1 THE FREIGHT RAIL INFRASTRUCTURE CHALLENGE 2009 AASHTO SCORT Conference – Oklahoma City, OK September 20 – 23, 2009

2 2 Benefits of Freight Railroads One Intermodal Train Can Take 280 Trucks off the Highway Rail Is the Safest Mode of Ground Freight Transportation Rail Transportation Is Three Times More Fuel Efficient Than Trucks On Average, UP Hauls One Ton 790 Miles on One Gallon of Diesel Fuel Trains Are Three Times Cleaner than Trucks on a Ton-mile Basis

3 U.S. DOT projection Billions of Tons of Freight Transported in the U.S. Long-Term Demand for Freight Transportation Will Skyrocket

4 Today 2035 without improvements Below capacity Near capacity At capacity Above capacity Expected Traffic vs. Capacity

5 5 Capital Expenditures As % of Revenue Source: U.S. Census Bureau; EEI, AAR, Average (Note: Utilities are ) 16.9% 12.6% 5.3% 2.5%

6 Class I Railroad Spending* on Infrastructure vs. State Highway Agency Spending* Railroads Already Spend More Than Most State Highway Agencies! *Capital outlays plus maintenance expenses. Sources: FHWA Highway Statistics Table SF-12; AAR 1.Texas$ Florida $ California $4.19 Union Pacific $4.17 BNSF $ New York $ Pennsylvania $ Illinois $3.30 CSX $ Michigan $ North Carolina $ Ohio $2.14 Norfolk Southern $ Georgia $1.88 $ in Billions

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8 Rio Valley Switching Company Rehab Conceptual - TBD

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11 Y Port Laredo Laredo RG Run- Around Tex- Mex I-35 Rio Grande Milo ’ Y N Laredo – Construct 2 nd Main Track to Replace RG Capability Project Description: Construct 2 nd Main Track in 2 phases and place in active service in anticipation of possible RG track closure Construct 2nd main line beside existing main between Laredo Yard and bridge over Interstate 35 (MP 405.6) Convert current end of the RG run-around into a universal crossover between new and existing main lines Install CTC along both mains between Laredo Yard and I-35 Retire RG Run-around Benefits: Eliminate 26 at-grade street crossings on the RG Reduce emissions from idling vehicle waiting to cross RG track Provides replacement capacity to offset approximately 4 miles double track immediately north of border crossing on the RG track

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13 Eagle Pass Grade Separation – FM 1021 Construct road- over-railroad grade separation at FM 1021 to eliminate conflicts at-grade

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15 Nogales – Rio Rico, Extend Setout Track Project Description: » Extend Track 126 to the South and tie into mainline » Construct pad adjacent to Track 126 to accommodate piggy packer to permit intermodal loaded shipments over Nogales gateway Benefits Eliminate need for time-consuming delays for inspections at Tucson Accommodate inspections for intermodal shipments Extend Track 128 and connect to Main at approx MP 57 Lease property for container inspectio n area

16 Project Description: » The proposed westward connection from the Nogales subdivision at Tucson enhances overall progress towards the goal of seamless operation of NAFTA traffic between the United States and Mexico. This connection will provide a direct connection to Sunset Route allowing expedited movement of goods from Mexico to Phoenix, the Los Angeles Basin and Northern California destinations. By improving operations to and from Nogales, and especially through the elimination of time consuming additional car handling at Tucson, the new westward connection supports existing and future US investment in Mexico by ensuring fast and reliable freight transport of finished goods returning to the US. Benefits Support growth in auto, grain and chemicals over the Nogales gateway. Provide access to the Nogales sub from the west. Avoids unnecessary congestion in Tucson yard. Existing connection New west-leg connection CP SP985 Tucson Wye Connection