Francis P. Mulvey Commissioner Surface Transportation Board Railroad Regulator Panel

1. Francis P. MulveyCommissioner Surface Transportation Board Railroad Regulator Panel RBC Capital Markets 2009 Transportation Conference Toronto, Ontario--September 8, 2009

2. STB Background Successor to the ICC Three member board—non-partisan Railroad rate and service disputes Railroad mergers and acquisitions Board considers authorizing abandonments and new construction Limited jurisdiction over other modes

3. Recent Changes at the STB • Commissioner Doug Buttrey retired from the Board earlier this year • President Obama named Mulvey Acting Chairman in March 2009 • President Obama appointed Dan Elliott new Chairman in August 2009 • Board now has two Democratic Members, but remains non-partisan

4. The Mission of the STB • Despite changes in STB leadership primary mission of the STB remains unchanged • STB must balance need for railroads to earn adequate revenues with shippers’ need for reasonable rates • Ensure structural changes in the railroad industry are in public interest • STB must adapt to changing conditions

5. Rail Rate Cases at the STB • Much railroad traffic exempt from STB rate regulation • Shippers often claimed rate cases took too long and cost too much to bring • Many shippers felt they had no access to STB’s processes for rate relief • Congress directed the Board to develop procedures for small rate cases

6. Changes to Large Rate Case Procedures • Streamlined procedures to reduce time and cost for adjudicating large rate cases—Court of Appeals upheld • First large rate cases handled under new guidelines—AEP North Texas, Western Fuels, KCPL, Oklahoma Gas & Electric • Major shipper win in Western Fuels • Major case involving DuPont and CSX resolved through STB facilitated mediation

7. New Small Rail Rate Case Processes Allows rail customers to choose the methodology that is most appropriate for consideration of a complaint: A rail customer choosing the simplest approach, the “Three-Benchmark” methodology, is eligible to recover up to $1 million over a 5-year period A rail customer choosing the “Simplified Stand-Alone Cost” methodology is eligible to recover up to $5 million over a 5-year period Court upheld challenges to methodologies

8. Experience with Small Rate Case Guidelines • First cases brought by DuPont • Six lines of traffic found to be market dominant; rate relief ordered • Cases were on appeal; court docket held in abeyance while STB considers correction • Recently, parties notified the Board that they have reached a settlement • STB currently adjudicating 2 UP/USM cases (1 SSAC; 1 3BM)

9. Recent Activities • April 30 Hearing on the Uniform Railroad Costing System (URCS) • Staff examining potential approaches to updating or replacing URCS • Continuing oversight of CN/EJE merger • No new mergers on the horizon

10. Legislative Activities Affecting the STB and/or the Railroad Industry • Both Chairmen of Senate Commerce Committee and House T&I Committee want to reauthorize the STB • Both Senate and House bills could change the regulatory framework—unclear at this point what final bills will look like • Senate bill changing railroads’ antitrust exemption is now being considered as part of STB reauthorization bill

11. Thank youAny Questions?