B.C.D. 01-5

Employer Status Determination

CBEC Railway, Inc.

JAN 1 0 2001

This is the determination of the Railroad Retirement Board concerning the

status of CBEC Railway, Inc., as an employer under the Railroad Retirement

Act (45 U.S.C. § 231 et seq.) and the Railroad Unemployment Insurance Act (45

U.S.C. § 351 et seq.).

Information regarding CBEC was provided by Jon Andreasen, Counsel for

CBEC, and was also taken from Interstate Commerce Commission Decision

and Notice of Exemption in Finance Docket Numbers 31717 and 31718. CBEC,

a wholly-owned subsidiary of Midwest Power Systems, Inc., was incorporated

on July 18, 1990, to acquire from Iowa Southern Railroad, Inc. and operate a rail

line of approximately 3.85 miles. Construction of the line was completed in

November 1997 and railroads began using the track at that time. CBEC reports

that it has no employees.

CBEC does not own any locomotives, railcars, or other physical assets, but

owns and maintains a segment of rail trackage. CBEC has entered into

trackage rights agreements providing rights to use CBEC right-of-way with

The Burlington Northern and Santa Fe Railway Company (BA No. 1621), the

Iowa-Interstate Railroad Company (BA No. 3760). and the Great Western

Railway Company of Iowa. LLC (BA No. 3779). CBEC has retained the Great

Western Railway Company to provide certain maintenance and repair work as

needed on a time and materials basis. CBEC is a party to an Intercompany

Administrative Services Agreement with MidAmerican Energy Company in

accord with which certain administrative services may be provided to CBEC on

a fee for service basis.

Section 1(a)(1) of the Railroad Retirement Act (45 U.S.C. § 231(a)(1)), insofar as

relevant here, defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction of the

Surface Transportation Board under Part A of subtitle IV of title

49. United States Code;

Sections 1(a) and 1(b) of the Railroad Unemployment Insurance Act (45 U.S.C.

§§ 351(a) and (b)) contain a substantially similar definition, as does section 3231

of the Railroad Retirement Tax Act (26 U.S.C. § 3231).

In its decision regarding the employer status of Railroad Ventures, Inc. (B.C.D.

00-47), the Board held that an entity that has STB authority to operate a rail

BA# 2653
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CBEC Railway, Inc.

line, but leases or contracts with another to operate the line in question, is

covered under the Acts administered by the Board unless the Board

determines that the entity is not a carrier. The Board enunciated a three-part

test in B.C.D. No. 00-47 to be applied in making this determination. 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.

In this case, CBEC owns a rail line and contracts for operation over that rail

line by a number of railroads. CBEC also has arranged for maintenance and

repair work on the rail line. There is no information that would indicate the

CBEC Railway, Inc.’s intent in purchasing the line is primarily designed to

preserve rail service rather than profit from railroading activities. The

evidence of record thus indicates that CBEC has as a primary business purpose

to profit from its railroad activities. Accordingly, the Board finds that CBEC

became a rail carrier employer under the Railroad Retirement and Railroad

Unemployment Insurance Acts effective November 1, 1997, the date rail

operations began on its rail line.

V. M. Speakman, Jr.