supporting statement - rail depreciation studies revised 7-26-13

2140-00__
July 2013

SUPPORTING STATEMENT- RAIL DEPRECIATION STUDIES

A. Justification:
1. Why the collection is necessary. The Surface Transportation Board (Board) has broad
statutory authority to provide economic regulatory oversight of railroads, addressing such
matters as rates; service; the construction, acquisition and abandonment of rail lines; carrier
mergers; and interchange of traffic among carriers (49 U.S.C. §§ 10101-11908). Under
49 U.S.C. § 11143, the Board is required to identify those classes of property for which rail
carriers may include depreciation charges under operating expenses, and the Board must also
prescribe a rate of depreciation that may be charged to those classes of property. Pursuant to the
Board’s authority under § 11145 and 49 C.F.R. Part 1201, § 4-2(b), the seven Class I (large) rail
carriers are required to submit Depreciation Studies to the Board. Using appropriate industrywide models for determining depreciation rates, these railroads submit information about their
depreciable property and propose depreciation rates for this property. The Depreciation Study
includes support for all the factors (such as average service lives, salvage ratios, and average
remaining lives) used to develop the depreciation rates. The Board reviews the information in the
railroads’ Depreciation Studies and determines the appropriate depreciation rates.
2. How the collection will be used. The Board reviews the Depreciation Studies
provided by Class I railroads and uses the information in these studies to prescribe depreciation
rates. These depreciation rate prescriptions state the period for which the depreciation rates
apply. Class I railroads apply the prescribed depreciation rates to their investment base to
determine monthly and annual depreciation expense. This expense is included in the railroads’
operating expenses, which are reported in their R-1 reports (OMB Control Number 2140-0009).
Depreciation expenses are also used by the railroads to develop Income Statements and are
included in the operating costs applied in various proceedings before the Board, such as rate
reasonableness cases and determination of railroad revenue adequacy. Railroads also use the
depreciation rates authorized by the Board in their own budgeting and preparing of appropriate
financial statements for other purposes.
3. Extent of automated information collection. The carriers email this collection to the
Board as an attachment.
4. Identification of duplication. The Board has exclusive jurisdiction over the economic
regulation of freight railroads. No other Federal agency collects the information in the rail
Depreciation Studies, nor is this information available from any other source.
5. Effects on small business. No small entities will be affected by the collection of this
information. Only Class I railroads, which have operating revenues in excess of $250 million

(1991 dollars) adjusted for inflation, are subject to this reporting requirement. The Board has
adopted an indexing methodology that will ensure that regulated carriers are classified based on
real business expansion, rather than the effects of inflation.
6. Impact of less frequent collections. Depreciation rates must be reviewed frequently to
ensure appropriateness. Depreciation Studies are collected every three years for equipment and
every six years for other depreciable property, such as track. Less frequent studies could result
in significant misstatements of operating expenses, which the Board uses to set rates that
railroads must charge when a railroad’s rate is challenged by a shipper.
7. Special circumstances. No special circumstances apply to this collection.
8. Compliance with 5 C.F.R. § 1320.8. The Board published a notice in the Federal
Register, providing a 60-day comment period regarding this collection. See 77 Fed. Reg. 44710
(7/30/12). No comments were submitted. As required, the Board also published a notice
providing a 30-day comment period, with comments to be sent to OMB. See 78 Fed. Reg. 18676
(3/27/13).
9. Payments or gifts to respondents. The Board does not provide any payment or gift to
respondents.
10. Assurance of confidentiality. The Class I carriers have been providing this
information for many years and are aware that the information provided in Depreciation Studies
is considered commercially confidential and is protected from disclosure under the Freedom of
Information Act. Only the depreciation rate prescriptions, which are set by the Board based on
this information, are made public by posting them on the Board’s website.
11. Justification for collection of sensitive information. This collection contains no
information of a personally sensitive nature.
12. Estimation of burden hours for respondents. Based on informal feedback recently
provided from a sampling of the railroad industry, we estimate a per-respondent-railroad burden
of no more than 515 hours annually and a total annual burden of 3,605 hours (515 hours X 7
Class I railroads). This estimate is based on reported burden hours of between 500 and 540
hours annually. The Board published these burden estimates in its 60-day Federal Register
notice and requested comments as to their accuracy. No comments were received.
13. Other costs to respondents. (a) Continuing this existing collection will impose no
start-up costs on respondents. (b) The cost to respondents is between $8,340 and $30,000
annually, resulting in an annual average of $20,500 and a cumulative total for all 7 Class I
railroads of $143,500.
14. Costs to Board. We estimate that annually it takes 1,728 hours (GS 14/10 hourly rate
with benefits of $81.26) to review the Depreciation Studies and prepare the depreciation rate
prescriptions based on the Depreciation Studies; 48 hours (GS 15/10 hourly rate with benefits of
$92.39) to review the depreciation rate prescriptions and the staff analysis and recommendations;

and 144 hours (GS 13/2 hourly rate with benefits of $54.66) to do a Quality Assurance review of
the depreciation rate prescriptions and the staff analysis and recommendations, resulting in a
total cost to the Board of $152,723.
15. Changes in burden hours. This is an existing collection without an OMB control
number. The Board’s predecessor agency, the Interstate Commerce Commission, began
collecting Depreciation Studies in the mid-1970s.
16. Plans for tabulation and publication. The Board does not publish the information
submitted in Depreciation Studies because this information is considered confidential. However,
the depreciation rate prescriptions, which are prepared by the Board based on information in the
Depreciation Studies, are posted on the Board’s website.
17. Display of expiration date for OMB approval. No form is used for this collection.
However, once the collection is approved, the Board will display the control number and
expiration date of the collection by publishing a special notice in the Federal Register stating the
control number and expiration date of the collection as provided in 5 C.F.R. § 1320.3(f)(3).
18. Exceptions to Certification Statement. No exceptions are sought.
B. Collections of Information Employing Statistical Methods:
Not applicable