Federal Register / Vol. 82, No. 205 / Wednesday, October 25, 2017 / Rules and Regulations 49295 

1The cost of capital is calculated as the weighted 

average of the cost of debt and the cost of equity, 

with the weights determined by the railroad 

industry’s capital structure (the fraction of capital 

from debt or equity on a market-value basis). See 

Methodology to be Employed in Determining R.R. 

Indus.’s Cost of Capital, EP 664, slip op. at 6 (STB 

served Jan. 17, 2008). 

2A company is considered to be primarily in the 

railroad business if at least 50% of its total assets 

are devoted to railroad operations. R.R. Cost of 

Capital—1984, 1 I.C.C.2d at 1003–04. 

3 In the Board’s cost of capital calculation for 

2016, the Board waived its requirement that a 

company’s stock be listed on either the NYSE or the 

AMEX, noting that CSX Corporation transferred its 

stock exchange listing from the NYSE to the 

NASDAQ in 2015. R.R. Cost of Capital—2016, EP 

558 (Sub-No. 20), slip op. at 2 n.4 (STB served Aug. 

7, 2017). 

(3) ASTM D5582–14, Standard Test 

Method for Determining Formaldehyde 

Levels from Wood Products Using a 

Desiccator, Approved-August 1, 2014, 

IBR approved for § 770.20(b). 

(4) ASTM D6007–14, Standard Test 

Method for Determining Formaldehyde 

Concentrations in Air from Wood 

Products Using a Small-Scale Chamber, 

Approved October 1, 2014, IBR 

approved for §§ 770.3, 770.7(a) through 

(c), 770.15(c), 770.17(a), 770.18(a), and 

770.20(b) through (d). 

(5) ASTM E1333–14, Standard Test 

Method for Determining Formaldehyde 

Concentrations in Air and Emission 

Rates from Wood Products Using a 

Large Chamber, Approved October 1, 

2014, IBR approved for §§ 770.3, 

770.7(a) through (c), 770.10(b), 

770.15(c), 770.17(a), 770.18(a), and 

770.20(c) and (d). 

(c) * * * 

(1) BS EN ISO 12460–3:2015 E, Woodbased panels.—Determination of 

formaldehyde release—Part 3: Gas 

analysis method, November 2015, IBR 

approved for § 770.20(b). 

(2) BS EN ISO 12460–5:2015 E, Wood 

based panels.—Determination of 

formaldehyde release—Part 5: 

Extraction method (called the perforator 

method), December 2015, IBR approved 

for § 770.20(b). 

* * * * * 

(f) * * * 

(1) JIS A 1460:2015(E), Determination 

of the emission of formaldehyde from 

building boards—Desiccator method, 

First English edition, published 2015– 

10, IBR approved for § 770.20(b). 

* * * * * 

(g) * * * 

(1) PS 1–09, Structural Plywood, May 

2010, IBR approved for §§ 770.1(c) and 

770.3. 

(2) PS 2–10, Performance Standard for 

Wood-Based Structural-Use Panels, June 

2011, IBR approved for §§ 770.1(c) and 

770.3. 

[FR Doc. 2017–23062 Filed 10–24–17; 8:45 am] 

BILLING CODE 6560–50–P 

SURFACE TRANSPORTATION BOARD 

49 CFR Chapter X 

[Docket No. EP 664 (Sub-No. 3)] 

Revisions to the Cost-of-Capital 

Composite Railroad Criteria 

AGENCY: Surface Transportation Board. 

ACTION: Final Action. 

SUMMARY: The Surface Transportation 

Board (STB or Board) is adopting a final 

action to update one of the screening 

criteria used to create the ‘‘composite 

railroad’’ for the Board’s annual cost-ofcapital determination. This final action 

requires a company’s stock to be listed 

on either the New York Stock Exchange 

(NYSE) or the Nasdaq Stock Market 

(NASDAQ), rather than on either the 

NYSE or American Stock Exchange 

(AMEX), as the AMEX no longer exists. 

DATES: This action is applicable on 

November 24, 2017. 

FOR FURTHER INFORMATION CONTACT: 

Amy C. Ziehm, (202) 245–0391. 

Assistance for the hearing impaired is 

available through the Federal 

Information Relay Service (FIRS) at 

(800) 877–8339. 

