presentation to Association of Car Accounting and Car Service Officers

Outline goals and objectives of North America Freight Car Association (NAFCA) Describe past work done by Association Review current issues and items of concern Discuss issues of concern for the future Objective

NAFCA organized 15 years ago to deal with issues related to private rail equipment In 1997 LOSAC (organization formed to obtain better mileage compensation for covered hoppers) merged into NAFCA NAFCA inherited LOSAC’s antitrust immunity to meet and discuss compensation for private cars NAFCA membership is open to manufacturers, owners, lessors and lessees of rail cars not owned by railroads NAFCA

Currently made up of 32 members who collectively own or operate in excess of 656,000 rail freight cars –536,000 privately marked rail cars –120,000 leased to railroads –Members include: All major railcar manufacturers Major railcar owners and lessors Shippers who own and/or lease railcars (AG and Petro Chem) Over 55% of all railcars in the US are privately owned and operated NAFCA Membership

Promote the safe, efficient and economical use of private cars Investigate and educate regarding operational, regulatory, economic and legal matters that affect private cars Secure the establishment and maintenance of reasonable, equitable and lawful practices and rules affecting the use of, repair of and principles of compensation for all private cars NAFCA Mission Statement

Educate the public and lawmakers regarding operational, regulatory, economic and legal matters that affect private cars and private cars owners and lessees. Work with carriers and legislative bodies and seek areas where we can work together to find ways to improve the safe operation of private rail equipment while protecting the rights of private cars owners and lessees. NAFCA Goals

In addition to monitoring and advising our members regarding industry issues we will take the lead in protecting the interests of private car owners and lessees when deemed appropriate –We performed a study comparing AAR labor rates to independent car shop labor rates and negotiated with AAR to obtain a reduction in AAR labor rates –Worked closely with the AAR and other groups seeking voting memberships on many of the AAR committees that develop rules and regulations for railcars and maintenance issues –Correspond directly with railroads, Senate and Congress regarding issues of importance to our members Rule 91 service interruptions Railroad pool rules and regulations Car registration rules (OT-5) and regulations Preemption of Federal law contained in H.R NAFCA Actions

Work to protect our members interests regarding mechanical and safety standards and operations of private rail equipment –Recently changed bylaws to allow NAFCA to get involved with issues surrounding deprescription –Seek to work directly with carriers and AAR to resolve issues –File complaints before the STB and/or Federal Courts NAFCA Actions

NAFCA filed a complaint against the BNSF regarding storage charges for private rail cars –Issue: BNSF began charging demurrage and storage on empty private cars which were in the railroad yards waiting to be spotted NAFCA filed request with the STB seeking institution of a declaratory order proceeding to determine if an individual railroad can deny OT-5 based on a railroad’s individual standards for equipment that meets all AAR and FRA standards and safety requirements NAFCA became concerned about the AAR’s efforts to create a centralized database for OT-5 registration of private cars –Tank cars to be included in OT-5 process –Concern about interchange safety and mechanical standards –Lack of definition/understanding of what “adequate storage” encompasses NAFCA Actions

NAFCA made proposal to AAR OT-5 TAG –Proceed forward with centralized database for OT-5 registration –Mechanical and safety standards to be those defined in the AAR Interchange Rules –Adequate storage requirement satisfied by shipper having a storage plan in place Defined as cars not used in the normal business cycle OT-5 Tag accepted proposal NAFCA and AAR working together to jointly develop the centralized OT-5 registration database –System will be of benefit to shippers and carriers alike –System will be a significant improvement over current system and will be user friendly –User testing in October 2008 –Completed and in use by December 2008 NAFCA Actions

Carrier control of AAR Interchange and Car Service Rules –Imposing maintenance costs on car owners that are mainly aimed at reducing carrier operating and track maintenance costs Shippers have minimal input Costs paid by car owners Benefits accrue to railroads –Hollow worn wheels –WILD wheel detectors –Constant contact side bearings –Electronic brakes Distribution of costs Lengthy conversion process and issues What corridors, commodity would benefit most –Continued need for increased car owner voting rights at AAR Committee meetings Liability shift to car owners NAFCA Watch Items

You cannot relax in any business……

It’s been quite a ride…………