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STB proposes new rules for rail service data reporting, cost of capital methodology

The Surface Transportation Board (STB) on Sept. 30 announced two proposed rulemakings, one affecting the reporting of rail service data and the other relating to the agency's methodology for determining the rail industry's cost of capital. The board proposed amending its railroad performance data reporting rules to include chemical and plastics traffic as a distinct reporting category to the Class Is' weekly reporting of the "cars-held" metric. That metric tracks the average number of loaded and empty rail cars that have not moved for at least 48 hours. Class Is are required to regularly report certain railroad service metrics, which are publicly available on the STB's website. The board uses the data to monitor service conditions on the freight-rail network. The data also gives shippers, railroads and other stakeholders insight for making commercial and logistics decisions, STB officials said in a press release. The STB's decision to propose the rulemaking grants, in part, a petition by the American Chemistry Council, they said. STB members believe that reporting chemical and plastics traffic data would help the board and stakeholders to better detect and mitigate emerging service issues affecting chemicals and plastics shipments, they added. Comments on the proposed rule are due Dec. 6, with replies due Jan. 6, 2020. The second proposed rule would incorporate an additional model, called "Step MSDCF," into the STB's calculation of the rail industry's cost of capital. Each year, the STB determines that figure, which the board calculates as the weighted average of the cost of debt and the cost of equity. The figure is used in a variety of regulatory proceedings, according to STB officials. Currently, the board's method to determine the cost-of-equity component of the industry's cost of capital relies on two models: Morningstar/Ibbotson Multi-Stage Discounted Cash Flow Model and the Capital Asset Pricing Model. The STB's proposed rulemaking calls for adding the Step MSDCF model, which when used in combination with the current two models, would "enhance the robustness of the resulting cost-of-equity estimate during periods — like the present one — in which certain railroads are undertaking significant operational changes," agency officials said. Comments on that proposed rulemaking are due Nov. 5, with replies due Dec. 4.