Transportation Strategy SCMN 4780 Railroad Industry Rail Industry

Transportation Strategy SCMN Rail Industry 2010 US Shipments(TONS) Truck12,49068% Rail1,77610% Pipeline1,4948% Intermodal1,3808% Water8605% Air120% Other3022% Total18,313 RAIL TRUCK Railroad Share of US Transportation Market

Transportation Strategy SCMN Rail Industry Truck / Rail / Inland Water Freight Routing

Transportation Strategy SCMN Rail Industry Truck / Rail Activity vs. US Economy

Transportation Strategy SCMN Rail Industry 1940s: WW-II brings railroads the highest ridership in American history. 1950s and 1960s : Drastic decline US railroad travel due to growth in use of motor vehicles and airplanes. Due to financial issues, railroads respond through downsizing and mergers. ICC (regulatory body) prevents railroads to shut down lanes. 1970s: Congress creates Amtrak to retain passenger service option. Conrail, a freight railroad, founded from remains of Penn Central and other bankrupt railroads in NE. 1980s: Railroads deregulated. 1990s: ICC is abolished and replaced by Surface Transportation Board to assume the remaining regulatory functions. Major railroads continued to merge to remain viable. Conrail sells its assets to Norfolk Southern and CSX. Recent History of US Railroads

Transportation Strategy SCMN Rail Industry Railroad Traffic Carloads Originated (M) Intermodal Units (M): Containers Trailers Total Tons Originated (B) Rail Freight Statistics

Transportation Strategy SCMN Rail Industry US Rail Activity vs. GDP

Transportation Strategy SCMN Rail Industry US Rail Activity Recent Growth

Transportation Strategy SCMN Rail Industry US Rail Activity Trend

Transportation Strategy SCMN CLASS I – large railroads with annual revenue > $350 million. They comprise 1% total number of freight railroads but account for 67% of industry’s mileage, 90% of employees, 93% of freight revenue. REGIONAL – line haul railroads with > 350 miles and/or revenue between $40 million and $350 million. There are ~30 regional railroads with most employing between 75 and 500 people. LOCAL – line haul railroads operating < 350 miles and earning < $40 million per year (average ~ $5 million). There are ~300 local railroads. They perform point-to-point service over short distances. SWITCHING & TERMINAL – railroads that provide switching and/or terminal services, regardless of revenue. They perform pick up and delivery services within a certain geographic area. Types of (Freight) Railroads Rail Industry

Transportation Strategy SCMN Rail Industry BNSF Burlington Northern & Santa Fe CN *Canadian National CP *Canadian Pacific CSX CSX Transportation FXE *Ferrocarril Mexicano (aka Ferromex) KCS Kansas City Southern Railway NS Norfolk Southern KCSM *Kansas City Southern de México UP Union Pacific * non-US ownership Current NA Major Railroads

Transportation Strategy SCMN Rail Industry 2010 Railroad Operating Revenue ($B)

Transportation Strategy SCMN Rail Industry Class 1 - US Railroad Track Network

Transportation Strategy SCMN Major Railroad Track Network Rail Industry

Transportation Strategy SCMN Rail Industry US Rail Freight Activity

Transportation Strategy SCMN Where is Rail Freight Service Mostly Used? extraction conversion manufacture assembly distribution retail consumption order delivery DOWNSTREAM UPSTREAM Rail Freight

Transportation Strategy SCMN Rail Industry Commodity Group Tons (M) Portion Coal % Chemicals % Farm Products % Non-metallic Minerals % Misc. Shipments % Food % Metal Ores % Metal Products % Waste & Scrap Materials % Petroleum & Coke % Stone, Clay & Glass Products % Pulp & Paper % Lumber & Wood Products % Motor Vehicles & Equipment % All Other Commodities % Total 1,851 US Rail Freight Carried - Year 2010

Transportation Strategy SCMN 4780 Freight Moved by Rail Rail Industry 2010 Freight Cars in Service, Railroad 683K 2010 Freight Cars in Service, All Owners 1,565K

Transportation Strategy SCMN Rail Industry Rail Car Activity by Commodity

Transportation Strategy SCMN Rail Industry Rail Service Transit Times from St. Louis Service Performance Characteristics?

Transportation Strategy SCMN Rail Industry Rail Safety

Transportation Strategy SCMN Rail Industry Rail Incident Videos

Transportation Strategy SCMN Rail Industry Rail Industry Safety (HazMat) TRANSCAER® - Trans portation C ommunity A wareness and E mergency R esponse is a voluntary national outreach effort that focuses on assisting communities to prepare for and to respond to a possible hazardous materials transportation incident. TRANSCAER® members consist of volunteer representatives from the chemical manufacturing, transportation, distributor, and emergency response industries, as well as the federal and local governments. Whistle Stop Tours

Transportation Strategy SCMN Rail Industry Railcar Safety (HazMat) Phosphorus - Phosphorus is essential for life. The vast majority of phosphorus compounds are consumed as fertilizers. Other applications based on phosphorus compounds are detergents, pesticides, nerve agents, explosives and matches. It is surface mined typically in a 90 / 10 ratio of earth to phosphorus mineral. The majority of phosphorus-containing compounds are produced for use in fertilizers after phosphate-containing minerals are converted to phosphoric acid. In higher value applications, white phosphorus is oxidized to acid and is subsequently neutralized with base to give phosphate salts. Phosphoric acid obtained in this manner is relatively pure and is the main source of phosphates used in detergents and other non-fertilizer applications. The allotrope white phosphorus should be kept under water at all times, as it presents a significant fire hazard due to its extreme reactivity with atmospheric oxygen. Mining operations Conversion plant

Transportation Strategy SCMN Rail Industry Current Rail Industry Outlook Carload volume yet to reach pre-recession level US industrial production expected to grow in 2012 Growing global demand for US agriculture products Opportunities: 1.Discretionary pricing power 2.Rail transport more fuel efficient (cheaper) vs. truck 3.Rail network improvements ahead of other transport modes 4.Financially, railroads generally stable Threats: 1.Increasing governmental regulations 2.Required capital intensity of the business 3.Threats from unionized labor