1. 1 Rail Infrastructure Spending Railroad investments to meet growing demands Brian Sweeney BNSF Railway MACE Conference November 4, 2015

2. 2 A Capital-Intensive Industry Railroads typically spend the equivalent of 20 percent of revenues on capital programs (Manufacturing average is 3 percent) The top four Class I railroads spend more maintaining their right of way than all but a few states Highway Trust Fund: $35 billion (tax dollars) Railroad Capital Budgets: $29 billion (private funding)

3. 3 2005-2014 BNSF Volumes Source: Association of American Railroads (AAR) data

4. 4 BNSF Aggressively Deploying Capital to Meet Service Expectations BNSF CAPITAL INVESTMENT OF $53B FROM 2000 - 2015 $ Billions $2.3 $1.9 $2.1 $2.0 $2.6 $3.1 $3.8 $3.4 $3.3 $3.6 $2.7 $4.0 $3.6 $5.5

5. 5 $5.5B Record Capital Investment in 2014 $2.4 billion Core Network and Related Assets $1.8 billion Loco, Freight Car, & Other Equip $1.1 billion Expansion & Efficiency $200 million PTC 4

6. BNSF’s 2015 Capital Commitment $6B $2.9 billion Core Network & Related Assets $1.4 billion Loco, Freight Car, & Other Equip $1.5 billion Expansion & Efficiency $200 million PTC BNSF Spending Even More in 2015 - $6B 6

7. 7 Double Track and CTC Miles Added 2014-2015 Category20142015P DT Miles Added82129 CTC Miles Added72806 New Sidings126 Extended Sidings1115

8. North Region – 2015 Projects Bellingham sub: one double-track project Glasgow sub: complete three double-track projects started in 2014, and begin one additional double-track project Dickinson sub: one siding extension Jamestown sub: completing CTC signaling project started in 2014 Devils Lake sub: CTC signaling Noyes sub: one new siding Hillsboro sub: CTC signaling and connection upgrade Staples sub: one CTC signaling project and three double-track projects Midway sub: one double-track project Monticello sub: subdivision connection and track upgrades St. Paul sub: one triple-track project Aurora sub: CTC signaling project with crossover plants, plus begin construction on two more double-track segments St. Croix sub: CTC signaling project with crossover plants Beardstown sub: five siding extensions plus CTC signaling on the north end of the subdivision 8

9. 9 Policies Must Encourage Reinvestment Pre-1980 rates strictly controlled by ICC Rate Bureaus set one-size-fits-all rates Could not have rate/service contracts with shippers Could not react quickly, if at all, to market changes Could not easily shed unproductive assets Profits declined, reinvestment stalled

10. 10 Policies Must Encourage Reinvestment Burdensome regulation caused significant problems that came to a head in the 1970s: 25 percent of industry in bankruptcy Unable to attract capital, ROI of 1 or 2 percent Conrail created to save service in Northeast Deferred maintenance “Standing derailments” Service declined Question: “Do we nationalize the railroads, or deregulate?”

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13. 13 Threats to Go Back to the Future Anti-Trust Exemptions Under Attack Railroads have limited exemptions STB regulates those areas Not just baseball Two sets of rules Every federal district court would have jurisdiction Undo railroads created decades ago? Rate/Access requests at STB

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