1. Future of Freight Rail National Association of Counties 2011 Rail Conference Commissioner Francis P. Mulvey April 28, 2011

2. STB Basics Independent economic regulatory agency for the railroad industry Jurisdiction over  Railroad rate and service disputes  Railroad mergers and acquisitions  Rail line abandonments and construction  Freight/passenger rail relationships  Limited jurisdiction over other modes

3. Board Structure Comprised of 3 Board members Ann Begeman confirmed on April 14, replacing Chip Nottingham All members have rail transportation backgrounds –Elliott: United Transportation Union –Mulvey: House T&I staff; DOT IG for rail; GAO transportation group –Begeman: Senate Commerce staff

4. STB STAFF Highly educated professional staff - lawyers, economists, financial analysts, environmental and railroad operational specialists Named #1 small agency - annual federal employee survey for past 2 years “One of the most obscure corners of the federal government.... train geeks and experts” Washington Post

5. Future of Freight Rail Hard to Predict Positive state of rail industry today not predicted 10 years ago 5 years post-Staggers, industry was still struggling Many variables in 25-year outlook Past is not necessarily prologue

6. Recent increase in rail volume 14 straight months of traffic gains Nearly all commodities up from the same period 1 year ago Grain, Coal, Chemical, Motor Vehicles up  BNSF, UP, NS carload volume increases greater than 5% (vs. same week 1 year ago)  CSX, KCS, and CN all in positive territory  CP decline due to recent service issues

7. Intermodal at near-record highs CSX, NS, BNSF, KCS and CN post gains of 8-10% (vs. same week 1 year ago) UP gains smaller (2.5%) More commodity types moving via intermodal (e.g., some forest products migration from boxcar to intermodal)

8. Future Traffic Growth Rate of continued traffic growth unknown Capacity may become issue  1930 – 250,000 Class I route miles 2009 – 90,000 Class I route miles  1940 – 1.6 million Class I employees 2011 – 161,000 Class I employees

9. Future Traffic Growth Railroads continue to increase infrastructure investments  1995 –$6 billion Class I capital expenditures  2009 – nearly $10 billion capital expenditures  2011 - $12 billion planned capital expenditures  Most capital expenditures for replacement, not expansion Rail market share growth; barge/pipeline decline Not clear whether rail could handle substantial traffic shift from trucks

10. Energy Policy Significant percentage of rail revenue derived from coal transport Changes in coal/energy policy could impact –Traffic volume –Destination (export vs. domestic usage) Push for renewable energy could change traffic makeup Ethanol policy

11. Trade Issues Impact export volumes Will a growing percentage of U.S. coal go to Asia? Will there be larger overseas sales for U.S. automotive manufacturers? Will worldwide grain shortages send more U.S. grain overseas?

12. Changes in Transportation Policy PTC implementation and experience Changes in safety regulations Changes in legislative/regulatory economic regulation Budget cuts/increases in federal programs that support rail industry investment

13. Changes in Rail Industry Innovation Likely future productivity and efficiency improvements Last 25 years have produced –Increased train speeds –Longer trains; more emphasis on unit trains –Changes in employee functions/crew size Productivity gains were passed on to shippers via lower rates; this has changed in past few years

14. Growth of Passenger Rail High speed rail investment –Will it happen on a large scale? –Will it impact freight rail capacity in the short or long term? –Funding? Growth in transit ridership and potential impact on freight rail capacity

15. Local Gov’t Influence on Rail Industry Participation in STB proceedings –CN/EJE merger proceeding - hundreds of local comments on safety, environment, oversight –Local officials/citizens comment in many proceedings STB’s Rail Customer & Public Assistance Program Community/state purchase of rail lines –Maine recent purchase of 200+ mile line –3 Indiana communities bought line being abandoned; trail use now and possibility of rail use in future

16. Thank you Any Questions?