminal Area
An area, usually in an industrial area, where a railroad owns and operates all track facilities.   Through terminal agreements, other railroads can operate over these tracks either directly or through a terminal area railroad.

Trackage Rights
Permission for a railroad to run its trains over the tracks of another railroad.  The railroad that owns the tracks (the “landlord”) is entitled to compensation from the railroad that uses the tracks (the “tenant”).  Railroads agree to trackage rights for mutual convenience, often to improve operating efficiency.  In addition, trackage rights have been imposed as conditions in rail mergers.  For example, in a merger between the only two railroads with access to a “two-to-one” rail customer, another railroad is sometimes granted trackage rights (or haulage rights) to maintain the pre-merger level of competition.  With “overhead” or “bridge” trackage rights, the tenant railroad can travel across the landlord’s line, but has no commercial access to the rail customers at points along that line.  The STB does not order trackage rights simply to create competition, except in a merger case.

Trainload-Type Movement (Unit Trains)
Trainload-type movements (unit trains) involve the shipment of groups of 50 or more railcars moving together generally from a single origin to a single destination or interchange point.

The use of more than one mode of transportation to ship goods or commodities from an origin to a destination.  In a truck/rail transload, the shipment is initially loaded on a truck, taken to a rail depot, loaded on a railcar, and transported to destination by rail.

Two-To-One Rail Customer
In the context of a rail merger, a rail customer that is served by two railroads that have applied to merge (also used for “two-to-one points” and “two-to-one routes”).

Variable Costs
Costs that vary in direct proportion to an increase or decrease in traffic levels.  The level of long-run variable costs as developed by the STB’s Uniform Rail Costing System (URCS) procedures fall into three general cost areas: (1) variable operating expenses; (2) depreciation, rents and leases; and (3) return on investment in both road and equipment property.  For variable costs, return is calculated at the railroad’s current cost capital level as determined by the STB in its Annual Cost of Capital Proceedings.

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