Evolution of Rail Related Energy Markets The Energy Forum New York, NY March 18, 2013
Assn. of American Railroads www.aar.org SLIDE 2
Integrated Rail Network U.S. freight rail network ~140,000 route-miles; ~40,000 in Canada & Mexico Every U.S. state but Hawaii ~ 1.5 million freight cars, ~ 31,000 locomotives in service in N. America Seamless across borders except for Customs SLIDE 3
Total: $68.1 billion Stone, gravel, sand - $2.1 bil. (3%) 1.83 billion tons originated Coal $14.7 bil. (22%) *Estimated. Some intermodal revenue is also included in individual commodities. Source: AAR (FCS) Gross Revenue in 2012 for Class I Railroads Intermodal* $14.6 bil. (22%) Other $6.0 bil. (9%) Lumber & paper $3.8 bil. (6%) Steel & other metal products $2.6 bil. (4%) Motor veh. & parts $4.9 bil. (7%) Food Chemicals $5.4 bil. (8%) $9.1 bil. (13%) Grain - $4.8 bil. (7%) SLIDE 4
Record Capital Spending Expected in 2013 U.S. Freight Railroad Capital Spending ($ billions) $11.6 $10.2 $9.9 $9.8 $9.2 $8.5 $5.9 $6.2 $6.4 $12.5 $13.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013e Data are for Class I railroads. e estimate Source: AAR SLIDE 5
2009-2012 Have Been the Safest Years in History for RRs 110 100 90 80 70 60 50 40 30 20 10 0 (Index 1980=100) Grade crossing collisions: 82% Train accidents: 80% Employee injuries: 85% '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12* *2012 is preliminary % = change from 1980-2012. Source: FRA SLIDE 6
8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 What s This? 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: EIA U.S. Crude Oil Production (millions of barrels per day) SLIDE 7
What s This? Shale containing oil or gas SLIDE 8
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7.0 U.S. Crude Oil Production What s This? (millions of barrels per day) 6.5 6.0 5.5 5.0 4.5 4.0 1998 2000 2002 2004 2006 2008 2010 2012 Source: EIA SLIDE 10
2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 What s This? U.S. Crude Oil Production by State: 2003-2012 (000 barrels per day; % = % change 2003-2012) 79% 720% -22% -46% 37% 27% -22% 9% TX ND CA AK OK NM LA WY Federal offshore production (mainly in Gulf of Mexico) is not included. Source: EIA SLIDE 11
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Railroads Help Keep Coal- Based Electricity BNSF CN CP CSX FXE KCS/KCSM NS UP Other RRs Freight Railroads in North America SLIDE 17
What s This? Hypothetical Transportation Costs Bakken to Gulf Coast (per barrel) Rail Pipeline Truck through Bakken $3 Load onto rail car $2 Rail direct cost $8 Trucking through Bakken $3 Tank car lease $3 Unload from truck to pipeline $2 Unload $2 Pipeline direct cost $7 Total $18 Total $12 The big unknown pipeline capital cost? Source: Morgan Stanley SLIDE 18
What s This? Pipelines and Railroads Have Different Characteristics Pipeline Rail Environmental concerns Permitting challenges Construction cost $$$ $ Long-term contract Operating economics $ $$$ Flexibility Relative relationships are approximations. Source: Morgan Stanley, AAR SLIDE 19
Originated Rail Carloads of Crude Petroleum on U.S. Class I Railroads: 2003-2012 233,811 65,751 29,605 12,291 9,961 6,032 4,729 5,912 9,500 10,840 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: AAR Freight Commodity Statistics SLIDE 20
2,860 2,498 2,832 2,650 3,395 6,784 8,583 10,843 11,324 11,389 16,789 26,247 36,544 51,492 64,663 81,122 Originated Rail Carloads of Crude Petroleum on U.S. Class I Railroads: Q1 2009 - Q4 2012 2009 2010 2011 2012 Source: AAR Quarterly Commodity Statistics SLIDE 21
