Ns Sustainability Report 2008

8/7/2019 Ns Sustainability Report 2008

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Commitment To SustainabilityBusiness Pro le

Governance Structure And Management SystemsPer ormance IndicatorsPeople Making A Di erence

246

1046

Contents


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2 S U S T A I N A B I L I T Y R E P O R T 2 0 0 82 S U S T A I N A B I L I T Y R E P O R T 2 0 0 8

Our Commitment To Sustainability

Companies that incorporate sustainabilitypractices into their business operations strive tobe at harmony with the world in which theyoperate. Nor olk Southern is working hard toachieve this balance. You can read about ourprogress in this document, our rst-ever

sustainability report. We have endeavored tomake it as comprehensive and transparent inour reporting as we possibly can. From ourbeginnings in the earliest days o Americanrailroading in the 1830s, Nor olk Southern andthe rail industry as a whole have made great leapstoward environmental consciousness. In uturereports, we plan to document continuousprogress and improvement in sustainability e orts.

So I invite you to take a close look, beginningwith our business pro le, which is ollowed byan analysis o our governance structure andmanagement systems. The report next describesthe steps Nor olk Southern is taking to achievesustainable economic, environmental, andsocial per ormance. We are particularly proudo the section that highlights some o our peoplewho are making a di erence in support o sustainable business practices. It illustrates whatI never tire o saying whenever I have the oppor-tunity: The people o Nor olk Southern are thekey to our companys success. Its true in ourindustry-leading sa ety record, in our nancialper ormance, and in our operating and servicee ciency. As you will read, the contributionsour people are making toward excellence in

sustainability are just as impressive.

Nor olk Southern is committed

to being a responsible

corporate

citizen o the communities we serve.

We appreciate the natural

beauty o the environment

in which we operate, and we are dedicated to preserving resources so

they are passed on to uture

generations.


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3S U S T A I N A B I L I T Y R E P O R T 2 0 0 8

It is noteworthy that this report is among therst major accomplishments o a Nor olk

Southern sustainability team directed by Blair

Wimbush. Blair became the rail industrys rstcorporate sustainability o cer last year, andhis appointment signi es Nor olk Southernscommitment to industry leadership in thisarena. The teams charge is to measure andmanage Nor olk Southerns environmentalimpact and to strengthen relationships withenvironmental stakeholders. Our goal is toachieve industry leadership in uel conservation,

emissions reduction, e cient energy use,recycling, use o renewable materials, andenvironmental partnerships.

Railroads have a proud and storied tradition asan industry that helped build our nation. Justas technology trans ormed railroad operations,it also made them greener. Today, rail is morevital to our national transportation network than

ever, and it is the most energy-e cient andeco- riendly way to transport the goods thatmove the nations economy. One train canhaul as much reight as 500 trucks. On average,a reight train moves a ton o reight 436 mileson a single gallon o diesel uel. A typical truckemits three times more nitrogen oxide andparticulates than a locomotive, on a ton-milebasis. These clear advantages o rail reight

transportation have ar-reaching implications oraddressing our nations crowded highways whileprotecting and conserving natural resources.

Railroads should be leaders o corporatesustainability. Images o reight trains windingtheir way through scenic vistas in the opencountryside are icons o American culture.

Nor olk Southern is at home in the outdoors.Our corporate responsibilityand our missionis to take care o our home so that uture

railroaders can sustain our corporate successand the health o our environment.

We believe it is our responsibility to conductour business in accordance with sustainabilitypractices that will help to provide ongoingopportunities or our people, our communities,our customers and our investors. Environmentalstewardship is essential to Nor olk Southerns

success, and it refects our corporate businessstandards o ethics and responsibility.

Our commitment is long-term. Just as we haveserved our customers and communities orclose to two centuries, Nor olk Southern isdedicated to remaining a responsible corporatecitizen or generations to come.

Wick MoormanChairman, President, and Chie Executive O fcer Nor olk Southern Corporation


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4 S U S T A I N A B I L I T Y R E P O R T 2 0 0 8

Our Business Profle

Overview:Norfolk Southern

Corporation is one of thenations premier transportation

companies. Its Norfolk Southern

Railway Company subsidiary

operates approximately 21,000

route miles in 22 states and

the District of Columbia, serves

every major port in the eastern

United States, and provides

superior connections to

western rail carriers. Norfolk

Southern operates the most

extensive intermodal network in

the East and is North Americas

largest rail carrier of metals

and automotive products.

Moving the Goods That Move the Economy Our railway transports raw

materials, intermediate products, and fnished goods

in the Southeast, East, and Midwest and, via interchange

with rail carriers, to and rom the rest o the United

States, and Canada and Mexico. Nor olk Southern

also transports overseas reight through ports we serve on the Atlantic and Gul coasts, and West Coast ports

served by connections with other carriers. The company

provides comprehensive logistics services. The

common stock o Nor olk Southern is listed on the New

York Stock Exchange under the symbol NSC.

Nor olk Southern was incorporated in Virginiaon July 23, 1980. On June 1, 1982, Nor olkSouthern acquired control o two majoroperating railroads, Nor olk and Western RailwayCompany and Southern Railway Company.Through a limited liability company, Nor olk

Southern and CSX Corporation jointly ownConrail Inc., whose primary subsidiary isConsolidated Rail Corporation. Nor olk Southernhas a 58 percent economic and a 50 percentvoting interest in the jointly owned entity.


