Railroad classes are the system by whichfreight railroads are designated in theUnited States. Railroads are assigned to Class I, II or III according to annual revenue criteria originally set by theSurface 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.)
There are six Class I freight railroad companies in the United States:BNSF Railway,CSX Transportation,Canadian National Railway,CPKC,Norfolk Southern Railway, andUnion Pacific Railroad. Canadian National also operates inCanada and CPKC operates in Canada andMexico.
In addition, the national passenger railroad in the United States,Amtrak, would qualify as Class I if it were a freight carrier, as would Canada'sVia Rail passenger service.Mexico'sFerromex freight railroad would also qualify as Class I, but it does not operate within the United States.
Initially (in 1911) the former federal agencyInterstate Commerce Commission (ICC) classified railroads by their annualgross revenue. Class I railroads had an annual operating revenue of at least $1 million, while Class III railroad incomes were under $100,000. Railroads in both classes were subject to reporting requirements on a quarterly or annual schedule. In 1925, the ICC reported 174 Class I railroads, 282 Class II railroads, and 348 Class III railroads.[1]
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"). TheClass 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,[2] 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 andWisconsin Central, asked the 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.[3] The Class II maximum criterion was increased in 1992 to $250 million annually, which resulted in theFlorida East Coast Railway having its status changed to Class II.
The thresholds set in 1992 were:
Since dissolution of the ICC in 1996, theSurface 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 as there are differentlabor 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. TheAssociation of American Railroads typically divides non–Class I companies into three categories:
In the United States, theSurface Transportation Board categorizes rail carriers into Class I, Class II, and Class III based on the carrier's annual revenue. The thresholds, last adjusted for inflation in 2023, are:[4]
InCanada, aClass I rail carrier is defined (as of 2004[update]) as a company that has earned gross revenues exceeding $250 million (CAD) for each of the previous two years.[5]
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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 April 2023[update], just six Class I freight railroads remain.
BNSF Railway andUnion Pacific Railroad have aduopoly over all transcontinental freight rail lines in the Western United States, whileCSX Transportation andNorfolk Southern Railway operate most of the trackage in the Eastern United States, with theMississippi River being the rough dividing line.Canadian National Railway (via its subsidiaryGrand Trunk Corporation) operates north–south lines near the Mississippi River.Canadian Pacific Kansas City, doing business as CPKC, runs from southern Canada, then goes south through the central United States to central Mexico.
In addition, the national passenger railroads in the US and Canada—Amtrak andVia Rail—would both qualify as Class I if they were freight carriers. Mexico'sFerromex would qualify as a Class I railroad if it had trackage in the United States.
| Railroad | Trackage | ||
|---|---|---|---|
| Canada | United States | Mexico | |
| BNSF Railway | Yes | Yes | No |
| Canadian National Railway | Yes | Yes [Note 1] | No |
| CPKC | Yes | Yes | Yes |
| CSX Transportation | Yes | Yes | No |
| Norfolk Southern Railway | Yes | Yes | No |
| Union Pacific Railroad | No | Yes | No |
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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 theAssociation of American Railroads as "Regional Railroads" are typically Class II. TheFlorida East Coast Railway, theIowa Interstate Railroad, and theAlabama and Gulf Coast Railway are some examples of Class II railroads.
Class III railroads are typically localshortline 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 asGenesee & Wyoming orWatco. TheMaryland and Delaware Railroad, theSan Pedro Valley Railroad, and theBuckingham Branch Railroad are some examples of Class III railroads.
