A Class I railroad in the United States and Mexico, or a Class I rail carrier in Canada, is a large freight railroad company, as classified based on operating revenue.
Smaller railroads are classified as Class II and Class III. The exact revenues required to be in each class have varied over time, and they are now continuously adjusted for inflation.
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The Surface Transportation Board (STB) defines a Class I railroad in the United States as "having annual carrier operating revenues of $250 million or more" after adjusting for inflation using a Railroad Freight Price Index developed by the Bureau of Labor Statistics (BLS).[1] According to the Association of American Railroads (AAR), Class I railroads had minimum carrier operating revenues of $346.8 million (USD) in 2006,[2] $359 million (USD) in 2007,[3] $401.4 million (USD) in 2008[4] and $378.8 million (USD) in 2009.[5]
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.
The establishment of the criteria in the United States has always been subjective, since different regulations apply to the different classes. In early 1991 both Montana Rail Link and Wisconsin Central asked the Interstate Commerce Commission (ICC) to increase the minimum annual operating revenue criteria (then established at $93.5 million USD) in order to avoid being re-designated as Class I, due to increased administrative and legal costs resulting from different regulations.[6] This criterion was increased in 1992 to $250 million annually, which resulted in the Florida East Coast Railway having its status changed to Class II. Rail carriers with less than $20 million in revenue remained in Class III.[7]
Currently eleven railroads in North America are classified as Class I, eight of which operate in the United States.
The classification of railroads in the U.S. as Class I, II or III was started by the Interstate Commerce Commission in the 1930s. Initially Class I railroads were defined as railroads with operating revenue of at least $1 million (equal to $16,004,866 today). There were 132 Class I railroads in 1939.
The $1 million figure was used until 1956 (at which time there were 113[8]); however since that time it has increased faster than inflation. In 1956 it was increased to $3 million (equal to $24,243,243 today). By 1963 the number of Class I railroads had dropped to 102. By 1965 the cut-off had increased to $5 million (equal to $34,804,233 today), to $10 million in 1976 (equal to $38,580,645 today) and to $50 million in 1978 (equal to $168,321,392 today), at which point only 41 railroads were still Class I. The Class III category was dropped in 1956, but reinstated in 1978. In 1979 all switching and terminal railroads, even those with Class I or Class II revenues, were re-designated as Class III.
Currently the Class II and Class III designations are rarely used outside the rail transport industry. The Association of American Railroads typically divides non-Class I companies into three categories:
In the United States the Surface Transportation Board continues to use the designations of Class II and Class III since there are different labor regulations for the two classes.
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