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For 2007:

30,806Average number

o employees

$9.4 billionRailway operating

revenues

$2.6 billionIncome romrailway operations

$1.5 billionNet income

$26.1 billion Total assets$6.4 billion

Total debt

$9.7 billionStockholders equity

39.6%Debt-to-total

capitalization ratio

$25.64Stockholders equityper share

Nor olk Southern makes available ree o chargethrough its Web site at www.nscorp.com itsannual report on Form 10-K, quarterly reports

on Form 10-Q, current reports on Form 8-K,and all amendments to those reports as soon asreasonably practicable a ter such material iselectronically led with or urnished to theSecurities and Exchange Commission. In addition,the ollowing documents are available on thecompanys Web site and in print by request:

Corporate Governance Guidelines

Charters o the Committeeso the Board o Directors

The Thoroughbred Code o Ethics

Code o Ethical Conduct orSenior Financial O cers

Categorical Independence Standards

or Directors

Nor olk Southerns major subsidiary is Nor olkSouthern Railway Company. It and its railroadsubsidiaries transport raw materials, intermediate

products, and nished goods classi ed in theollowing market groups, along with thepercentage o total railway operating revenuesthey contributed in 2007: coal (25 percent);intermodal (20 percent); chemicals (13 percent);metals and construction (12 percent); agriculture,consumer products, and government (11 percent);automotive (10 percent); and paper, clay, and

orest products (9 percent). Although most o

Nor olk Southerns customers are domestic,ultimate points o origination or destination orsome o the products transported (particularlycoal bound or export and some intermodalcontainers) may be outside the United States.

This is Nor olk Southerns rst sustainabilityreport and covers the reporting period throughDec. 31, 2007, except as otherwise noted. Its

content is in ormed by the Sustainability Report-ing Guidelines o the Global Reporting Initia-tive. Future reports will move toward morecomprehensive reporting built on both theprinciples and content o the Global ReportingInitiative. Our Environmental ProtectionDepartment and Environmental Policy Council,comprised o high-level corporate o cers,ensure that appropriate policies, procedures

and resources are in place to address environ-mental health and sa ety considerations acrossthe system. The council, a corporate sustainabil-ity team, and a group o core executive sponsors,including the chie executive o cer, veri ed theaccuracy and reliability o this report.


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Our Governance StructureAnd Management Systems

Overview:Norfolk Southern

has corporate policies and

procedures guiding its

economic, environmental, and

social performance. Quality in

everything we do is vital to our

long-term success. The purpose of

our quality policy is to achieve

our corporate vision to be the

safest, most customer-focused

and successful transportation

company in the world.

Code o Ethics,Core Values Govern

Employee Conduct First and oremost is

Nor olk Southerns Thoroughbred Code o Ethics,

which is based on our Core Values called SPIRIT,

or Sa ety, Per ormance,Integrity, Respect, Innovation,

and Teamwork.

Safety: We put sa ety rst by taking care o the people around us and ollowing the rules.

Performance:We are per ormance-drivenand committed to providing quality customerservice. We act on acts and are accountable

or results.

Integrity:We do the right thing. We are open,air, honest, and straight orward.

Respect:We believe in the importance o allo our stakeholders. We value the ideas andbelie s o our co-workers.

Innovation:We constantly seek new ideas andcreative solutions to business challenges.

Teamwork:We believe that working togetheralways produces the best results.


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These Core Values identi y the behaviors thatare key to ul lling our corporate vision.Not intended to be limiting, they provide aramework or Nor olk Southerns expectationsor employee conduct. They support our

corporate vision and the companys commit-ment to sustainability.

The Thoroughbred Code o Ethics builds uponthe Core Values by providing us with a mutualunderstanding o how we are expected toconduct ourselves. Nor olk Southerns directors,o cers and employees must conduct themselvesin accordance with the Core Values and theCode o Ethics. By doing so, we maintain ourgood name and our strong relationships withour customers, stockholders, ellow employees,and the communities we serve.

Policies and Procedures Support Corporate Ethics, Values Written procedures assist in implementation o Nor olk Southerns Core Values and ThoroughbredCode o Ethics policies. These include policiesand procedures such as: Reporting Concerns

and Complaints Regarding Accounting, InternalControls and Auditing Matters; Equal Employ-ment Opportunity; Code o Ethical Conduct orSenior Financial O cers; Conficts o Interestand Related Person Transactions; Commitment toEthical Business Conduct; Hazardous MaterialIncident and Readiness Capability; AntitrustCompliance Guide; Sa ety and General ConductRules; Compliance Procedure; EmployeeEducation Assistance; and others.

Likewise, Nor olk Southern is committed toprotecting the quality o the environment or ouremployees, our customers, and our communities,and we have corporate policies and procedures inplace pertaining to environmental per ormance.

