Freight Railroads: Moving America Forward Association of American Railroads March 2, 2009

1. Freight Railroads: Moving America Forward Association of American Railroads March 2, 2009

2. America’s demand for safe, affordable, and environmentally- responsible transportation has never been greater than it is today — and that demand will grow in the future. Railroads are the most sensible way to meet this demand.

3. Efficiency From Coast to Coast

4. The Leader in Freight Transportation (ton-miles) Railroads Trucks Water Pipeline Pipeline excludes natural gas. Source: U.S. DOT

5. Why Freight Rail? Fuel Efficiency  Move a tonof freight436 miles per gallon.  Three times more fuel efficient than trucks. • Since 1980, double the freight on sameamount of fuel!

6. Why Freight Rail? Lower Greenhouse Gases U.S. Greenhouse Gas Emissions  Moving freight by rail instead of truck reduces greenhouse gases by two-thirds or more.  Diverting 10% of long-distance truck traffic to rail would be like taking 2 million cars off the road or planting 280 million trees. Everything Else 99.3% Freight Rail 0.7% Source: EPA

7. Why Freight Rail? Less Highway Gridlock • One train does the work of 280 (or more) trucks. • That means less highway gridlock and lower highway spending.

8. Why Freight Rail? Keeping Goods Affordable Inflation-Adjusted RR Rates* — Down 54% Since 1980! *Average revenue per ton-mile, Class I railroads. Source: AAR

9. Today Below capacity Near capacity At capacity Above capacity 2035 without improvements Expected Traffic vs. Capacity

10. What Are Railroads Doing to Increase Capacity?  Massive equipment and infrastructure investment  Enough people for the job Cooperative alliances Improved operating plans Technology

11. $39 Billion Gap Between What RRs Can Afford and the Capacity We Need $135 billion in infrastructure expansion by 2035 Class I railroads only. Source: Cambridge Systematics

12. RRs Have Far Higher Capital Intensity Than Most Other Industries Capital Expenditures as a % of Revenue: Avg. 1997-2006 Class I RRs Computers Avg. All Mfg. Wood Prod. Petrol. & Coal Prod. Plastics Nonmet. Minerals Paper Food Chemicals Motor Vehicles Sources: U.S. Census Bureau, AAR

13. 1. Texas $7.57 2. $5.69 Florida 3. $4.19 California $4.17 Union Pacific $3.89 BNSF 4. $3.59 New York 5. $3.30 Pennsylvania 6. $3.30 Illinois $2.62 CSX 7. $2.61 Michigan 8. $2.48 North Carolina 9. $2.14 Ohio $2.12 Norfolk Southern 10. $1.88 Georgia Railroads Spend More Than Most State Highway Agencies! Class I Railroad Spending* on Infrastructure vs. State Highway Agency Spending* - 2006 ($ billions) *Capital outlays plus maintenance expenses. Sources: FHWA Highway Statistics Table SF-12; AAR

14. RR Profitability is Below AverageEven in Era of “Record Profits” Return on Equity: Railroads vs. All Industries Source: Value Line

15. Tax Incentives Are a Smart Choice to Bridge the Funding Gap  25% tax credit for projects that expand rail capacity. $1 in investment yields $3 in economic benefits!  $1 billion in rail investment = 20,000 jobs.  Huge public benefits far outweigh costs.

16. Working Together: Public-Private Partnerships  Combine resources to meet public needs.  Railroads pay for their benefits, public pays for public benefits.  Examples: Alameda Corridor, CREATE, Heartland Corridor, National Gateway

17. The Staggers Act: Balanced Regulation Works (Index 1981 = 100) Productivity Volume Staggers Act Passed Oct. 1980 Revenue Price Source: AAR

18. Excessive Regulation Would Mean Reduced Capacity and Service  Goal = lower rail rates for certain shippers • Result = lower rail revenue, capital drain, disinvestment. • Would mean less rail capacity and capability when we need more.