SUPPLEMENTARY INFORMATION: As one of 

its regulatory responsibilities, the Board 

determines annually the railroad 

industry’s cost of capital.1 The cost-ofcapital figure represents the Board’s 

estimate of the average rate of return 

needed to persuade investors to provide 

capital to the freight rail industry. The 

cost-of-capital determination is one 

component used in evaluating the 

adequacy of railroad revenues each year 

under the procedures and standards 

mandated by Congress in the Railroad 

Revitalization and Regulatory Reform 

Act of 1976, Public Law 94–210, 90 Stat. 

31 (1976) and promulgated in Standards 

for Railroad Revenue Adequacy, 364 

I.C.C. 803 (1981), modified, 3 I.C.C.2d 

261 (1986), aff’d sub nom. Consol. Rail 

Corp. v. United States, 855 F.2d 78 (3d 

Cir. 1988). The cost-of-capital finding is 

also an essential component of many 

other Board regulatory proceedings. 

The Board determines the railroad 

industry’s cost of capital for a 

‘‘composite railroad,’’ which is based on 

data from a sample of railroads. 

Pursuant to Railroad Cost of Capital— 

1984, 1 I.C.C.2d 989 (1985), the sample 

includes all railroads that meet the 

following criteria: 

—The company is a Class I line-haul 

railroad; 

—If the Class I railroad is controlled by 

another company, the controlling 

company is primarily a railroad 

company and is not already included 

in the study frame; 2

—The company’s bonds are rated at 

least BBB by Standard & Poor’s and 

Baa by Moody’s; 

—The company’s stock is listed on 

either the NYSE or the AMEX; and 

—The company has paid dividends 

throughout the review year. 

1 I.C.C.2d at 1003–04; see also R.R. Cost 

of Capital—2015, EP 558 (Sub-No. 19), 

slip op. at 3 (STB served Aug. 5, 2016). 

On April 18, 2017, the Board issued 

a Notice of Proposed Rulemaking 

(NPRM) that proposed to update the 

fourth screening criterion used to create 

the ‘‘composite railroad’’ for the Board’s 

annual cost-of-capital determination. 

Specifically, the Board proposed that its 

fourth screening criterion be modified to 

require a company’s stock to be listed 

on either the NYSE or the NASDAQ, 

rather than on either the NYSE or 

AMEX, as the AMEX is no longer in 

existence. See NPRM, slip op. at 1–2. 

The Board sought comments on the 

NPRM by May 18, 2017, and replies by 

June 19, 2017. The Board received 

comments on the proposed action from 

the Association of American Railroads 

(AAR) and the Western Coal Traffic 

League (WCTL). No reply comments 

were filed. After consideration of the 

comments received, the Board is 

adopting the changes proposed in the 

NPRM as a final action. 

Comments 

In its comments, AAR states that it is 

supportive of the Board’s proposal to 

update the ‘‘composite railroad’’ 

screening criteria to better reflect the 

current state of the marketplace. (AAR 

Comment 2.) AAR requests that the 

Board move expeditiously to adopt the 

proposal and prohibit any party from 

expanding the scope of this proceeding 

by offering proposals that would 

‘‘manipulate’’ the cost-of-capital 

process. (Id.) 

WCTL generally supports the Board’s 

proposal and states that expanding the 

screening criteria to include NASDAQlisted companies, i.e., CSX Corporation 

(CSX),3 would result in a larger 

composite sample. (WCTL Comment 1– 

2.) WCTL, however, argues that the 

‘‘composite railroad’’ sample is still 

rather small, consisting of just four 

companies—CSX; Kansas City Southern 

Corporation (KCS); Norfolk Southern 

Corporation (NSC); and Union Pacific 

Corporation (UPC)—that have 


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49296 Federal Register / Vol. 82, No. 205 / Wednesday, October 25, 2017 / Rules and Regulations 

4WCTL’s figures appear to be percentages of the 

total market capitalization of the railroad industry. 

significant differences. (Id. at 2.) WCTL 

also notes that the composite sample 

omits BNSF Railway Company 

(BNSF)—which, it asserts, is by some 

measures the largest railroad in the 

United States—because BNSF 

constitutes less than 50% of the assets 

of its parent company, Berkshire 

Hathaway. (Id.) According to WCTL, by 

including CSX in the composite sample 

(but omitting BNSF), the industry 

average cost of capital reflects roughly 

59% western and 41% eastern railroads, 

even though in actuality western 

railroads—UPC, BNSF, and KCS— 

account for 73% of the industry, and the 

two eastern railroads—CSX and NSC— 

account for only 27%. (Id.) 4 WCTL 

argues that excluding CSX, along with 

BNSF, from the composite sample 

would actually result in an average that 

is more representative of the regional 

division (75% western and 25% 

eastern). (Id.) WCTL asserts that the 

Board’s proposal could result in an 

average that is less representative of the 

industry as a whole, and a cost-ofcapital figure that is more distorted. (Id. 