Speci cally, it is Nor olk Southerns policy toensure that every employee is trained in and

ully understands the environmental requirementso the job and is responsible and accountable

or conducting work activities in a manner thatmeets or exceeds applicable environmentalcompliance standards. Our policies protect theenvironmental quality o Nor olk Southernsreal estate through sound management o land,water, and other property resources. We comply

ully with applicable laws and regulations relatedto protecting the environment and transportingenvironmentally sensitive materials. We cooperate

ully with all governmental authorities chargedwith protecting the environment or withregulating transportation o hazardous materials.It is our policy to ensure that appropriate publicagencies and the a ected public are in ormedabout any incident relating to Nor olk Southernoperations that has the potential to causeenvironmental harm. Further, we strive tominimize waste through activities such asrecycling, reduced consumption o energy,greater use o environmentally pre erredmaterials, and use o nonpolluting technologies,procedures, and work practices.


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Nor olk Southerns corporate procedures requirethat corporate activities must be handled inaccordance with these policy objectives, and incompliance with all applicable ederal, state, andlocal laws and regulations. Overriding proceduralobjectives to implement these policies include:

protecting the environment; protecting people and communities; budgeting or environmental quality; and

anticipating legislative impacts oncurrent operations.

To ensure continuing improvement, reductiono pollution, and achievement o these policyobjectives, appropriate processes or measuringper ormance, reporting environmental in ormation,and evaluating environmental e ects have beenimplemented. Each employee is to regard thise ort to attain environmental quality as both apersonal and a corporate responsibility, andemployees at all levels throughout the corporationhave speci c responsibilities or implementingthe environmental policy. Nor olk Southern postsall our corporate policies and procedures on thecompanys ethics and compliance intranet site,available to all employees.

Sa ety: Nor olk Southerns frst priority We are committed to the principle that sa ety isgood business and that all employees should beprovided a sa e working environment. Ouremployee sa ety record demonstrates thatcommitment. For 19 consecutive years, Nor olkSouthern has earned the E. H. Harriman Awardgold medal or the best employee sa ety record

among the largest North American railroads. Weexpect all o our people to promote sa ety, as it isboth a personal and a corporate responsibility.

This responsibility cannot be trans erred. There-ore, each employee is held personally account-

able. The companys sa ety policy centers onthe ollowing six tenets:

All injuries can be prevented.

All exposures can be sa eguarded.

Prevention o injuries and accidents isthe responsibility o each employee.

Training is essential or good sa etyper ormance.

Sa ety is a condition o employment.

Sa ety is good business.

We believe that the overall sa ety and health o our employees is in the best interests o eachemployee and the corporation.

Sa ety and health, and all that these termsencompass, have long been o primary impor-tance to Nor olk Southern. In support o thispolicy, Nor olk Southern promotes a proactivesa ety process and will continue to: minimizesa ety and health risk actors to our employeesand the communities in which we operate byemploying sa e and appropriate technologies,programs, and operating procedures; educateour employees about sa ety and health risk

actors in their workplaces; evaluate proceduresand work practices to minimize potentialemployee exposures and improve sa ety in theworkplace; in orm the a ected public aboutincidents relating to corporation operations thatpose general sa ety or health hazards; complywith applicable laws, regulations, and rulesrelated to sa ety and health in all o our businessactivities; and cooperate with all regulatoryauthorities charged with protecting the sa etyand health o the public and our employees.


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We have an Operations Division Sa ety SteeringCommittee that is responsible or interpretationo the sa ety policy. In addition, all departmentvice presidents are responsible or the imple-mentation and administration o the policy intheir respective departments, and each employeeis accountable or complying with it.

Business Partnerships Strengthen

Sustainability E orts Nor olk Southern is the rst railroad member o S.E.E. Change (Society, Environment, Economy),launched in 2005 by Business Roundtable, anassociation o 160 chie executive o cersrepresenting companies totaling $4.5 trillion inrevenues and nearly 10 million employees, topromote better business and a better world.Nor olk Southern and 31 other leading U.S.companies reported on their ongoing sustain-ability e orts in Business RoundtablesSEEing Change: 2008 Progress Report. Membercompanies, representing virtually every sectoro the economy, outlined their e orts to achievereal environmental and social changes throughtheir commitments to sustainable businesspractices. Nor olk Southern summarized a widerange o initiatives that are incorporated in thissustainability report. The S.E.E. Change report ispart o the memberships ongoing e orts tomeasure and share sustainability best practices.

Nor olk Southern also is a member o ResponsibleCare, a global voluntary initiative o theInternational Council o Chemical Associations,through which companies work together tocontinuously improve their health, sa ety andenvironmental per ormance, and to communicate

with stakeholders about their products andprocesses. The Responsible Care ethic helps thechemical industry operate sa ely, pro tably, andwith due care or uture generations.

Nor olk Southern won the 2007 TRANSCAER (Transportation Community Awareness andEmergency Response) National AchievementAward. TRANSCAER is a voluntary, nationwideoutreach e ort that helps communities prepare

or and respond to possible hazardous materialtransportation incidents. Volunteers consist o representatives rom chemical producers,distributors, carriers, rst responders, andgovernment agencies. Receiving the NationalAchievement Award signi es widespreadrecognition o Nor olk Southerns dedication tothis critical program and its leadership intraining local emergency responders through acombination o hands-on activities, tables topexercises, and whistle-stop tours.

