AASHTO

Standing Committee on Rail Transportation Denver, Colorado September 2014

SLIDE 1 BNSF CN CP CSX FXE KCS/KCSM NS UP Other RRs

Railroads Help Keep Coal Based Electricity

Freight Railroads in North America

ASSOCIATION OF AMERICAN RAILROADS

$16,7 Record Investments in Recent Years Despite the Economy Railroad Spending on Infrastructure and Equipment* ($ billions) $25,5 $25,1 $26,0 $23,3 $21,5 $20,7 $20,2 $20,2 $19,3 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e

*Capital spending + maintenance expenses. e – estimate Data are for Class I railroads. Source: AAR SLIDE 2 ASSOCIATION OF AMERICAN RAILROADS

Until the Recession, A Steady Increase in Rail Traffic

2,0 1,8 1,6 1,4 1,2 1,0 0,8 0,6 0,4 '80 (trillions of ton-miles)

Up 95%

'83 '86 '89 '92 '95 '98

Data are for Class I railroads. Source: AAR

'01 '04 '07 '10 '13

SLIDE 3 ASSOCIATION OF AMERICAN RAILROADS

America’s Railroads Carry Just About Everything

Intermodal* $15.5 bil Coal - $14.3 bil Chemicals - $9.9 bil Food - $5.6 bil Motor vehicles & parts - $5.5 bil Grain - $4.7 bil Sand, gravel, & other nonmetallic minerals - $3.2 bil Steel and other metal products - $2.7 bil Pulp & paper - $2.3 bil Stone, clay & glass prod. (e.g., cement, ground Lumber & wood - $1.8 bil minerals) - $1.8 bil Total gross freight revenue in 2013: $72.1 billion

*Intermodal is estimated; some intermodal revenue is included in individual commodities Source: AAR (FCS report) SLIDE 4 ASSOCIATION OF AMERICAN RAILROADS

U.S. Crude Oil Production

(millions of barrels per day) 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0

SLIDE 5

'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Source: Energy Information Administration ASSOCIATION OF AMERICAN RAILROADS

What’s This?

SLIDE 6 Shale containing oil or gas ASSOCIATION OF AMERICAN RAILROADS

What’s This?

SLIDE 7 ASSOCIATION OF AMERICAN RAILROADS

U.S. Crude Oil Production

(millions of barrels per day) 9,5 9,0 8,5 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0 '91 '93 '95 '97 '99 '01 '03 '05 '07 7.45 million in 2013 '09 '11 '13 '15e

e – Energy Information Administration estimate Source: EIA SLIDE 8 ASSOCIATION OF AMERICAN RAILROADS

U.S. Crude Oil Production by State: 2004-2013

(millions of barrels per day; % = % change from 2004-2013) 2,800 2,400 139% 2,000 -14% 1,600 1,200 909% 800 -16% -43% 400 74% 53% -14% 22% 179% 0

SLIDE 9

TX GULF* ND CA AK OK

*Federal offshore Gulf of Mexico Source: EIA

NM LA WY CO

ASSOCIATION OF AMERICAN RAILROADS

Domestic Energy Renaissance Means Huge Benefits for U.S.

   Reduced reliance on oil from countries that are not secure and whose interests do not necessarily correspond to our own.

Thousands of new and better jobs and economic development opportunities all over the country.

Higher tax revenue, lower trade deficit. SLIDE 10 ASSOCIATION OF AMERICAN RAILROADS

U.S. Oil Refineries

SLIDE 11

A lack of refineries in areas of new production like ND means crude oil has to be trans ported to where it can be refined.

Source: Government Accountability Office based on EIA data as of 1/1/13 ASSOCIATION OF AMERICAN RAILROADS

What’s This?

SLIDE 12 ASSOCIATION OF AMERICAN RAILROADS

Why Move Crude by Rail?

 Geographical flexibility  Responsiveness  Efficiency  Underlying infrastructure  Isolation of commodity SLIDE 13 ASSOCIATION OF AMERICAN RAILROADS

Originated Carloads of Crude Oil on U.S. Class I Railroads

407 761 233 698 4 729 2006

SLIDE 14

5 912 9 500 2007 2008

Source: AAR

10 840 29 605 65 751 2009 2010 2011 2012 2013

ASSOCIATION OF AMERICAN RAILROADS

Still a Very Small Portion of Railroad Traffic 2009 2013 Everything else 99.96% Everything else 98.6% Crude oil 0.04% Crude oil 1.4%

Crude oil is such a small share of total rail traffic, it’s not plausible to claim it “crowds out” other rail traffic to a significant degree.

SLIDE 15 ASSOCIATION OF AMERICAN RAILROADS

Crude by Rail Safety: Three Key Facets

 Accident prevention  Accident mitigation  Emergency response SLIDE 16 ASSOCIATION OF AMERICAN RAILROADS

Accident Prevention

       Reinvestments Technological advancements Defect detectors Routing model Inspections Speed restrictions Train braking SLIDE 17 ASSOCIATION OF AMERICAN RAILROADS

Accident Mitigation

Focus on making tank cars used for crude oil safer:  March 2011: Rail industry asks PHMSA to adopt tougher requirements for new tank cars.  July 2011: AAR Tank Car Committee adopts proposal to PHMSA as basis for new industry standards (“CPC-1232”) for tank cars ordered after Oct. 1, 2011.

 Nov. 2013: Rail industry calls on PHMSA to adopt standards more stringent than CPC-1232, including retrofitting existing tank cars or phasing out if not modified. SLIDE 18 ASSOCIATION OF AMERICAN RAILROADS

TANK CAR STANDARDS

High Capacity Pressure Relief Valves Top Fittings Protection Steel Tank Head Shields SLIDE 19 Bottom Outlet Handles Jacket and Thermal Protection ASSOCIATION OF AMERICAN RAILROADS

Emergency Response Training

2012 2020p 2030p 2040 Long-Term Demand for Freight Transportation Will Surge Billions of Tons of Freight Transported in the U.S.

19,7 22,1 25,1 28,5

The U.S. DOT expects total U.S. freight movements to rise from around 17.6 billion tons in 2011 to 28.5 billion tons in 2040 – a 45% increase.

SLIDE 21 p – projected Source: FHWA -

Freight Analysis Framework

, version 3.4

ASSOCIATION OF AMERICAN RAILROADS

Freight by Rail

SLIDE 22 ASSOCIATION OF AMERICAN RAILROADS

New and Improved: www.aar.org

SLIDE 23 ASSOCIATION OF AMERICAN RAILROADS