1. Transportation Challenges Facing Grain, Feed and Processing Industry Presentation to Northeast Agribusiness and Feed Alliance 2016 Annual Meeting Feb. 2, 2016 Albany, N.Y.

2. U.S. Department of Transportation  Federal Highway Administration construction, maintenance and preservation of the Nation’s highways, bridges and tunnels  Federal Motor Carrier Safety Administration reduce crashes, injuries and fatalities involving large trucks and buses  Federal Railroad Administration maintaining and improving the U.S. freight and passenger rail networks.

3. US DOT (con’t.)  Surface Transportation Board – Now an Independent Agency Economic regulatory agency Railroad rate and service disputes  St Lawrence Seaway Maintain a safe and reliable deep draft seaway from the Port of Montreal to Lake Erie

6. Review of State Legislatures & Departments of Transportation

7. Transportation by State MassachusettsNew YorkVermontNew Hampshire Total Road Miles76,000243,00030,00033,000 Total Rail Freight Miles9523,500590415 Total Trips (all transit)400 Million3.83 billion2.3 million1.3 million FTEs10,0008,7001,3001,600 State funding (Billions) $ 2.14 $ 6.50 $ 0.22 $ 0.29 State $/trip $ 5.35 $ 1.70 $ 0.94 $ 2.20 State legislature NO YES-by program YES

9. Overview of U.S. Transportation Network

10. U.S. Transportation Network (In Miles) 196019701980199020002010 Highway 3,545,6933,730,0823,859,8373,866,9263,936,2224,067,077 Class I rail 207,334196,479164,822119,75899,25095,573 Navigable channels 25,000 Oil pipeline NA 182,072 Natural gas pipeline 630,950913,2671,051,7741,270,2951,377,3201,553,625 Source: U.S. Department of Transportation’s Bureau of Transportation Statistics, October 2015.

11. Modal Share for U.S. Grain Movements BargeRailTruck Million TonsPercentMillion TonsPercentMillion TonsPercent 19986417%12633%18750% 19997419%13534%18547% 20007218%13032%20250% 20017218%13333%20350% 20027419%13033%18948% 20036817%13033%19349% 20046716%13633%20750% 20055814%14134%22253% 20066014%15835%22851% 20076614%15233%24653% 20085612%14931%27157% 20096313%14330%26957% 20106513%15130%29357% 20116012%13828%29860% 20126013%12626%29161% 20135712%11524%30964% Source: USDA’s Agricultural Marketing Service Modal Share Analysis, June 2015.

12. Export vs. Domestic Movement of U.S. Grain TotalExportDomestic Million Tons 1998377105271 1999394127267 2000404123281 2001408122286 2002393118275 2003392110282 2004411126284 2005421115305 2006446129317 2007465142322 2008476137339 2009474127347 2010509135374 2011496132364 2012478107371 2013481115366 Source: USDA’s Agricultural Marketing Service Modal Share Analysis, June 2015.

13. Estimated Average Miles per Shipment (2012; Includes All Modes and Excludes Farm Movements) CommodityAvg. Miles per Shipment Wheat288 Corn96 Other cereal grains490 Soybeans119 Oilseeds and nuts506 Animal feed ingredients; preparations748 Wheat flour, groats, and meal185 Malt, milled rice and corn (broken, flour, groats, and meal, inulin, wheat gluten, milled cereals and other vegetables and grains 587 Animal or vegetable fats, oils, waxes, and their cleavage products, prepared edible fats, and flours and meals of oil seeds (excludes oils and fats for use as biodiesel) 448 Ethanol, ethanol blends of more than 10 percent ethanol, and other fuel alcohols139 Ethanol, for use as biofuels289 Source: U.S. Department of Transportation, Bureau of Transportation Statistics and U.S. Department of Commerce, U.S. Census Bureau, 2012 Economic Census: Transportation Commodity Flow Survey, December 2014.

