AASHTO Spring Meeting Portland, Maine May 2017 Jennifer W AASHTO Spring Meeting Portland, Maine May 2017 Jennifer W. Macdonald AVP Government Affairs

State of the Railroad Industry Safety Trends Economic Outlook/Traffic Regulatory Environment Legislative Outlook ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS Freight Rail: Safe & Getting Safer RR Safety Trends: 2000-2016  63% Hazmat accident rate*  39% Grade crossing collision rate  47% Employee injury rate  43% Train accident rate *through 2015 Source: FRA, AAR ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS Safe and Getting Safer ASSOCIATION OF AMERICAN RAILROADS

PTC Implementation: On Track Freight railroads spending $100 million/month on PTC All equipment will be installed by end of 2018 Fully operational by end of 2020 ASSOCIATION OF AMERICAN RAILROADS

(% change over previous year) Strong Correlation Between Growth in Rail Traffic and Goods-Related GDP (% change over previous year) GDP sectors that generate freight were essentially in recession in 2016 *Imports, exports, and personal consumption of goods; fixed residential investment; business investment in equipment & structures; government gross investment; and change in inventories. **U.S. carloads excluding coal and grain, plus intermodal units. Rail traffic is originations and does not include the U.S. operations of Canadian railroads. Source: BEA, AAR ASSOCIATION OF AMERICAN RAILROADS

(6-week moving average originations) Total U.S. Rail Carloads (6-week moving average originations) 2006 (peak year) Week # Data do not include intermodal and do not include the U.S. operations of CN and CP. Source: AAR ASSOCIATION OF AMERICAN RAILROADS

Total U.S. Rail Carloads: YTD Through April (millions) Data are originations and do not include the U.S. operations of CN and CP. Source: AAR Rail Time Indicators ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS Sharp Decline in Rail Coal Carloads (millions) Data are originated carloads for Class I railroads. Source: AAR (Freight Commodity Statistics) ASSOCIATION OF AMERICAN RAILROADS

U.S. Electricity Generation (% share of total generation, 2007-2016) by Type of Fuel (% share of total generation, 2007-2016) Source: Energy Information Administration ASSOCIATION OF AMERICAN RAILROADS

U.S. Rail Intermodal Traffic: YTD Through April (millions) Data are originations and do not include the U.S. operations of CN and CP. Source: AAR Rail Time Indicators ASSOCIATION OF AMERICAN RAILROADS

U.S. Rail Intermodal Traffic (average weekly originations) Data are average weekly originations for each month, are not seasonally adjusted, and do not include the U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic ASSOCIATION OF AMERICAN RAILROADS

Rapid Intermodal Growth (millions) Containers Trailers Source: AAR Weekly Railroad Traffic ASSOCIATION OF AMERICAN RAILROADS

Containers vs. Trailers as % of U.S. Rail Intermodal Traffic Source: AAR (Weekly Railroad Traffic) ASSOCIATION OF AMERICAN RAILROADS

Characteristics of the Intermodal Network  Must accommodate both domestic and international business  Focused on high volume origin-destination pairs  Best when operated as single origin to single destination trains  Cost control and service reliability are critical SLIDE 15 ASSOCIATION OF AMERICAN RAILROADS

Characteristics of Strong Intermodal Corridors  Sufficient capacity to keep trains moving  Long enough to compete with trucks  Sufficient volume to keep unit costs competitive  Strong highway feeder system at each end and at intermediate terminals ASSOCIATION OF AMERICAN RAILROADS

Characteristics of the Newest Intermodal Terminals  Usually outside urban areas  Easy highway access  Designed to accommodate adjacent distribution / production centers  Land for future growth  Minimize “on terminal” truck movements ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS U.S. Rail Carloads + Intermodal Traffic: 2007-2016 (millions) Data are originations and do not include the U.S. operations of CN and CP. Source: AAR Weekly Railroad Traffic ASSOCIATION OF AMERICAN RAILROADS

Total U.S. Rail Carloads + Intermodal Traffic (6-week moving average originations) 2006 (peak year) Week # Data do not include the U.S. operations of CN and CP. Source: AAR Rail Time Indicators ASSOCIATION OF AMERICAN RAILROADS

Railroads and International Trade ASSOCIATION OF AMERICAN RAILROADS

RRs and International Trade: Summary Statistics ~50,000 rail jobs — worth over $5.5 billion in annual wages and benefits — depend directly on international trade ASSOCIATION OF AMERICAN RAILROADS

U.S. Rail Revenue From International Trade Rail movements associated with international trade include virtually every type of commodity railroads carry and involve every region of the country. ASSOCIATION OF AMERICAN RAILROADS

Railroads Help Keep Coal-Based Electricity ASSOCIATION OF AMERICAN RAILROADS

Railroads Help Keep Coal-Based Electricity ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS Legislative Agenda Regulatory Reform Tax Reform Infrastructure Package Trade ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS Regulatory Reform Regulations Executive Orders Safety Advisories Guidance ASSOCIATION OF AMERICAN RAILROADS

ASSOCIATION OF AMERICAN RAILROADS Corporate Tax Reform Class 1 railroads pay on average 33% federal tax rate. When you add state and local taxes, the effective tax rate is 37%. U.S. corporate tax rate is the highest in the industrialized world ASSOCIATION OF AMERICAN RAILROADS

Infrastructure Initiative Freight railroads are spending an average of $60 million/day on infrastructure and equipment State-freight rail partnerships leverage federal investment ASSOCIATION OF AMERICAN RAILROADS

Truck Size and Weight Redux Effort underway to increase truck weights on interstates to 91,000 lbs. 15-year pilot for 10 states. SHIP Coalition (Safer Hauling & Infrastructure Protection) House floor vote on this same issue in 2015 –defeated 236-187. ASSOCIATION OF AMERICAN RAILROADS

www.aar.org www.freightrailworks.org (202) 639-2100 Association of American Railroads 11/10/2018