BNSF Railway

Changes to Transportation and

Barbara Haertling

Distribution

November 12, 2008

0

We’ve come a long way…

NOWNOWHopper FleetIncreased UnitizationVelocity = Capacity

THENWagons and roadsWagons and roadsBoxcars and mixed freight

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http://www.lewiston-ut.org/lewistonhistory/images/GrainWagonHarris.jpg

Trends in Ag Rail Transportation

Deregulation COTs

Standardized Grain Unit Sizes

Fertilizer Unit TrainNetwork

Unit TrainsCorn Syrup

Eth lDeregulation COTs EthanolDDG’sMeals

Traffic Analysis

High-Capacity Cars

GrainShuttleNetwork

1980s 1990s

Network

2000 & B d

2

Beyond

Trends in Ag Rail Transportation

DeregulationTariff-Based

Rates

Standardized Grain Unit Sizes

Fertilizer Unit TrainNetwork

Unit TrainsCorn Syrup

Eth lDeregulation Rates EthanolDDG’sMeals

BN Traffic Analysis

COTs High-Capacity Cars

GrainShuttleNetwork

1980s 1990s

Network

2000 & B d

3

Beyond

Grain Shuttle Program

1 or 2 year term Dedicated Power

Customer Commitment BNSF Commitment

110 Straight Line / LoopApprox. 7400 feet

15 Hour Load at Origin

Dedicated Hopper CarsMinimum 2.5 turns per monthLiquidity and Flexibilityg

15 Hour Unload at DestinationCertified Scales/WeightsEl t i C

q y yRewards Risk

Electronic Commerce

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Grain Shuttle Facility

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BNSF Grain Shuttle Network

2002 2008

Origins (80) Origins (160)U.S. Destinations (27)Under Construction (14)10 Mexican Shuttle Destinations

Destinations (66)Under Construction (15)29 Mexican Shuttle Destinations

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Merchandise Network Move

Bowdle, SD to Houston, TX

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23 45

106

18:0024:00

15 d l d d h l3

100

23:00

15 day loaded haul6 trains3 low UPT locals

4

96

23:00

10:00Cumulative

Terminal Visits

6 terminal stops

5

6

88

30

10:00

27:00

x:xx

Terminal Visits

Units per Train

Hours in Terminal

7

x:xx Terminal

Shuttle Move

Bowdle, SD to Houston, TX

6 d l d d h l

110

6 day loaded haul1 trainMaximized UPT0 terminal stops

Cumulative Terminal Visits

x:xx

Terminal Visits

Units per Train

Hours in Terminal

8

x:xx Terminal

Grain Capacity Has Increased

40 000 46 500

Whole grains

35,000

40,000

41 500

44,000

46,500

30,000

Ca

rs

36,500

39,000

41,500

oa

din

gs

25,000

31,500

34,000

,

Lo

20,0001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

29,000

Average Fleet Size Average Monthly Loadings

9

Average Fleet Size Average Monthly Loadings

Shuttle Program Success

Customers have invested a billion dollars in shuttle facilityCustomers have invested a billion dollars in shuttle facility upgrades or new facilities on the BNSF

S i h i d d ti llService has improved dramaticallyShuttles turn 2.5 times per month vs one time for singlesCapacity has been created to handle increasedCapacity has been created to handle increased agricultural production

Effi i i lt i t i l di t lEfficiency gains result in cost savings, leading to lower shuttle rates when compared to single carloads

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Evolution to Fertilizer Unit Trains

Product Focus:Phosphates

Service Guidelines:Unit Train Programp

UreaPotashUAN

g65 car train minimum 24 hour origin load 15 hour destinationUAN

Sulphur15 hour destination unload

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2002 Fertilizer Unit Train Network

Urea OriginTotal #

2

Phosphate Origin

Potash Origin

Sulphur Origin

1

2

1

Dry N/P Shuttle Destinations

Liquid UAN Origin

UAN

0

4

UAN Destinations

0

12

2008 Fertilizer Unit Train Network

2008 - 4.5 million unit train tons.

Urea OriginTotal #

4

Phosphate Origin

Potash Origin

Sulphur Origin

3

2

1

Dry N/P Shuttle Destinations

Liquid UAN Origin

UAN

1

34

UAN Destinations

10

13

West Con Milbank, SD Terminal

14

Lange-Stegmann St. Louis Urea Center

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Fertilizer Unit Trains are Increasing

120 000Carloads

100,000

120,000

60,000

80,000Singles

20,000

40,000

Unit Train20% 22%25%

37%38%

36%

02002 2003 2004 2005 2006 2007

Unit Train

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Fertilizer Program Success

Service and equipment utilization have improved dramaticallyq p p yUnits turn twice as fast as singlesIncreased capacity

Efficiency gains result in cost savings, leading to lower freight rates when compared to single carloads

Enhanced fertilizer product positioning and purchasing flexibility

Market penetration increased

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What Does the Future Hold?

AASHTO forecasts U.S. domestic freight ton-mileage to grow at 2.05% compound annual growth rate from 2005-2020

Truck 2.32% CAGR = 60% increase in 2020Rail 1 94% CAGR = 55% increase in 2020

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Rail 1.94% CAGR = 55% increase in 2020Water .68% CAGR = 30% increase in 2020

Majority of Current Rail Routes are Operating Below Capacity Levels

Current Rail Corridor Volumes Compared to Current Corridor Capacity

19Source: National Rail Freight Infrastructure Capacity and Investment Study September 2007

Without capacity improvements, congestion would affect nearly every region of the country

Future Rail Corridor Volumes Compared to Current Corridor Capacity 2035 Without Improvements

20Source: National Rail Freight Infrastructure Capacity and Investment Study September 2007

Railroad Capacity: AAR/Cambridge Study

Assessed long-term capacity needs of primary rail freight

Class 1 capital investments needed to meet 2035 volume demand

needs of primary rail freight corridors $135 B

Shortfall$39 BAssumed no shift in modal tonnage shares among rail, truck and water beyond those Productivity

Shortfall

$26 B

$39 B

projected by U.S. DOT

$39 billion shortfall will occurGrowth$70 B

$39 billion shortfall will occur without a stimulus to bring investments up sooner in their cycle

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cycle Total Needed Sources of Capital

Source: National Rail Freight Infrastructure Capacity and Investment Study September 2007

Focus on the Future

Continued efficiency gains are critically important to meet capacity needs of the future

Collaborate with customers with existing facilities to i i i ffi i d f t it lmaximize service, efficiency and future capital

investment

C t t iti f it t i bCreate new opportunities for unit train moves by building origin and destination operating capacities

Focus on reducing bottlenecks and increasing speedFocus on reducing bottlenecks and increasing speed and efficiency

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