14. Estimated Average Miles per Shipment for Cereal Grains (Excludes Farm Movements) Cereal GrainsAvg. Miles per Shipment All modes202 Truck94 Rail670 Water670 Multiple modes1,077 Source: U.S. Department of Transportation, Bureau of Transportation Statistics and U.S. Department of Commerce, U.S. Census Bureau, 2012 Economic Census: Transportation Commodity Flow Survey, December 2014.

15. Trends Affecting Ag Transportation Needs  Growing Ag Production to Meet Demand of Expanding, More Affluent World Population; translates into continued, growing demand for all modes  Impacts of Climate Change on Crop Production and Demand Growth Trends  Shipper/Receiver Facility Development Costs for Transportation Efficiencies; loading, unloading, side track capacity  Currency Fluctuations: Pressure on U.S. exports; Increased Canadian imports into Northeast impacts traditional U.S. grain flows into area  Canadian Government Rail Mandates: Will they reemerge?  Truck, Rail Regulatory Environment

16. New Rail Law – A Start to Restoring Regulatory Balance? 16

17. New Rail Law (P.L. 114-110) – Key Provisions  Authorizes Surface Transportation Board (STB) to initiate investigations of rail practices (except rail rates) on own initiative (rather than only in response to the filing of formal shipper complaint)  Makes STB independent agency; expands to five commissioners  Requires STB to establish public database and report quarterly to Congress on: Status of ongoing STB proceedings Status of complaints filed and how resolved Service complaints received and how resolved Status of unfinished STB proceedings  Review rate-review process  Enable STB members to communicate with one another on proceedings, issues without calling public meeting

18. Major STB Proceedings 18

19. Major STB Proceedings Underway  Rail Service Performance Reporting: Make Permanent  Access to Challenge Unreasonable Rail Rates Create Workable Approach for Captive Ag Shippers at STB Rail Carriers Reaching Revenue Adequacy – Merely a Goal? Or Should it Affect Rate-Setting Freedom? Explore expanding NGFA Rail Arbitration to apply to rates, accessorial charges, etc.; mediation already available  Competitive Switching: Create Reasonable Way for Ag Shippers to Access Lines of Competing Carriers Require Carriers to Justify Switch Charges Exceeding 180 percent of variable cost of providing switch

20. Major STB Proceedings for 2016  Potential CP Acquisition of Norfolk Southern : CP pause in response to congressional, RR, shipper concern; seeking Justice Dept. review of other Class I RR opposition CP proposal to put CP into voting trust; with CP management running NS during regulatory review process First time STB would judge under new 2001 merger rules  CP required to demonstrate merger in public interest (enhance competition) and benefits of end-to-end merger can’t be achieved through other means  STB Jan. 7 Letter to House Judiciary Committee  Agency required to consider “downstream impacts” – future merger transactions that likely would be triggered  Voting trust of kind proposed by CP not previously considered by STB – new merger rules require more cautious consideration than previously

21. Major STB Proceedings for 2016  Potential CP Acquisition of NS CP “pro-competition” proposals for shippers  Competitive Terminal Access – dependent on internal scoring metrics of shipper satisfaction  Removal of bottleneck rates – challenges of rates reliant on flawed STB rate-challenge process  Removal of paper barriers with shortlines Fallout?: Other Class I carriers concern over increased STB regulation; will seek own merger targets

22. Major STB Proceedings for 2016  STB Rail Customer and Public Assistance Program – Good Avenue for Shippers Confidential, informal forum to enhance private-sector, voluntary resolution of rail operation and service-related issues  Rates and other charges  Car supply and service issues  Interchange issues  Claims for damages  Concerns over rail employees  Demurrage Claims  Community concerns Contact: 866-254-1792 or rcpa@stb.dot.gov