Certifcations, Internal Management Systems

Sa eguard Environment Many o Nor olk Southerns acilities are ISO9001 certi ed. In addition, the corporation hasin place an environmental management systemthat guides employee behaviors. The policiesand procedures that orm the building blockso the environmental management system arecodi ed in a corporate Our World OurChoice Re erence Manual. The environmental

management system includes policies thatde ne the rules and requirements o theorganization, as well as procedures that de neimplementation. These cover a wide range o issues, including contract control, audit,training, emergency preparedness, regulations,agency approvals, monitoring and measure-ment, corrective actions, document control,and others.


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In 2007, the company set records in railwayoperating revenues, income rom railwayoperations, and diluted earnings per share.We achieved customer recognition as a leadingservice provider, andwe are committed tocontinued growth involume and revenuesand to deliveringexceptional economicper ormance byproviding superiorservice.

For 2007:

Railway operating revenues $9.4 billion

Railway operating expenses $6.8 billion

Income rom railway operations $2.6 billion

Railway operating ratio 72.6%

Net income $1.5 billion

Earnings per share-diluted $ 3.68

Total compensation and bene ts $2.6 billionYear-end stock price $50.44

Dividends per share $0.96

Price/earnings ratio at year end 13.71

Number o stockholders at year end 36,955Shares outstanding at year end 379,297,891

Overview:Norfolk Southern,along with the rest of the rail

freight transportation industry,

has seen record growth in

traffic and revenue, generating

strong financial performance

and stockholder returns.Fundamental changes in the

transportation marketplace

play to the strengths of the rail

industry. These changes include

higher fuel costs, increased

highway congestion, andcontinued shortages of long-

distance truck drivers.

Our Economic Performance Indicators


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Metals and Construction: The metals andconstruction group includes steel, aluminum

products, machinery, scrap metals, cement,aggregates, bricks, and minerals. Nor olkSouthern leads the industry in the transportationo steel and other metals. The railroad serves19 integrated mills, 17 minimills, more than38 major steel processors, and more than 75steel distribution acilities. Nor olk Southern isworking with German steel manu acturerThyssenKrupp to support a new processed steel

plant being built near Mobile, Ala. The plant isexpected to be Nor olk Southerns largest-everindustrial development project and one o thelargest new plant investments in the United States.

Agriculture, Consumer Products,and Government:The countrys increasingdemand or ethanol and other renewable uels

is driving business or Nor olk Southernin thetransport o ethanol as well as the corn andsoybeans needed or its production, and the

ertilizer to grow these crops. U.S. productiono ethanol is soaring, and producers rely onNor olk Southern to transport it. Nor olk South-ern moves more than a billion gallons o ethanol a year rom plants west o the Missis-sippi to eastern destinations. Another core part

o Nor olk Southerns agriculture business is theshipment o corn rom the Midwest to theanimal eeding, processing, and export marketsin the East and Southeast.

General Merchandise Comprises Five Major Commodity Groups General merchandise tra c is composed o vemajor commodity groupings: automotive;chemicals; metals and construction; agriculture,consumer products and government; and paper,clay, and orest products. A total o 2.8 milliongeneral merchandise carloads accounted or 55percent o Nor olk Southerns total railway

operating revenues in 2007.

Automotive:Nor olk Southern is North Ameri-cas largest carrier o automotive products.Thirteen o the last 23 assembly plants built inthe United States were located on Nor olkSouthern rail lines, and the company nowserves 28 plants. More than 70 percent o automobiles manu actured in North America

move via rail. In 2007, Nor olk Southern movedmore than 5 million vehicles rom the assemblyline or delivery to dealers.

Chemicals: Chemicals are essential ingredientsin millions o consumer products, and they havemany industrial uses. When it comes to shippingthem, rail is the sa est mode o transportation.Nor olk Southern annually presents its Thorough-bred Chemical Sa ety Award to chemicalcustomers that handle more than 1,000 carloadso hazardous chemicals without incident. Qualityservice is important as well, as rising energyand eedstock costs place pressure on Americanmanu acturers to compete in the global market-place. Nor olk Southern helps customers remaincompetitive by providing excellent service.

If You Use It, ChancesAre We Haul It

Freight hauled on the

Norfolk Southern railway

system is of three major types:

general merchandise,

intermodal shipments in

containers and trailers, and

coal. Virtually everything that

consumers use in everyday life

from automobiles to furniture

and appliances moves on

the railroad. Norfolk Southern

moves the goods that move the

economy and is a vital link in

international commerce.


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Paper, Clay, and Forest Products: In addition toserving paper mills, paper distribution centers,and sawmills, as well as transporting lumber,scrap paper, and clay, Nor olk Southerns paper,clay, and orest products business includes thetransportation o construction and demolitiondebris and moving municipal solid waste tocerti ed disposal sites. Nor olk Southern servesmore than 60 paper mills and more than 250paper distribution centers, saw mills, and otherconstruction-related acilities.

Coal Contributes 25 Percent o Revenue Coal, including coke and iron ore, is Nor olkSoutherns largest commodity group as mea-sured by revenues. The company handled 186million tons in 2007, accounting or about 25percent o total railway operating revenues.Nor olk Southern trains moved 143 million tonso utility coal in 2007enough to power morethan 32 million homes in the United States or ayear. Total coal handled through all system portsin 2007 was 34.1 million tons.