at 2–3.) Additionally, WCTL states that 

a ‘‘complicating factor’’ is that the 

second stage of the Board’s Multi-Stage 

Discounted Cash Flow model (MSDCF) 

uses a simple average of the growth 

rates of the individual carriers, such that 

KCS counts just as much as UPC. (Id.) 

Despite its criticisms, WCTL 

recommends that the Board adopt the 

proposed change, but ‘‘on a tentative or 

qualified basis that would allow the 

Board to revisit the matter, and allow 

parties to present relevant evidence, if 

inclusion of NASDAQ-traded carriers 

turns out to undermine the 

representativeness of the composite 

sample, or the accuracy of the cost-ofcapital’’ figure. (Id.) 

The Final Action 

To reflect the current marketplace, the 

Board will adopt the changes proposed 

in the NPRM and now require, as its 

fourth screening criterion, that a 

company’s stock be listed on either the 

NYSE or the NASDAQ. Commenters 

generally support the Board’s proposal 

and agree that the NASDAQ is a suitable 

replacement for the AMEX in the costof-capital determination. As noted in 

the NPRM, when the Board’s 

predecessor adopted the fourth 

screening criterion, it did so to ‘‘insure 

the availability of stock price data.’’ R.R. 

Cost of Capital—1984, 1 I.C.C.2d at 

1004. By requiring applicable carriers to 

trade on either the NYSE or the 

NASDAQ, the Board will continue to 

ensure the availability of stock price 

data for use in the Board’s computation 

of the rail industry’s cost of capital. 

Although WCTL supports the Board’s 

proposal and states that expanding the 

screening criteria to include NASDAQlisted companies, i.e., CSX, would result 

in a larger composite group, it argues 

that the Board’s proposed change could 

result in an average cost-of-capital figure 

that is less representative of the regional 

division of rail assets than it is now. The 

Board, however, is unpersuaded by 

WCTL’s argument. The purpose of 

including only carriers listed on 

particular stock exchanges in the 

‘‘composite group’’ is to ensure the 

availability of stock price data for the 

annual cost-of-capital determinations 

for carriers that satisfy the other criteria. 

See R.R. Cost of Capital—1984, 1 

I.C.C.2d 989, 1004 (1984). Here, there is 

no debate that CSX meets the other 

criteria and that NASDAQ is a reliable 

source of stock price data. Excluding a 

carrier that meets the other criteria and 

has a reliable source of stock data, in an 

effort to achieve a ‘‘balance’’ between 

eastern and western carriers, is 

unwarranted. 

In any event, railroads operating in 

different parts of the United States may 

confront different markets, traffic mixes, 

densities, and topography. As a 

consequence, there are differences in 

the cost structures of eastern and 

western carriers. These physical and 

cost structure differences, however, do 

not imply variances in the cost of 

capital on a regional basis. Investors 

deploy capital around the world, 

looking to obtain the highest possible 

return, while incurring the lowest 

possible risk. WCTL has not provided 

evidence to demonstrate that there is 

any difference in the rate of return 

investors demand—i.e., the cost of 

capital—when investing in eastern and 

western rail carriers. Therefore, the 

Board believes that it is better to include 

CSX in the composite-industry cost of 

capital, as it was in previous years when 

it was listed on NYSE, to ensure a larger 

sample size. 

With respect to WCTL’s argument that 

another ‘‘complicating factor’’ is that the 

second stage of the Board’s MSDCF uses 

a simple average of the growth rates of 

individual carriers, such that KCS 

counts as much as UP, the Board finds 

such an argument to be outside the 

scope of this proceeding. The core issue 

here is whether, for purposes of the 

cost-of-capital calculation, it is 

appropriate to replace a defunct stock 

exchange (AMEX) with a stock exchange 

in current and prevalent use (NASDAQ). 

WCTL’s growth rate argument does not 

relate to that issue and is a collateral 

attack on other components of the 

Board’s approved methodology. 

