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Rail is making a difference in d omestic crude growth

BNSF Railway. Grand Forks, ND. September 18, 2013. Matthew K. Rose. Chairman and Chief Executive Officer. Rail is making a difference in d omestic crude growth. Topics. Birth of crude by rail Fast track to growth Value of rail What’s next. The Birth of Crude by Rail.

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Rail is making a difference in d omestic crude growth

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  1. BNSF Railway Grand Forks, ND September 18, 2013 Matthew K. Rose Chairman and Chief Executive Officer Rail is making a difference indomestic crude growth

  2. Topics • Birth of crude by rail • Fast track to growth • Value of rail • What’s next

  3. The Birth of Crude by Rail

  4. BNSF in North Dakota For more than a century, BNSF Railway has played an important role in North Dakota’s economy • BNSF employs nearly 1,500 in ND and has hired more than 240new employees in 2013 • New or expanded BNSF served facilities represent investments worth $390 millioncreating more than 680 jobs in ND (2010-2012) • BNSF has invested more than $540 million in ND for capacity expansion and maintenance (2010-2013)

  5. Ag Shuttle Network as the Model • BNSF learned from our record with agriculture customers for building a strong supply chain network

  6. BNSF Shuttle Network

  7. Fast Track to Growth

  8. Growth in Crude Rail Shipments BNSF Crude Volumes592,000 bpd average in July, 2013 BNSF Total Volumes (000s bpd) 2010 2011 2012 2013

  9. North Dakota Unit Train Rail Facilities BNSF crude shippers invested nearly $1 billion developing 11 new Bakken origin facilities

  10. Crude Transportation Package • Upstream, midstream or downstream, operations are mainstream to the mission of BNSF Railway. • Upstream: • Sand • Pipe • Aggregate • Midstream: • Crude Oil • NGL • Downstream: • Fuels • Asphalt

  11. Rail is Filling the Gap • Relieving U.S. Oil and Gas Transportation Bottlenecks 20% OTHER 69% RAIL 23% PIPELINE 6% RAIL 74% PIPELINE 8% OTHER 2013 Williston Basin Production 2010 Williston Basin Production 11

  12. Value of Rail

  13. Rail is Providing Unique Value • MarketDistribution Flexibilityallows producers to ship in multiple constructs and to refineries throughout the U.S. • Investments in infrastructure, people and process ensures Reliable Transportation Services for producers. • Decades-long commitment to Safe Operating Practices helps prevent accidents in the first place.

  14. Vast Origin Network Provides Flexibility Proving access to all of the nation’s western shale plays Crude Origin Facilities 14

  15. 50 Destination Facilities by end of 2014 West Coast: 19 Destination Facilities East Coast: 11 Destination Facilities Mid-Continent: 12 Destination Facilities BNSF Network Other Networks Unit Train Facility Manifest Facility In-Development Facility Crude Destination Facilities Gulf: 19 Destination Facilities 15

  16. How Have we Responded Today? In 2013, BNSF plans to invest $400 million on capacity initiatives to support crude-by-rail growth

  17. Safe Crude Oil Rail Transportation • Rail is one of the safest ways to transport crude oil and hazardous materials • 99.997% of rail industry shipments of hazardous materials reach their destination without a release caused by a train accident • BNSF hazmat releases continue to decline even as volumes grow BNSF Total Hazmat Releases BNSF Number of Hazmat Shipments

  18. What’s Happened in the Past 12 Months Safety: FRA Emergency Order 28 & Rail Voluntary Measures • The rail industry has exceeded FRA Emergency Order 28 by implementing tighter controls on the commodity mix. • The industry is applying provisions of the Emergency Order to: • 1 or more loads of Toxic Inhalation/ Poisonous Inhalation materials, including ammonia solutions, Spent Nuclear Fuel or High Level Radioactive Waste • 20 or more loaded tank cars of any hazardous material • Identified trains will not be left unattended on main line or siding tracks • Specific location exemptions require lead locomotive to be locked and the operating control handles removed • All relevant information such as weather and grade for these trains must be recorded, verified and confirmed between the train crew and dispatcher

  19. What’s Next

  20. Opportunities • Continued expansion in Bakken • New production in non-Bakken shales • Pipeline to rail connections will expand options for customers • Destination development continues • Canadian rail development is coming 20

  21. Challenges • Spreads have narrowed, but seems to be a short-term phenomenon • Pipeline competition • Political and environmental risks

  22. Questions?

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