23. Rail Infrastructure Investment  Class I Carriers Investing Heavily in Infrastructure  Grant Programs at DOT Railroad Rehabilitation and Improvement Financing  Loans, loan guarantees to RRs, states, local govt., corps.  Acquire, rehab rail equipment, tracks, bridges, rail yards; enhance safety, increase capacity  Repayment over 35 years at Treasury interest rate  27 states; 35 loans; $2.7 billion (80% to Class II & III RRs) Transportation Investment Generating Economic Recovery (TIGER) Grant Program  State, local govt.  Freight rail, bridges, highways  $4.6 billion; 381 projects in 50 states  Focus on innovation, safety, accident-prevention Transportation Infrastructure Finance and Innovation Act (TIFIA) Credit Assistance Program -- large projects  Direct loans, loan guarantees, standby lines of credit

24. Truck Issues

25. New Highway Law Enacted in 2015  Five-Year, $305 Billion Law – First Long-Term Highway Bill in a Decade Increases Funding, Predictability  Key Provisions Supported by NGFA: Requires U.S. Department of Transportation to pursue rulemaking evaluating impacts on motor carrier industry and safety before increasing minimum insurance requirements above $750,000 Establishes national freight and multimodal policies focusing on most strategic freight assets to improve safety, efficiency, reliability of freight movements Requirement for ports to report performance efficiency metrics Makes permanent the exemption for livestock, poultry haulers from Hours of Service 30-minute rest period Establishes pilot program to reduce age limit for drivers on federal Interstate highways to 18 (consistent with most states)  Key Missing Element: No increase in national truck weight limit on Interstate highways to 91,000 pounds on six axles

26. FMCSA Regs  Hours of Service (HOS) Rules Applies to CDL drivers transporting products interstate in vehicles weighing 10,001 pounds or more, or hazardous materials in quantities requiring placarding Requirements for drivers transporting property  May not drive more than 11 hours or work more than 14 consecutive duty hours after 10 consecutive hours off duty  Rest breaks: May drive only if 8 hours or less have passed since end of driver’s last off-duty or sleeper-berth period of at least 30 minutes; does not apply to drivers using short-haul exceptions  May not drive after 60/70 hours on duty in 7/8 consecutive days. May restart a 7/8 consecutive day period after taking 34 or more consecutive hours off-duty  Suspended: Requirement to include two rest periods from 1 to 5 a.m. home terminal time

27. HOS Exemption for Ag, Feed  HOS Exemption for Ag Applies to CDL drivers during planting and harvesting seasons as determined by state Applies to following transportation:  Agricultural commodities from the source of the agricultural commodities to a location within a 150 air-mile radius from the source;  Grain and feed included in exemption definition of ag commodity (any “agricultural commodity, non-processed food, feed, fiber or livestock”)  Limited number of states have incorrectly excluded grain handlers from using ag exemption  Farm supplies for ag purposes transported from wholesale or retail distribution point to farm or other location where farm supplies are intended to be used, within 150 air-mile radius from distribution point; or from wholesale distribution point to retail distribution point of farm supplies, within 150 air-mile radius from wholesale distribution point

28. New FMCSA Regs  Anti-Coercion Rules – Took Effect Jan. 29 Apply to motor carriers, shippers, receivers or transportation brokers that threaten to withhold work from, take employment action against, or punish driver for refusing to violate FMCSA regulations (e.g., hours-of-service limits, hauling hazardous materials, violating CDL regs, operating in violation of drug and alcohol testing rules, etc.) Driver required to tell requestor that regulatory violation will occur as precursor to filing complaint FMCSA now accepting coercion complaints from drivers; required to be filed within 90 days of alleged incident  Precautions Be cautious in what say, do, email related to service, delivery time requirements, driver performance etc. Courteous, respectful of drivers; consider designated parking areas for drivers to sleep in cabs?