Crude Petroleum as % of Total Carloads Originated on Class I Railroads: 2003-2012 0.79% 0.22% 0.04% 0.03% 0.02% 0.01% 0.02% 0.03% 0.04% 0.10% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: AAR Freight Commodity Statistics SLIDE 22
Railroads Help Keep Coal- Based Electricity Freight Railroads in North Dakota SLIDE 23
Carloads of Crude Petroleum What s Originated This? by Railroad: Q1 2010 - Q4 2012 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 BNSF CSX GTC KCS NS SOO UP Source: AAR Freight Commodity Statistics SLIDE 24
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Railroads Help Keep Coal- Based Electricity Freight Railroads in the Gulf Area BNSF CN CP CSX FXE KCS/KCSM NS SLIDE 26
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 What s This? Carloads of Crude Petroleum Terminated by Railroad: Q1 2010 - Q4 2012 0 BNSF CSX GTC KCS NS SOO UP Source: AAR Freight Commodity Statistics SLIDE 27
What s This? Shale containing oil or gas SLIDE 28
Originated Rail Carloads What s of This? Crude Industrial Sand on U.S. Class I Railroads 244,822 293,298 181,085 115,234 124,349 139,341 112,310 2006 2007 2008 2009 2010 2011 2012 Source: AAR Quarterly Commodity Statistics database SLIDE 29
31 30 29 28 27 26 25 24 23 22 21 20 What s This? 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: EIA U.S. Natural Gas Production (trillion cubic feet) SLIDE 30
Avg. Delivered Price of Natural Gas to Electric Power Plants $14 (dollars per million BTU) $12 $10 $8 $6 $4 $2 $0 SLIDE 31 2007 2008 2009 2010 2011 2012 Source: Energy Information Administration
U.S. Electricity Generation: Natural Gas 150 140 130 120 110 100 90 80 70 60 50 (million megawatthours) 2012 2010 2009 2011 2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Energy Information Administration SLIDE 32
U.S. Electricity Generation: Coal 190 180 170 160 150 140 130 120 110 100 90 (million megawatthours) 2008 2010 2009 2012 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Energy Information Administration SLIDE 33
Coal vs. Natural Gas as % of U.S. Electricity Generation 52% 48% 44% 40% 36% 32% 28% 24% 20% 16% 12% Coal Natural gas 2007 2008 2009 2010 2011 2012 Source: Energy Information Administration SLIDE 34
U.S. Rail Carloads of Coal 160,000 150,000 140,000 (average weekly originations) 2008 (peak year) 130,000 120,000 110,000 100,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Excludes U.S. operations of Canadian railroads. Source: AAR SLIDE 35
U.S. Rail Carloads of Coal 160,000 150,000 140,000 130,000 120,000 110,000 100,000 (average weekly originations) 2008 (peak year) 2010 2009 2011 2013 2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Excludes U.S. operations of Canadian railroads. Source: AAR SLIDE 36
What s This? Crude petroleum (+168,060, +255.6%) Food (+52,878, +3.3%) Nonmetallic minerals (+38,184, +3.0%) Petr. prod. & coal products (+32,830, +5.7%) Coal (-675,300, -9.6%) Stone, clay, glass products (+21,540, +4.9%) Class I Carloads: 2012 vs. 2011 Pulp & paper (+16,013, +2.4%) Lumber and wood (+19,390, +6.0%) Transportation equip. +5,701, +0.4%) Chemicals (-15,129, -0.7%) Waste & scrap (-18,170, -2.8%) Farm products (-145,946, -8.5%) Primary metal products (+19,219, +3.3%) Metallic ores (-10,728, -1.2%) Source: AAR Freight Commodity Statistics SLIDE 37
What Could Mess Things Up? Limits on fracking Economy tanks Price changes Regulatory change Environmental issues SLIDE 38
Assn. of American Railroads www.aar.org SLIDE 39