Coal is an abundant ossil uel. Nor olk South-erns utility customers are engaged in clean-coal initiatives to keep energy reliable anda ordable. Nor olk Southern is a partner withgroups supporting cleaner utilization o thisimportant resource.


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A 2005 Texas Transportation Institute studyreported that Americans waste 3.7 billion hoursin travel time and 2.3 billion gallons in uelannually due to highway congestion. A singleintermodal train can haul the same volume o

reight as nearly 300 trucks. A train carryingreight other than intermodal can take up to

500 trucks o the highway. Freight trains movea ton o reight an average o 436 miles on asingle gallon o diesel uel. Plus, NS track andin rastructure are privately owned. As publicopposition mounts against building morehighways through communities, the intrinsicbene ts o rail become more apparent.

An expanding world population, an increas-

ingly global economy, mounting congestion onU.S. highways, and the need or improved uele ciency all are actors that are expected tohelp Nor olk Southerns intermodal businesscontinue to grow. Nor olk Southern handled3.1 million intermodal units in 2007, whichaccounted or 20 percent o total railway oper-ating revenues or the year.

Nor olk Southern expects increasing demandor transportation o containerized reight as

Asian economies continue to develop, the U.S.returns to a pattern o robust consumption,and its exports continue to increase. Anticipat-ing that growth, Nor olk Southern is workingcontinually to improve service and expandintermodal capacity.

Over the last veyears, intermodal hasbeen the astest-grow-ing part o Nor olkSoutherns business.The e ciencies o moving trailers and

domestic and interna-tional containers byrailway demonstratethe environmentaladvantages o trans-portation by rail.

For example, theederal Environmental

Protection Agency estimates that a typical truckemits nearly three times as much nitrogen oxideand particulate matter as a locomotive on aton-mile basis. I just 10 percent o the reightthat currently moves by truck was diverted torail, uel savings would approach 1 billiongallons per year.

Rapid growth and consumer demand arestraining transportation networks across thecountry. Rail transportation helps relieve conges-tion on the nations highways, and the EPA hasnoted that transportation by rail is the moreenvironmentally riendly mode o transportation.

Growing Intermodal Tra fc Highlights Environmental Advantages o Railway Transportation


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For example, in 2007, Nor olk Southern joinedwith another railroad, Union Paci c, to introducea shorter and aster route between Los Angelesand the Southeast. The new route moves overthe Meridian Speedway corridor throughShreveport, La. It is almost 150 miles shorterthan the previous route and aster than any

other service o ering in the market. The tworailroads plan to expand this already reliableservice and urther reduce transit times. Improve-ments to the Meridian Speedway, a joint venturebetween Nor olk Southern and Kansas CitySouthern, will create additional capacity thatis expected to allow the route to handleinternational tra c as well.

As part o the Heartland Corridor project, apublic-private partnership, Nor olk Southernand the Columbus (Ohio) Regional AirportAuthority together developed the RickenbackerIntermodal Terminal, which opened in 2008.The terminal increases reight capacity in theregion by more than 40 percent. The ColumbusRegional Airport Authoritys adjacent ware-house and distribution complex will serve as

Nor olk Southerns rst ully integrated inter-modal logistics park.

Public-Private Partnerships Beneft Communities Aging highways, increasing roadway congestion,and surging global trade require new investmentin rail capacity to keep the nations economygrowing. To ensure better service or customers,Nor olk Southern is partnering with ederal,state, and local governments to design and buildmajor in rastructure projects that will provide asa er, higher-capacity, and more uel-e cienttransportation network.

Nor olk Southerns biggest public-private partner-ship is the Crescent Corridor, which would provideintermodal rail service connecting underservedmarkets in the Northeast, the mid-Atlantic, andcentral Southeast. Stretching 2,500 miles on tworoutes connecting New Jersey with New Orleans,La., and Memphis, Tenn., the project in its rstphase potentially could divert in excess o 1

million trucks a year rom highways to rail lines.Rail hauls less than 5 percent o the long-distance, intercity truck tra c in this corridor,so upgrading the capacity o Nor olksSoutherns routes should result in more regionaldomestic reight tra c on rail and providebig public bene ts.

The project is projected to mitigate highwaycongestion on I-40, I-81, I-20 west o Atlanta,and I-75 between Knoxville and Chattanooga.E ects on I-85 and I-95 will be less pronounced.

The Environmental Protection

Agency estimates that a typical

truck emits nearly three

times as much nitrogen oxide

and particulate matter than

a locomotive on a ton-mile

basis. If just 10 percent of the

freight that currently moves by

truck was diverted to rail, fuel

savings would approach

1 billion gallons per year.


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It could take Nor olk Southern 20 years to completea project o the magnitude o the Crescent Corridor,which could cost more than $2.5 billion. But withpublic-private partnerships, the rst phase o theCrescent Corridor could be ramped up by 2013.

In addition to diversion o truck tra c rominterstate highways, public bene ts includecreation o new logistics centers across several

states. For reight customers, service will becompetitive with single-driver truck transit times.

As Nor olk Southern continues to develop andre ne the project, the Crescent Corridor alreadyhas received public support. Most o the stateand ederal legislators rom the region haveexpressed interest. Virginia has committed $40million in public unding. In the Front Royal, Va.,area, Nor olk Southern is constructing a ve-milestretch o double main-line track to speed traintra c on a critical segment o the corridor.Pursuant to its contract with the Virginia Depart-ment o Rail and Public Transportation, Nor olkSouthern is unding $20 million.

