Railroad classes

In the United States, railroad carriers are designated as Class I, II, or III, according to annual revenue criteria originally set by the Surface Transportation Board in 1992. With annual adjustments for inflation, the 2019 thresholds were US$504,803,294 for Class I carriers and US$40,384,263 for Class II carriers. (Smaller carriers were Class III by default.)

Not to be confused with Track class.

Class I railroads in North America in 2006

There are seven Class I freight railroad companies in the United States including two Canadian carriers with subsidiary trackage in the US: BNSF Railway, Canadian National Railway (via its subsidiary Grand Trunk Corporation), Canadian Pacific Railway (via its subsidiary Soo Line Corporation), CSX Transportation, Kansas City Southern Railway, Norfolk Southern Railway, and Union Pacific Railroad. (Mexico's Ferromex and Kansas City Southern de México would qualify as Class I, but do not operate within the United States.)

In addition, the national passenger railroad in the US, Amtrak, would qualify as Class I if it were a freight carrier, as would Canada's Via Rail passenger service if operating in the United States.

Background

Initially (in 1911) the Interstate Commerce Commission (ICC) classified railroads by their annual gross revenue. Class I railroads had an annual operating revenue of at least $1 million, while Class III railroad incomes were under $100,000 per annum. All such corporations were subject to reporting requirements on a quarterly or annual schedule. If a railroad slipped below its class qualification threshold for a period, it was not necessarily demoted immediately. In 1925, the ICC reported 174 Class I railroads, 282 Class II railroads, and 348 Class III railroads.

The $1 million criterion established in 1911 for a Class I railroad was used until January 1, 1956, when the figure was increased to $3 million. In 1956, the ICC counted 113 Class I line-haul operating railroads (excluding "3 class I companies in systems") and 309 Class II railroads (excluding "3 class II companies in systems"). The Class III category was dropped in 1956 but reinstated in 1978. By 1963, the number of Class I railroads had dropped to 102; cutoffs were increased to $5 million by 1965,[1] to $10 million in 1976 and to $50 million in 1978, at which point only 41 railroads qualified as Class I.

In a special move in 1979, all switching and terminal railroads were re-designated Class III — even those with Class I or Class II revenues.

In early 1991, two Class II railroads, Montana Rail Link and Wisconsin Central, asked the Interstate Commerce Commission (ICC) to increase the minimum annual operating revenue criteria (then established at US$93.5 million) to avoid being redesignated as Class I, which would have resulted in increased administrative and legal costs.[2] The Class II maximum criterion was increased in 1992 to $250 million annually, which resulted in the Florida East Coast Railway having its status changed to Class II.

The thresholds set in 1992 were:

  • Class I: A carrier earning revenue greater than $250 million
  • Class II: A carrier earning revenue between $20 million and $250 million
  • Class III: A carrier earning revenue less than $20 million

Since dissolution of the ICC in 1996, the Surface Transportation Board (STB) has become responsible for defining criteria for each railroad class. The STB continues to use designations of Class II and Class III since there are different labor regulations for the two classes. The bounds are typically redefined every several years to adjust for inflation and other factors.

Class II and Class III designations are now rarely used outside the rail transport industry. The Association of American Railroads typically divides non–Class I companies into three categories:

  • Regional railroads: operate at least 350 miles (560 km) or make at least $40 million per year.
  • Local railroads: smaller than a regional railroad, but engage in line-haul service.
  • Switching and terminal railroads: mainly switch cars between other railroads and/or provide service in a common terminal.

Classes

In the United States, the Surface Transportation Board categorizes rail carriers into Class I, Class II, and Class III based on carrier's annual revenues. The thresholds, last adjusted for inflation in 2019 are:[3]

  • Class I: A carrier earning revenue greater than $504,803,294
  • Class II: A carrier earning revenue between $40,387,772 and $504,803,294
  • Class III: A carrier earning revenue less than $40,387,772

In Canada, a Class I rail carrier is defined (as of 2004) as a company that has earned gross revenues exceeding $250 million (CAD) for each of the previous two years.[4]

Class I
Further information: List of Class I railroads

Class I railroads are the largest rail carriers in the United States. In 1900, there were 132 Class I railroads, but as the result of mergers and bankruptcies, the industry has consolidated and as of August 2021, just seven Class I freight railroads remain.

BNSF Railway and Union Pacific Railroad have a duopoly over all transcontinental freight rail lines in the Western United States, while CSX Transportation and Norfolk Southern Railway operate most of the trackage in the Eastern United States, with the Mississippi River being the rough dividing line. Canadian National Railway (via its subsidiary Grand Trunk Corporation) and Kansas City Southern Railway operate north-south lines near the Mississippi River. Canadian Pacific Railway (via its subsidiary Soo Line Corporation) has a comparatively small footprint in the Upper Midwest and Northeastern United States.

In addition, the national passenger railroads in the US and Canada —Amtrak and Via Rail— would both qualify as Class I if they were freight carriers. Similarly, Mexico's Ferromex would qualify as a Class I railroad if it had trackage in the United States.

Railroad Trackage
Canada United States Mexico
Amtrak [Note 1] Yes Yes No
BNSF Railway Yes Yes No
Canadian National Railway Yes Yes
[Note 2]		 No
Canadian Pacific Railway Yes Yes
[Note 3]		 No
CSX Transportation Yes Yes No
Ferromex No No Yes
Kansas City Southern Railway No Yes Yes
[Note 4]
Norfolk Southern Railway Yes Yes No
Union Pacific Railroad No Yes No
Via Rail [Note 1] Yes No No
  1. Meets the revenue specifications for Class I status, but is not technically a Class I railroad due to being passenger-only with no freight component.
  2. Operated by Grand Trunk Corporation, a wholly owned subsidiary of Canadian National Railway.
  3. Operated by Soo Line Corporation, a wholly owned subsidiary of Canadian Pacific Railway.
  4. Operated by Kansas City Southern de México, a wholly owned subsidiary of Kansas City Southern.

Class II
Further information: List of U.S. Class II railroads

A Class II railroad in the United States hauls freight and is mid-sized in terms of operating revenue. Switching and terminal railroads are excluded from Class II status.

Railroads considered by the Association of American Railroads as "Regional Railroads" are typically Class II. An example of a Class II would be the Florida East Coast Railway.

The Buckingham Branch Railroad is a typical example of a Class III shortline in Virginia

Class III
Further information: Shortline railroad

Class III railroads are typically local short-line railroads serving a small number of towns and industries or hauling cars for one or more railroads; often they once had been branch lines of larger railroads or even abandoned portions of main lines. Some Class III railroads are owned by railroad holding companies such as Genesee & Wyoming or Watco.

See also

References

Citations
  1. New ICC classification becomes effective Railway Age February 8, 1965 page 7
  2. Arrivals and Departures, Trains March 1991
  3. "Surface Transportation Board Economic Data". Retrieved February 17, 2021.
  4. Branch, Legislative Services (June 3, 2019). "Consolidated federal laws of canada, Transportation Information Regulations".

Sources
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