Finally, the Board declines WCTL’s 

request to adopt the final action on a 

conditional or tentative basis, 

purportedly to allow parties to present 

additional evidence after 

implementation. If parties have 

concerns in the future that inclusion of 

NASDAQ-traded carriers ultimately 

results in a less representative 

composite sample, they may file a 

petition to modify or revisit the 

composite group criteria regulation. 

Regulatory Flexibility Act Statement 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601–612, generally 

requires a description and analysis of 

new rules that would have a significant 

economic impact on a substantial 

number of small entities. In drafting a 

rule, an agency is required to: (1) Assess 

the effect that its regulation will have on 

small entities; (2) analyze effective 

alternatives that may minimize a 

regulation’s impact; and (3) make the 

analysis available for public comment. 5 

U.S.C. 601–604. Under § 605(b), an 

agency is not required to perform an 

initial or final regulatory flexibility 

analysis if it certifies that the proposed 

or final rules will not have a ‘‘significant 

impact on a substantial number of small 

entities.’’ 

Because the goal of the RFA is to 

reduce the cost to small entities of 

complying with federal regulations, the 

RFA requires an agency to perform a 

regulatory flexibility analysis of small 

entity impacts only when a rule directly 

regulates those entities. In other words, 

the impact must be a direct impact on 

small entities ‘‘whose conduct is 

circumscribed or mandated’’ by the 

proposed rule. White Eagle Coop. Ass’n 

v. Conner, 553 F.3d 467, 478, 480 (7th 

Cir. 2009). An agency has no obligation 

to conduct a small entity impact 

analysis of effects on entities that it does 

not regulate. United Distrib. Cos. v. 

FERC, 88 F.3d 1105, 1170 (D.C. Cir. 

1996). 

In the NPRM, the Board already 

certified under 5 U.S.C. 605(b) that the 

proposed change would not have a 

significant economic impact on a 

substantial number of small entities 

within the meaning of the RFA. The 

Board explained that a change in the 

listing requirement for inclusion in the 

composite railroad would not have a 

significant economic impact on the 

railroads included; likewise, the Board 

articulated that, whether or not a 

railroad would be included in the 

composite group would have no 

significant economic impact on that 

individual railroad. A copy of the 


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Federal Register / Vol. 82, No. 205 / Wednesday, October 25, 2017 / Rules and Regulations 49297 

5Effective June 30, 2016, for the purpose of RFA 

analysis for rail carriers subject to our jurisdiction, 

the Board defines a ‘‘small business’’ as a rail 

carrier classified as a Class III rail carrier under 49 

CFR part 1201. See Small Entity Size Standards 

Under the Regulatory Flexibility Act, EP 719 (STB 

served June 30, 2016) (with Board Member 

Begeman dissenting). Class III carriers have annual 

operating revenues of $20 million or less in 1991 

dollars, or $35,809,698 or less when adjusted for 

inflation using 2016 data. Class II carriers have 

annual operating revenues of less than $250 million 

in 1991 dollars or $ less than $447,621,226 when 

adjusted for inflation using 2016 data. The Board 

calculates the revenue deflator factor annually and 

publishes the railroad revenue thresholds on its 

Web site. 49 CFR part 1201. 

NPRM was served on the U.S. Small 

Business Administration (SBA). 

The final action changes one of the 

criteria for a railroad’s inclusion in the 

data sample that the Board uses to 

calculate the annual cost of capital. By 

definition, that group of railroads is 

limited to Class I carriers, which are not 

small businesses under the Board’s 

definition for RFA purposes.5 Thus, the 

action does not place any additional 

burden on small entities. Therefore, the 

Board certifies under 5 U.S.C. 605(b) 

that the final action will not have a 

significant economic impact on a 

substantial number of small entities 

within the meaning of the RFA. A copy 

of this decision will be served upon the 

Chief Counsel for Advocacy, Office of 

Advocacy, U.S. Small Business 

Administration, Washington, DC 20416. 

It is ordered: 

1. The final action described above is 

adopted and will be applicable on 

November 24, 2017. 

2. Notice of the action adopted here 

will be published in the Federal 

Register. 

3. A copy of this decision will be 

served upon the Chief Counsel for 

Advocacy, Office of Advocacy, U.S. 

Small Business Administration. 

4. This decision is effective on the 

date of service. 

Decided: October 17, 2017. 

By the Board, Board Members Begeman 

and Miller. 

Kenyatta Clay, 

Clearance Clerk. 