Another public-private partnership with stateand ederal governmentsthe HeartlandCorridorwill open up a new gateway ordouble-stacked container tra c rom the EastCoast to the Midwest, reducing transit time

rom the Hampton Roads ports to the OhioValley by 24 hours. In October 2007, Nor olkSouthern began work on the rst o 28 tunnelswhere vertical clearances are being heightenedto accommodate double-stacked containertra c. This is a $150 million public-privatepartnership involving contributions totaling $95million rom the ederal government, Virginia,West Virginia, and Ohio. When the project is

completed in 2010, trains carrying reight indouble-stacked containers will be able to cutmore than 200 miles and up to a days transittime between the East Coast and the Midwest.The project will provide communities along thecorridor with greater access to world markets,divert reight rom highways, and reducecongestion and uel emissions.


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In addition to public-private partnerships,Nor olk Southern works with other rail carriersto create additional rail in rastructure capacityand improve service. One railroad joint ven-ture, now pending approval o the Sur aceTransportation Board, is a Northeast corridorbetween Albany, N.Y., and Boston. It involvesmore than 400 miles o Pan Am Railways linesin New York and New England. The venture will

create a aster, higher capacity railroad orNor olk Southern to serve these markets :andextend our service reach.

In yet another corridor development announcedin 2008, Nor olk Southern joined with 10 NewYork-based short line railroads to convertshort-haul truck movements to rail. This pro-gramknown as the Empire Linkallows

participating short line railroads to market theexcess rail reight capacity on Nor olk South-erns Southern Tier and branch lines betweenBinghamton and Silver Springs, N.Y. As uelprices escalate, the Empire Link is an attractiveoption or shippers currently trucking reightin New York, Pennsylvania, and New Jersey.The project provides our New York short linepartners with tools and resources to design and

o er rail transportation services that are truck-competitive in lanes that are ewer than 500miles. The initiative represents a creative newway to partner with smaller railroads to provideservices to customers while minimizing conges-tion and emissions.

Regulations, Laws Govern Rail Operations Like all rail reight transportation companiesoperating in the United States, Nor olk Southernis subject to signi cant governmental regulationand legislation over commercial, environmental,and operating matters.

Railroads are subject to commercial regulationby the Sur ace Transportation Board, whichhas jurisdiction over some routes, uel

surcharges, conditions o service, the extensionor abandonment o rail lines, and rail mergersand acquisitions.

Railroads also are subject to sa ety and securityregulation by the Department o Transportationand the Department o Homeland Security,which regulate most aspects o Nor olkSoutherns operations.

Nor olk Southerns operations are subject toextensive ederal and to some extent, stateand loca l environmental laws and regulationsconcerning, among other things, emissions tothe air; discharges to waterways or groundwatersupplies; handling, storage, transportation, anddisposal o waste and other materials; and thecleanup o hazardous material or petroleum

releases. Nor olk Southerns managementpractices ensure compliance with these variousregulations. We manage in a responsiblemanner the risks o operating and complyingwith all regulations.


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Nor olk Southern has gone to great lengths to ensure the

sa e and secure transportation o TIH commodities.These include: Supporting new design requirements to

make tank cars stronger and sa er; Implementing a comprehensive

security plan; Coordinating with the Department o

Homeland Security, Transportation SecurityAdministration, Department o Transporta-tion, Coast Guard, Customs and BorderProtection, FBI, and various state HomelandSecurity o ces;

Participating in the voluntary Customs-TradePartnership Against Terrorism program tohelp ensure integrity o reight shipments;

Erecting physical barriers and new accesscontrol measures, issuing photo ID cardsto employees, providing security-speci cemployee training, and increasing NSpolice patrol requency;

Providing in o about TIH shipments to cer-

tain government agencies, and upon requestto local emergency response agencies, inorder to aid in their emergency responsepreparedness; and

Working through the TransportationCommunity Awareness and EmergencyResponse Program (TRANSCAER) to provideemergency response training, includingTIH response, to organizations along therail network.

Transporting Hazardous Materials Sa ely, Securely Sa ety is especially critical when it involvestransporting hazardous materials. Annually or thelast 12 years, Nor olk Southern has recognizedthe sa ety per ormance o our customers whoship more than 1,000 carloads o hazardouschemicals without incident by presenting themthe Thoroughbred Chemical Sa ety Award. Weshare the publics concerns about the transpor-tation o chlorine and similar commoditiesdesignated toxic inhalation hazards, so-calledTIH commodities. Because we are requiredunder ederal law as a common carrier, Nor olkSouthern transports some 23,000 carloads o TIHcommodities each year. Many issues surroundthe transportation o TIH commodities, includingsa ety, routing, noti cation, custody and securityo shipments, and a justi able balance o

nancial risk and reward to railroads.

Recognizing that the transportation o TIHsmandated by our common carrier obligation isinherently risky, Nor olk Southern will continueto work to transport TIHs sa ely and securelyeven while pursuing policies that reduce andproperly allocate those risks.


