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AlaskaRailroad.com The Alaska Railroad Corporation Effects of Reduced North Pole Refinery Production Bill O’Leary Vice President & CFO Presentation to the Senate Energy Working Group September 10, 2012
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AlaskaRailroad.com 2 Alaska Railroad Corporation Railroad built by the federal government (1914 – 1923) Purchased by the State of Alaska for $22 million in January 1985 Self-supporting, State-owned corporation Seven-member Board of Directors appointed by Governor Full-service passenger and freight railroad serving ports and communities from the Gulf of Alaska to Fairbanks Supports 3,000 jobs and $150 million in payroll across the State
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AlaskaRailroad.com 3 Alaska Railroad Quick Facts Operating Data Miles of main line 467 Miles of branch line 54 Miles of yards and siding 135 Total miles of track 656 Freight cars (owned & leased)1,254 Passenger cars 45 Locomotives 51 Employees (as of December 2011) Year-round employees685 Average years of service 12 Average age 46 Male 571 Female 114 Unions Most ARRC employees are members in 1 of 5 unions: United Transportation Union132 Transportation Communications Workers Union 39 International Brotherhood of Teamsters 61 American Federation of Govt. Employees274 American Train Dispatchers Association 8
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AlaskaRailroad.com 4 2012 Sources of Customer Revenue* *Current forecast
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AlaskaRailroad.com 5 2012 Sources of Freight Revenue * * Current Forecast
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AlaskaRailroad.com Petroleum Haul North Pole Refinery (NPR) Historical owners: Mapco, Williams, currently Flint Hills Resources (FHR) Refined products moved via rail between NPR and Anchorage Jet fuel, diesel, unleaded, naphtha primary products moved Historically, ARRC’s largest customer Marked decline beginning 2006 Discontinued naphtha export ANC air freight traffic down significantly since 2008 Shrinking market, increased competition
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AlaskaRailroad.com Sharp Decline in Fuel Shipments 53% decline in volume since 2003
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AlaskaRailroad.com Effects on ARRC 2006: FHR ceases production of naphtha for export – $7 million reduction in ARRC revenues 2009: FHR shutters crude tower #3 – ARRC eliminates ~ 200 positions, majority through attrition and vacancies – Significant non-personnel expense budget reductions and markedly reduced capital budget 2012: FHR shutters crude tower #1 mid-year – ARRC eliminates an additional ~ 50 positions – Diminishing returns, but further non-personnel expense reductions and capital cuts ANC/FAI freight service reduced from seven to five day/week service 2013: Further FHR reductions anticipated – Budget build on-going currently
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AlaskaRailroad.com Effects on ARRC 2006 – 2010: ARRC losing money on train operations – Real Estate and grant funding responsible for corporate net earnings – 2011: modest profit from operations ARRC facing uncertain future – Coal and interline services growing, but not offsetting petroleum drop from an earnings perspective Not all revenue is created equal – Unfunded federal mandate of Positive Train Control ~$70 million additional capital needed to meet requirement by 2015/2018 – Continued decline by former largest customer impacts ARRC ability to appropriately invest in infrastructure Safety still paramount, but few funds available for expansion capital Diminishing returns on continued cost reduction in current form –Five long- term collective bargaining agreements in place –Corporate reorganization may be required
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