[FR Doc. 2017–22894 Filed 10–24–17; 8:45 am] 

BILLING CODE 4915–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 648 

[Docket No. 170301213–7869–02] 

RIN 0648–BG70 

Fisheries of the Northeastern United 

States; Atlantic Sea Scallop Fishery; 

State Waters Exemption 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Final rule. 

SUMMARY: NMFS approves and 

implements an exemption for vessels 

with Federal Limited Access General 

Category Individual Fishing Quota 

permits from the State of Maine and the 

Commonwealth of Massachusetts. This 

exemption enables the vessels to 

continue fishing in their respective state 

waters once NMFS has announced that 

the Federal Northern Gulf of Maine total 

allowable catch has been fully harvested 

in a given year. Additionally, 

Massachusetts has requested that 

Federal Limited Access General 

Category Northern Gulf of Maine 

permits also be included in its 

exemption. Both states have requested 

this exemption as part of the Scallop 

State Water Exemption Program. This 

program specifies that a state may be 

eligible for a state waters exemption to 

specific Federal regulations if it has a 

scallop fishery and a scallop 

conservation program that does not 

jeopardize the biomass and fishing 

mortality/effort limit objectives of the 

Atlantic Sea Scallop Fishery 

Management Plan. Based on the 

information that Maine and 

Massachusetts have submitted, NMFS 

has determined that both states qualify 

for this exemption and that this 

exemption will not have an impact on 

the effectiveness of Federal management 

measures for the scallop fishery overall 

or within the Northern Gulf of Maine 

management area. 

DATES: Effective October 25, 2017. 

ADDRESSES: Documents supporting this 

action, including the State of Maine and 

Commonwealth of Massachusetts 

requests for the exemption, the 

Categorical Exclusion, and Framework 

Adjustment 28 to the Atlantic Sea 

Scallop Fishery Management Plan 

(FMP) are available upon request from 

John K. Bullard, Regional 

Administrator, NMFS, Greater Atlantic 

Regional Fisheries Office, 55 Great 

Republic Drive, Gloucester, MA 01930. 

Copies of the Permit Holder Letter are 

available from John K. Bullard, Regional 

Administrator, NMFS, Greater Atlantic 

Regional Fisheries Office, 55 Great 

Republic Drive, Gloucester, MA 01930– 

2298, or available on the Internet at 

http://www.greateratlantic.fisheries.

noaa.gov/sustainable/species/scallop/. 

FOR FURTHER INFORMATION CONTACT: 

Shannah Jaburek, Fisheries Management 

Specialist, 978–282–8456. 

SUPPLEMENTARY INFORMATION: 

Background 

The Scallop State Waters Exemption 

Program, described at § 648.54, specifies 

that a state with a scallop fishery may 

be eligible for state waters exemptions if 

it has a scallop conservation program 

that does not jeopardize the biomass 

and fishing mortality and effort limit 

objectives of the Scallop FMP. Under 

the Program, if NMFS determines that a 

state is eligible, federally permitted 

scallop vessels fishing in state waters 

may be exempted from specific Federal 

scallop regulations. One of these 

exemptions enables some scallop 

vessels to continue to fish in state 

waters within the Northern Gulf of 

Maine (NGOM) management area once 

the Federal NGOM total allowable catch 

(TAC) is reached. Any state interested in 

applying for this exemption must 

identify the scallop-permitted vessels 

that would be subject to the exemption 

(i.e., limited access, limited access 

general category (LAGC) individual 

fishing quota (IFQ), LAGC incidental, or 

LAGC NGOM). No vessel is permitted to 

fish for scallops in the Federal portion 

of the NGOM once the TAC is 

harvested. We provided a broader 

description of the Scallop State Waters 

Exemption Program in the preamble of 

the proposed rule (82 FR 29470; June 

29, 2017) for this action. We are not 

repeating that information here. 

We received a request from Maine to 

expand its current exemptions to allow 

the four IFQ-permitted vessels with 

Maine state-waters permits to fish in the 

Maine state-waters portion of the NGOM 

management area once we project the 

Federal TAC to be fully harvested. 

Massachusetts also sent a request to 

exempt LAGC IFQ and NGOM-federally 

permitted vessels that also hold a state 

permit. Only the northern portion of 

Massachusetts state waters, 

approximately Boston and north, fall 

within the NGOM management area. 

The fishery in this area has traditionally 

been split between a handful of stateonly vessels and 12 vessels with both 

Federal and state permits to fish for 


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