National Conference of State Legislatures. Minneapolis, Minnesota August 20th, 2014

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1 National Conference of State Legislatures Minneapolis, Minnesota August 20th, 2014

2 Railroads Help Keep Coal- Based Electricity BNSF CN CP CSX FXE KCS/KCSM NS UP Other RRs Freight Railroads in North America SLIDE 1

3 Record Investments in Recent Years Despite the Economy Railroad Spending on Infrastructure and Equipment* ($ billions) $25.5 $25.1 $23.3 $21.5 $20.2 $20.2 $20.7 $19.3 $26.0 $ e *Capital spending + maintenance expenses. e estimate Data are for Class I railroads. Source: AAR SLIDE 2

4 Until the Recession, A Steady Increase in Rail Traffic (trillions of ton-miles) Up 95% '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13 Data are for Class I railroads. Source: AAR SLIDE 3

5 America s Railroads Carry Just About Everything Food - $5.6 bil Grain - $4.7 bil Chemicals - $9.9 bil Motor vehicles & parts - $5.5 bil Sand, gravel, & other nonmetallic minerals - $3.2 bil Steel and other metal products - $2.7 bil Pulp & paper - $2.3 bil Stone, clay & glass prod. (e.g., cement, ground Lumber & wood - $1.8 bil minerals) - $1.8 bil Coal - $14.3 bil *Intermodal is estimated; some intermodal revenue is included in individual commodities Source: AAR (FCS report) Intermodal* $15.5 bil Total gross freight revenue in 2013: $72.1 billion SLIDE 4

6 U.S. Crude Oil Production (millions of barrels per day) '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 Source: Energy Information Administration SLIDE 5

7 What s This? Shale containing oil or gas SLIDE 6

8 What s This? SLIDE 7

9 U.S. Crude Oil Production (millions of barrels per day) 7.45 million in 2013 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15e e Energy Information Administration estimate Source: EIA SLIDE 8

10 U.S. Crude Oil Production by State: (millions of barrels per day; % = % change from ) 2,800 2,400 2,000 1, % -14% 1, % -16% -43% % 53% -14% 22% 179% TX GULF* ND CA AK OK NM LA WY CO *Federal offshore Gulf of Mexico Source: EIA SLIDE 9

11 Domestic Energy Renaissance Means Huge Benefits for U.S. Reduced reliance on oil from countries that are not secure and whose interests do not necessarily correspond to our own. Thousands of new and better jobs and economic development opportunities all over the country. Higher tax revenue, lower trade deficit. SLIDE 10

12 U.S. Oil Refineries Source: Government Accountability Office based on EIA data as of 1/1/13 A lack of refineries in areas of new production like ND means crude oil has to be transported to where it can be refined. SLIDE 11

13 What s This? SLIDE 12

14 Why Move Crude by Rail? Geographical flexibility Responsiveness Efficiency Underlying infrastructure Isolation of commodity SLIDE 13

15 Originated Carloads of Crude Oil on U.S. Class I Railroads 407, ,698 4,729 5,912 9,500 10,840 29,605 65, Source: AAR SLIDE 14

16 Still a Very Small Portion of Railroad Traffic Everything else 99.96% Everything else 98.6% Crude oil 0.04% Crude oil 1.4% Crude oil is such a small share of total rail traffic, it s not plausible to claim it crowds out other rail traffic to a significant degree. SLIDE 15

17 Crude by Rail Safety: Three Key Facets Accident prevention Accident mitigation Emergency response SLIDE 16

18 Accident Prevention Reinvestments Technological advancements Defect detectors Routing model Inspections Speed restrictions Train braking SLIDE 17

19 Accident Mitigation Focus on making tank cars used for crude oil safer: March 2011: Rail industry asks PHMSA to adopt tougher requirements for new tank cars. July 2011: AAR Tank Car Committee adopts proposal to PHMSA as basis for new industry standards ( CPC-1232 ) for tank cars ordered after Oct. 1, Nov. 2013: Rail industry calls on PHMSA to adopt standards more stringent than CPC-1232, including retrofitting existing tank cars or phasing out if not modified. SLIDE 18

20 TANK CAR STANDARDS High Capacity Pressure Relief Valves Top Fittings Protection Steel Tank Head Shields Bottom Outlet Handles Jacket and Thermal Protection SLIDE 19

21 Emergency Response Training

22 Long-Term Demand for Freight Transportation Will Surge Billions of Tons of Freight Transported in the U.S p 2030p The U.S. DOT expects total U.S. freight movements to rise from around 17.6 billion tons in 2011 to 28.5 billion tons in 2040 a 45% increase. p projected Source: FHWA - Freight Analysis Framework, version 3.4 SLIDE 21

23 Freight by Rail SLIDE 22