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Competition from other transportationproviders:Nor olk Southern is subject tocompetition rom motor carriers, railroads, andto a lesser extent, ships, barges, and pipelines,on the basis o transit time, pricing, and thequality and reliability o service. While Nor olkSouthern typically and primarily has usedinternal resources to build or acquire andmaintain its rail system, trucks and barges havebeen able to use public rights o way maintainedby public entities. Any uture improvements or

expenditures materially increasing the quality orreducing the cost o other modes o transporta-tion, or legislation granting motor carriersgreater latitude on size or weight limitations,could have a material adverse e ect on thecompanys nancial position.

Operations of interchange carriers: Nor olkSoutherns ability to provide rail service to

customers in the United States, Canada, andMexico depends in large part on its ability tomaintain cooperative relationships with con-necting carriers regarding reight rates, revenuedivisions, car and locomotive availability, dataexchange and communications, reciprocalswitching, interchange, trackage rights, andother matters. Deterioration in the operationsor service o those connecting carriers could

result in Nor olk Southerns inability to meetits customers demands or require Nor olkSouthern to use alternate train routes, whichcould result in signi cant additional costs andnetwork ine ciencies.

Railroads Manage Business Risks Various risks and challenges are inherent tooperation o rail reight transportation compa-nies, including Nor olk Southern. A descriptiono some o these risks ollows. The companysmost recent annual report on Form 10-K andsubsequent quarterly reports on Form 10-Qprovide more complete in ormation about theseand other risk actors, including risks posed bygovernment regulation and legislation as wellas risks associated with the transportation o hazardous materials. We have practices andpolicies to manage and mitigate the e ects o all these potential risks.

Terrorism or war:Because Nor olk Southernplays a critical role in the nations transportationsystem, it could become the target o an attack orhave a signi cant role in the governments pre-emptive approach or response to an attack or war.

General economic conditions: Prolongednegative changes in domestic and globaleconomic conditions a ecting the producersand consumers o the commodities Nor olkSouthern carries may have an adverse e ecton its operating results, nancial position,and liquidity.


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Reliance on technology: Nor olk Southernrelies to a large extent on technology thatenhances sa ety and reliability o many aspectso its rail operations, including dispatchingand train control. Signi cant disruption o thecompanys in ormation technology systems,including computer hardware, so tware, andcommunications equipment, could result in aservice interruption, security breach, or otheroperational di culties.

Labor issues:

Thevast majority o theemployees o Nor olkSouthern and otherrailroads belong tolabor unions. Laboragreements, strikes, orwork stoppages couldadversely a ect our

operations. Addition-ally, uture nationallabor agreements, orrenegotiation o laboragreements or

provisions o labor agreements, could signi -cantly increase Nor olk Southerns costs orhealth care, wages, and other bene ts.


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Claims and lawsuits: The nature o Nor olkSoutherns business exposes it to the potential

or various claims and litigation related to laborand employment, personal injury, commercialdisputes, reight loss and other property dam-age, and other matters. Job-related personalinjury and occupational claims are subject tothe Federal Employers Liability Act, which isapplicable only to railroads. The variabilityinherent in FELAs ault-based tort system couldresult in actual costs being very di erent romthe liability recorded.

Severe weather:Severe weather conditions andother natural phenomena, including hurricanesand foods, may cause signi cant businessinterruptions and result in increased costs,increased liabilities, and decreased revenues.

Work force issues: Work orce demographics,training requirements, and the availability o quali ed personnel, particularly engineers andtrainmen, could have a negative impact onNor olk Southerns ability to meet demand orrail service. Unpredictable increases in demand

or rail services may exacerbate such risks.

Fuel and other supply markets: Nor olkSouthern consumes about 500 million gallonso diesel uel each year, and the companyis working on many ronts to reduce thisconsumption. Fuel availability could bea ected by any limitation in the uel supply orby any imposition o mandatory allocation orrationing regulations. A severe uel supplyshortage arising rom production curtailments,disruption o oil imports, disruption o domesticre nery production, damage to re nery orpipeline in rastructure, political unrest, war,

or otherwise could adversely a ect Nor olkSouthern, its customers, and other transporta-tion companies. Due to the capital intensivenature and industry-speci c requirements o railroads, high barriers o entry exist or potentialnew suppliers o core railroad items, such aslocomotives and rolling stock equipment.Additionally, Nor olk Southern competes withother industries or available capacity and raw

materials used in the production o certain trackmaterials, such as rail and ties. Changes in thecompetitive landscapes o these limited-suppliermarkets could result in increased prices ormaterial shortages.


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We are committed to monitoring the success o our environmental per ormance by measuringand tracking appropriate metrics. In this our rstcorporate sustainability report, we present themetrics we now have, with a goal o showingcontinuous improvements in collection andreporting o data as well as in our record o environmental stewardship. Future reports willrefect expanding use o the reporting principlesas we move toward more comprehensive cover-age o economic,environmental, andsocial per ormance.

Overview:Norfolk

Southern is committed to

being an industry leader

in environmental

responsibility. Strong

sustainability practices are

good for our business, the

economy, and the environment,

and they benefit our people, the

communities and customers we

serve, and our stakeholders.

Focus on Eco-Friendly Purchasing Practices Nor olk Southern is a major provider o trans-portation services in North America and operatesmore than 22,000 route miles. Maintaining thisin rastructure requires us to procure signi cantamounts o crossties, rail, and stone ballast.

