Future of Freight Rail National Association of Counties

Future of Freight Rail National Association of Counties 2011 Rail Conference Commissioner Francis P. Mulvey April 28, 2011

STB Basics • Independent economic regulatory agency for the railroad industry • Jurisdiction over ØRailroad rate and service disputes ØRailroad mergers and acquisitions ØRail line abandonments and construction ØFreight/passenger rail relationships ØLimited jurisdiction over other modes

Board Structure • Comprised of 3 Board members • Ann Begeman confirmed on April 14, replacing Chip Nottingham • All members have rail transportation backgrounds – Elliott: United Transportation Union – Mulvey: House T&I staff; DOT IG for rail; GAO transportation group – Begeman: Senate Commerce staff

STB STAFF • Highly educated professional staff - lawyers, economists, financial analysts, environmental and railroad operational specialists • Named #1 small agency - annual federal employee survey for past 2 years • “One of the most obscure corners of the federal government. . train geeks and experts” Washington Post

Future of Freight Rail Hard to Predict • Positive state of rail industry today not predicted 10 years ago • 5 years post-Staggers, industry was still struggling • Many variables in 25 -year outlook • Past is not necessarily prologue

Recent increase in rail volume • 14 straight months of traffic gains • Nearly all commodities up from the same period 1 year ago • Grain, Coal, Chemical, Motor Vehicles up § BNSF, UP, NS carload volume increases greater than 5% (vs. same week 1 year ago) § CSX, KCS, and CN all in positive territory § CP decline due to recent service issues

Intermodal at near-record highs • CSX, NS, BNSF, KCS and CN post gains of 8 -10% (vs. same week 1 year ago) • UP gains smaller (2. 5%) • More commodity types moving via intermodal (e. g. , some forest products migration from boxcar to intermodal)

Future Traffic Growth • Rate of continued traffic growth unknown • Capacity may become issue § 1930 – 250, 000 Class I route miles 2009 – 90, 000 Class I route miles § 1940 – 1. 6 million Class I employees 2011 – 161, 000 Class I employees

Future Traffic Growth • Railroads continue to increase infrastructure investments § § 1995 –$6 billion Class I capital expenditures 2009 – nearly $10 billion capital expenditures 2011 - $12 billion planned capital expenditures Most capital expenditures for replacement, not expansion • Rail market share growth; barge/pipeline decline • Not clear whether rail could handle substantial traffic shift from trucks

Energy Policy • Significant percentage of rail revenue derived from coal transport • Changes in coal/energy policy could impact – Traffic volume – Destination (export vs. domestic usage) • Push for renewable energy could change traffic makeup • Ethanol policy

Trade Issues • Impact export volumes • Will a growing percentage of U. S. coal go to Asia? • Will there be larger overseas sales for U. S. automotive manufacturers? • Will worldwide grain shortages send more U. S. grain overseas?

Changes in Transportation Policy • PTC implementation and experience • Changes in safety regulations • Changes in legislative/regulatory economic regulation • Budget cuts/increases in federal programs that support rail industry investment

Changes in Rail Industry Innovation • Likely future productivity and efficiency improvements • Last 25 years have produced – Increased train speeds – Longer trains; more emphasis on unit trains – Changes in employee functions/crew size • Productivity gains were passed on to shippers via lower rates; this has changed in past few years

Growth of Passenger Rail • High speed rail investment – Will it happen on a large scale? – Will it impact freight rail capacity in the short or long term? – Funding? • Growth in transit ridership and potential impact on freight rail capacity

Local Gov’t Influence on Rail Industry • Participation in STB proceedings – CN/EJE merger proceeding - hundreds of local comments on safety, environment, oversight – Local officials/citizens comment in many proceedings • STB’s Rail Customer & Public Assistance Program • Community/state purchase of rail lines – Maine recent purchase of 200+ mile line – 3 Indiana communities bought line being abandoned; trail use now and possibility of rail use in future

Thank you Any Questions?