MAR 0 1 2002 B'.C.D. 02-17

Employer Status Determination

CBEC Railway Inc.

Decision on Reconsideration

This is the decision on reconsideration of the status of CBEC Railway

Inc., as an employer under the Railroad Retirement Act (45 U.S.C. § 231

et seq.) (RRA) and the Railroad Unemployment Insurance Act

(45 U.S.C. §351 et sea.) (RUIA).

PROCEDURAL BACKGROUND

In B.C.D. No. 01-05, issued on January 10, 2001, the Board held that

CBEC Railway Inc. (CBEC) became a rail carrier employer under the

RRA and the RUIA effective November 1, 1997. A timely request for

reconsideration of that decision was submitted on December 3, 2001.

DISCUSSION

In our decision dated January 10, 2001, we found that CBEC owns a rail

line and contracts for operation over that rail line by a number of

railroads. CBEC also has contracted for maintenance and repair on the

rail line. CBEC has no employees or any locomotives, railcars, or other 

physical assets. Based on these undisputed facts, the Board applied the 

three-part test first enunciated in B.C.D. No. 00-47, Employer Status

Determination Railroad Ventures Inc., Decision on Reconsideration, to

conclude that CBEC was an employer under the Acts.

The three-part test enunciated in Railroad Ventures is that an entity

that leases a line to another company or contracts with another

company to operate the line, is a carrier under the Railroad Retirement

Act unless the Board finds that all three of the following factors exist: 1)

the entity does not have as a primary business purpose to profit from

railroad activities; 2) the entity does not operate or retain the capacity

to operate the rail line; and 3) the operator of the rail line is already 

covered or would be found to be covered under the Acts administered by

the Board.

BA# 2653
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CBEC Railway Inc.

In our initial decision regarding CBEC, we concluded that there was no

evidence to support a conclusion that CBEC did not have as a primary

business purpose to profit from railroad activities. Therefore, we

concluded that CBEC was an employer under the Acts. CBEC has now

submitted evidence regarding this and the other prongs of the threepart test. In Railroad Ventures, we explained the three-part test as

follows:

1). The entity does not have as a primary business purpose to

profit from railroad activities. An entity that owns a

railroad line solely to preserve or promote passenger or

freight service would not be considered to have as its

primary business purpose to profit from railroad activities. 

The Board will make a finding regarding the primary

business purpose of the entity based upon full consideration 

of all the available facts. Factors that the Board will

consider in determining whether a primary business

purpose of an entity is to profit from railroad activities

include, but are not limited to: (1) the reasons stated in the 

STB decision for the entity’s acquisition of authority to

operate the rail line; (2) the existence of a State statute

which authorized the formation of the entity and/or 

authorizes the entity to acquire one or more rail lines for

the purpose or purposes set out in the authorizing statute;

(3) proof that the entity is considered by the Internal

Revenue Service to be a non-profit entity; (4) circumstances 

surrounding the acquisition of the line which would show

intent simply to maintain service such as a history of

unprofitability of the line acquired, potential or actual

abandonment of the line, or decrease in rail traffic over the

line; (5) whether the entity is affiliated with other carriers.
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CBEC Railway Inc.

2). The entity does not operate or retain the capacity to operate

the rail line. If another entity is the certified operator of the

rail line in question and actually conducts the railroad

service over the line, the entity that owns the line will not

be considered the operator. An entity that leases out the

rail line or grants trackage rights and easements will not be

considered to be operating the line if it does not retain

control over the day to day operations of the line.

3). The operator of the rail line is already covered or would be

found covered under the Acts administered by the Board.

Where the operator of the line is not covered and could not

be found to be covered, the Board will necessarily find the

entity owning the rail line to be covered and persons 

operating the line to be the entity’s employees.

According to the submission made in the request for reconsideration and

the affidavit submitted by Mr. Paul E. Freund, Vice President Fuel 

Trading and Transportation for MidAmerican Energy Company, a

regulated public utility that in association with two utility cooperatives,

Cornbelt Power Cooperative and Central Iowa Power Cooperative, owns

CBEC, the formation and operation of CBEC was motivated not by a

desire to profit from railroad activities but rather to obtain cheaper 

transportation costs for the coal shipped to the electrical generating

plant owned by the parents of CBEC. Analyzing the facts in this case

using the five factors set forth above in the first prong of the three-part

test, the Board notes the following facts: 1) according to the ICC

documents contained in the record, the purpose of the establishment of

CBEC was to provide for the construction of a new alternative rail line

to the electrical generating plant, thereby providing competition for the

transportation of coal; 2) a state statute that required the electrical

utilities to lower their transportation costs; 3) CBEC is a for profit entity 

for federal tax purposes; 4) according to the evidence of record, the line
CBEC Railway Inc.

was acquired solely to reduce transportation costs for the utilities that

own CBEC by providing competition for the transportation of coal to the

electrical generating plants; 5) CBEC is not affiliated with any other

railroad carrier. In addition, CBEC does not charge a fee to the 

railroads that operate over its rail line. Finally, over 95% of CBEC

revenues are derived from payments by its owners for each ton of coal

received at the generating plant. The Board concludes that given all of

the facts in this case, CBEC does not have as a primary business

purpose to profit from railroad activities.

CBEC also meets the second and third prongs of the three-part test.

Since CBEC has no employees or any locomotives, railcars, or other

physical assets, it does not operate or retain the capacity to operate the

rail line. The third prong of the test is also met, since the operators of

the rail line are covered under the Acts.

Accordingly, the Board finds that CBEC has not been a rail carrier

employer under the Railroad Retirement and Railroad Unemployment 

Insurance Acts through the date of this decision. The initial decision,

B.C.D. 01-5, is reversed.

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