1. Where We Are Today – Short Lines’ New Rules Dave Mears AVP-Equipment & Service American Short Line and Regional Railroad Association Presentation To American Car Accounting & Car Service Officers New Orleans, LA November 11-12, 2009

2. November 8-10, 2009August 15-18, 2009 2 How Are We Doing?

3. 3 November 8-10, 2009 ASLRRA Member Railroads 481

4. 4 November 8-10, 2009 YearEmployee HoursCategories*FatalitiesRate 1 2 3 2003 2004 2005 2006 2007 2008 **2009 97,122,382 98,202,880 100,074,486 101,754,349 103,120,889 102,564,916 76,410,177 1,765 1,766 1,758 1,660 1,618 1,167 426 296 270 230 258 267 142 50 45555514555551 45555514555551 4.25 4.16 3.98 3.78 3.67 3.60 3.10 *Categories: **Through August 1 = Non severe and non life-threatening injuries 2 = More severe; amputations, concussions, loss of sight, hearing, etc. 3 = Fatality 2003 - 2009 Class II / III Safety Performance

5. 5 November 8-10, 2009 Rail Industry Carloads 2008 - 2009 Class I's – Short Line Traffic Only RR 3 rd QTR 2008 3 rd QTR 2009Variance BNSF 526,280 435,795- 17.1% CN 136,277 100,279- 26.4% CP 195,742 173,161- 11.5% CSX 807,251 664,702- 17.7% KCS 157,391 112,004 - 28.8% NS 742,079 569,056 - 23.3% UP 675,000 540,000 - 20.0%

6. 6 November 8-10, 2009 Rail Health Indicators – Mixed Story for Now Energy Demands – Decreasing Petroleum Costs – Down But Slowly Increasing Consumer Demands – Slipping / Flat Imports Rose in July 2009 4.7% (2 straight up months) Exports Up 2.1% (4 straight up months) Food Supply – Stressed Globally Railroad Environmental Benefits – Good / Best Railroad Growth – Network Expansion / Public-Private Partnerships – Stalled % of Freight on Rail – Significant Decline Railroad Rolling Equipment in Storage – Very High / Minor Improvements

7. 7 November 8-10, 2009 Rail Health Indicators Rail Modernization and Use of Technology – Expanding Railroad Efficiency – Lower OR, Better Speeds, and Weak Dwell Rates? Railroad Productivity – Up Railroad Safety Performance – Good / Excellent Railroad Workforce – Down / Small Returns to Service Railroad Pricing Power – Strong Railroad Financial Posture – Solid Investment in Railroads – Stable / Down Railroad Unfunded Regulatory Requirements – Very High / Significant Issue Railroad Retirement Trust Fund – Down But Healthy ($31B to $26B)

8. 8 November 8-10, 2009 Rail Health Indicators Rail Network Regional / Geographic Positioning – Good / Excellent Limited Ground Freight Options – Current Economics Favor Freight Rail The Indicators are Generally Good for Freight Rail – Will Remain Vital to the Economy for Both Near and Long Terms

9. November 8-10, 2009August 15-18, 2009 9 New Rules Are On The Way!

10. 10 November 8-10, 2009 Rail Safety Improvement Act of 2008 H.R. 2095 90 Industry Action Items, including:  32 New Regulations  7 Amended Regulations  8 New Plan Requirements  11 New Report Assignments  8 New FRA Studies  4 Pilot Programs

11. 11 November 8-10, 2009 Rail Safety Improvement Act of 2008 (cont'd) 1. Positive Train Control – Implement 2015; RSAC Completed: NPRM 06/09 with Short Line Exemptions; FRA Final Rule 11/09 2. Hours of Service – RSAC Completed: Final Rule 07/09; In Effect 07/16/09 3. Bridge Safety Requirements – RSAC Completed; NPRM 2009 4. Tunnel Requirements – Implement 5. Grade Crossing Inventory – Implement 10/16/09 6. 1 – 800 ENS – Implement Within 18 months 7. Risk Reduction Program – Implement 8. Top 10 States Require Xing Action Plan – Implement

12. 12 November 8-10, 2009 Rail Safety Improvement Act of 2008 (cont'd) 9. Dark Territory Switch Technology – Future RSAC 10. Broken Rail Service Failure Rate – Study 11. Certify Conductors – RSAC 07/09 – 12/09 12. Certify Carmen – Study 13. Sight Distance Law & Regulations at Xings – Implement 14. Radio Monitoring Authority – In Effect 15. Civil Penalties $25K-$100K – In Effect 16. 800 New FRA Inspectors – Implement Hiring 2009

13. 13 November 8-10, 2009 Ongoing and Significant FRA Rail Safety Advisory Committee (RSAC) 1. Railroad Operating Rules 2. Medical Standards for Train Crews 3. Occupational Noise Standards and Requirements 4. Accident / Incident Reporting Requirements 5. Private Crossings 6. Roadway Worker Protection Rules and Requirements 7. Passenger Safety 8. Rail Integrity 9. Concrete Ties Utilization 10. Bridge Inspection and Maintenance 11. Tunnel Standards 12. Locomotive Standards