29. New FMCSA Regs  Electronic Logging Devices (ELDs) to Monitor HOS -- Final Rule Issued Dec. 10 Deadline for implementing: December 2017; use of automatic on-board recording devices allowed until December 2019 or longer if they can be modified to meet ELD specifications Applies to all drivers currently required to complete paper logs, except pre-2000 model year trucks (electronic connectivity deficiencies); perverse effect – some truckers buying glider kits to put old truck on new frame Exceptions to ELD requirement:  Drivers who use paper logs for not more than 8 days during any 30-day period;  Drivers who conduct driveaway-towaway operations, where vehicle is product being delivered;  Drivers of vehicles manufactured before model year 2000 (change from proposed rule, resulting from vehicle connectivity concerns;  Drivers who operate using logbook timecard exception (i.e. short-haul, 100-air mile-radius drivers).  Drivers not required to complete logs because they meet one of the short-haul exemptions; in instances where drivers don’t meet short-haul exemption conditions, drivers required to keep paper log

30. New FMCSA Regs  ELDs – New Document-Retention Requirements Focused on verifying on-duty time, not driving time Fleets required to retain up to eight supporting documents from the following categories per driver for each 24-hour period:  Bills of lading, itineraries, schedules or equivalent documents indicating the origin and destination of a trip;  Dispatch records, trip records, or equivalent documents;  Expense receipts related to on-duty not driving time;  Text messages, email messages, instant messages, or other electronic mobile communications transmitted through a fleet management system;  Payroll records, settlement sheets, or other documents reflecting driver payments  Supporting documents required to contain following elements: driver identification, date, vehicle location and time.  If motor carrier has more than eight supporting documents containing these data elements, they must retain the ones nearest the beginning and end of driver’s shift and in manner allowing them to be easily matched to logs  Drivers required to submit such documents within 13 days of receipt and produce those in their possession to law enforcement upon request

31. New FMCSA Regs  ELD and Paper Log Exemptions for Short-Haul Drivers Applies to CDL drivers operating within100 air-mile radius  ELD rule does not reference 150-mile ag exemption (NGFA, ATA to seek inclusion)

32. Food Safety Modernization Act – Transportation Implications

33. Big 6 FSMA Rules Date Regs Issued Current Good Manufacturing Practice (CGMP) and Preventive Controls – Human Food Aug. 30, 2015 (Sept. 17, 2015) Current Good Manufacturing Practice (CGMP) and Preventive Controls – Animal Food Foreign Supplier Verification Programs Oct. 31, 2015 (Nov. 27, 2015) Accreditation of Third-Party Auditors Sanitary Transportation of Food, FeedMarch 31, 2016 Food Defense/Intentional AdulterationMay 31, 2016

34. Sanitary Transportation of Food/Feed  Scope – Applies to: Rail and truck; barges, vessels excluded Shippers, receivers and carriers that transport “food” in U.S. (including grains, oilseeds, feed, feed ingredients, processed commodities) Both interstate and intrastate shipments  Good Parts of FDA-Proposed Rule Flexibility to use appropriate, effective sanitary transportation practices Limit to rail and truck Not rule out certain classes or types of rail or truck conveyances or transportation equipment  FDA Overreach in Proposed Rule

35. Sanitary Transportation of Food/Feed  FDA Overreach in Proposed Rule – Clearly Unfamiliar with Transport Proposed requiring identification of immediate previous three loads hauled Designation of adulteration leading to cargo claims Access to hand-washing facilities  NGFA, Industry-Sought Changes Do not undermine Carmack amendment requirement for carriers to provide clean equipment suitable for type of product being hauled Require identifying only immediate previous load hauled; require carrier to specify clean- out method used Exempt from Part 11 electronic recordkeeping rules Narrow excessively broad definitions of bulk vehicles and transportation equipment Exempt intracompany transfers between facilities operating under same legal entity Exempt dedicated rail, truck conveyances and equipment used to haul same type of human or animal food (e.g., shuttle trains dedicated solely to hauling grain; processed commodity tank cars) Support exemption for transport of live food-producing animals Include responsibility for transportation brokers to inform carriers of clean equipment requirements Include exemption for bagged, packaged, canned, containerized animal feed, feed ingredients, pet food Develop FDA guidance for safe transport of raw ag products from farms

36. Transportation Challenges Facing Grain, Feed and Processing Industry Questions? Thank you! Louise Calderwood, Government Relations Director Northeast Agribusiness and Feed Alliance Randy Gordon, President, National Grain and Feed Association