14. 14 November 8-10, 2009 Ongoing and Significant (Cont'd) 13. ECP Brake Specifications and Requirements 14. Pressure Tank Car Specifications 15. Positive Train Control Implementation, Standards, Rules 16. Conductor Certification Other: *17. HazMat Risk Assessment / Routing Rules *18. Emergency Escape Breathing Apparatus Requirements *19. Emergency Call Numbers at Grade Crossings 24-7-365 Call Centers *20. At Grade Crossing Inventory *21. Continuous Welded Rail Standards *22. Narrow Band Radio Frequency Change and Equipment 23. Locomotive Horn Testing and Record Keeping * Not RSAC

15. 15 November 8-10, 2009 Legislative and Regulatory Focus 2009 “Big 6”  Positive Train Control (PTC)  Final Rule Will be out This Year – November ( ? )  Short Line Exemptions: + SL’s can Operate on PTC Equipped Territory Up to and Beyond 20 Miles But Not More than 4X Day + Non PTC Loco can Cross PTC Equipped Territory at Diamonds But Requires Split Point Derails + 2020 Requirements – SL Operations Beyond 20 Miles must have PTC Equipped Locomotives  Short Lines with Passenger and TIH Moves Have Other Considerations  Hours of Service (HOS)  2 FRA Requests Submitted by ASLRRA: + Petition for Waiver – 280 Short Lines Approximately 5,000 Covered Employees (T & E) – FRA Response Anticipated Oct. 2009 + Petition for Exemption – 155 Short Lines (974 T & E) With Fewer than 16 Employees – FRA Response Oct. / Nov. 2009  Until FRA Approves Requests New HOS Rules are in Effect

16. 16 November 8-10, 2009 Legislative and Regulatory Focus 2009 (Cont’d)  Reregulation  Bottle Neck, Terminal Access, Paper Barriers are Central Components of Reregulation  Rockefeller Rereg Legislation is Uncertain This Year  Short Line and Class I Positions were Consistent and Mutually Supportive  Antitrust Legislation  Kohl / Baldwin Legislation (S. 146 / H.R. 233) May be Incorporated into any Senate Reregulation Legislation  Short Line Tax Credit  Expires December 31, 2009  Extension Efforts Proceeding Well: + 218 House Members are Sponsors of H.R. 1132 + 48 Senate Members are Sponsors of S. 461 + Short Line Members Engaged in State Delegation “Fly-In” All Summer to Lobby Members  “Extenders Bill” in Nov. / Dec. Looks To Be a Potential Option This Year for our Tax Credit Extension

17. 17 November 8-10, 2009 Legislative and Regulatory Focus 2009 (Cont’d)  Truck Size and Weights  Safe Highways and Infrastructure Preservation Act (SHIPA) Bill H.R. 1618 – Rep. James McGovern (MA)  Safe Highways and Infrastructure Preservation Act (SHIPA) Bill S. 779 – Sen. Frank Lautenberg (NJ)  Both Bills: + Freeze Truck Size and Weights on National Highway System to 80K lb Trucks + Freeze Longer Combination Vehicles (LCV)  Co-Sponsors: + 120 in the House Bill (H.R. 1618) + 7 in the Senate Bill (S. 779)  State TSW Initiatives: + FL – Weight Increase for Cattle Trucks + ME – Pilot Project for 100K lbs in Appropriations Bill Now  A Truck Size and Weights Bill is Not Expected to Move this Year ( ? )

18. 18 November 8-10, 2009 Near Term Short Line Legislative and Regulatory Compliance Expenditures  Positive Train Control: $ – Yet to be Determined  Hours of Service: $ – Hire More Personnel  Emergency Escape Breathing Apparatus (EEBA): $ – 3 Units Mounted in each Loco Cab Moving TIH / EXPLOSIVE / Radiological  Radio Narrow Banding: $ – 12.5 KH Radio for: New Base Stations, Locomotives, Vehicles, Mobile Radios & Antennas, etc.  Grade Crossing Inventories and Signage: $ – Inventory All Public Crossings. New Signage on all Crossings  1 – 800 Call Centers $ – Contract for or Hire and Equip a Call Center  Bridge Inspections and Reporting: $ – Inventory, Inspection, Filing, Load Capacity Determination, Reporting  Conductor Certification: $ – Train Conductors to Standard

19. 19 November 8-10, 2009 Near Term Short Line Legislative and Regulatory Compliance Expenditures  Locomotive Horn Testing and Recording: $ – Contract for Horn Testing  Medical Standards: $ – Yet to be Determined  Occupational Noise Standards and Requirements: $ – Hire Contractor to test, Record, Maintain Records  HazMat Risk Assessment Routing (TSA): $ – Evaluate Movement of TIH by Routing Tool, Report and Reroute  Security Training, Chain of Custody for TIH (TSA): $ – Training  New D&A Requirements: $ – Testing of All Personnel at Random  Training Standards: $ – Yet to be Determined  Locomotive Horn Testing and Recording: $ – Contract Horn Testing

20. 20 November 8-10, 2009 American Short Line and Regional Railroads  Connecting America's Communities  Strengthening America's Economy  Protecting America's Environment

21. 21 November 8-10, 2009