Material purchases for 2Crossties replaced 2.8 millionBoard eet o switchand bridge ties replaced 10.1 million

Rail replaced 401 miles

Tons o ballast placed 2.9 million Throughout our system, we use recycledmaterials, such as paper and packaging. In 2007,7 percent o the paper, packaging, and o cesupplies we purchased included recycled orrecovered materials. We recycle brake shoes

systemwide, and be ore we dispose o oil lters,we crush the oil rom them to reduce land llcontamination. We also recycle used oil rom ourmajor locomotive shops. At our Chattanoogashop, we reclaimed 50,900 gallons o engine oilin 2007 or reuse in locomotives.

Our Environmental Performance Indicators


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Maximizing E fciencies o Rail Transportation Energy is necessary to move the goods thatmove the economy. Nor olk Southern consumesdiesel uel to operate our trains and electricity topower our buildings and systems. The accom-panying tables show our uel and electricityconsumption totals or 2007 and our uel useper million dollars o revenue, and revenueton-miles per gallon o diesel or the last ouryears. We strive to minimize our energy use

and maximize the e ciencies that are innateto rail transportation by continuously ocusingon reducing locomotive idling time, improvinglocomotive power utilization, and deployingtrain handling tools that plan or and deliverreductions in consumption o diesel uel acrossour system.

Transporting reight by rail is more uel-e cient,

and there ore less carbon-intensive, thantransporting reight by truck. In 2007, Nor olkSouthern moved an average o 394 revenueton-miles (one ton o reight moved one mile)o reight on a gallon o diesel uel. The averagecombination truck moves only about 118

revenue ton-mileso reight per gallono diesel consumed.

Net Ton-MilesPer Gallon Diesel Fuel

2004 2005 2006 2007

393 394 392 393

Revenue Ton-MilesPer Gallon Diesel Fuel

2004 2005 2006 2007

395 395 393 394

As our business grows, so does our energyconsumption. Our innovative train-handlingsystems, such as LEADER which uses an

onboard computer to calculate optimum trainspeed will help Nor olk Southern maximizeour energy and uel e ciency while providingservices critical to a healthy economy.

Nor olk Southerns feet o motor vehicles, suchas cars and trucks used by railroaders insupervising and maintaining our 22,000 milerail system, includes hybrid vehicles, such as

the Ford Escape. In 2007, we added 97 hybridon-road vehicles to our feet. The company isevaluating the per ormance o the hybrids andreviewing the entire feet o on-road vehicles toensure that each vehicle is suitable or itspredominant use. Among the actors we areevaluating are size, weight, horsepower, ueltype, and e ciency.

In 2007:

500.4 million Gallons o diesel uel11.3 millionGallons o gasoline

1.5 millionGallons o propaneand heating oil480.7 million

Kilowatt-hourso electricity

372.6 millionCubic eet o natural gas

Energy useper million $ of revenue:Diesel uel per milliondollars o revenue 53,053 gallons

Gasoline per milliondollars o revenue 1,198 gallonsPropane and heating oilper million dollars o revenue 164 gallons

Electricity per milliondollars o revenue 50,965 kilowatt-hours

Natural gas per milliondollars o revenue 38,000 cubic feet


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Lighting the Way to Energy Savings Nor olk Southern is committed to reducingenergy consumption in its o ce buildings.The latest technological advances in lightingsystems have been deployed to save energycosts, reduce the companys carbon ootprint,and bene t local communities all whileimproving overall lighting.

In 2007, Nor olk Southern embarked on a

systemwide two-year initiative to replace andupgrade lighting in all o ces, shops, and yardacilities. The project covers 600 buildings plus

yard acilities at 300 Nor olk Southern locations.In addition to producing savings in utility bills,lowering maintenance costs, and improvinglighting, the project serves to reduce greenhousegas emissions as less energy is required to lightthe companys acilities.

Localities urther bene t as planners work toavoid over-lighting outdoor company acilities,lessening the impact on adjacent communities.

Converting existing lighting to newer, moreenergy e cient technologies will result insubstantial savings in Nor olk Southerns annualelectric bill, about 40 percent o which goes

or lighting its acilities systemwide. The newersystems combine use o more e cient fuores-cent technologies with pulse-start metal halidelighting. The metal halide produces a morepeople- riendly white light, and the pulse-starttechnology gives instant startup and reducedenergy consumption. The end results aremore light with less power, and more e ectivelight distribution.

Here is a summary o some o the annual benefts o the

lighting upgrade project: Estimated energy consumption savings

o 50 million kilowatt-hours

Reduce carbon dioxide emissionsby 76 million pounds

Reduce nitrogen oxide emissions

by 105,150 pounds Reduce sul ur dioxide emissions

by 271,800 pounds

Emissions reductions equivalent toremoving 4,325 cars rom the road

Nor olk Southern also is installing occupancysensor controls throughout its acilities.Occupancy sensors automatically controllighting by turning lights o when spaces areunoccupied. The sensors give building operatorsadditional opportunities to improve energysavings without compromising lighting orbuilding occupants.


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Tracking Recyclable Materials Nor olk Southern does not have a process ortracking the total amount o general o ce andyard waste generated by our operations. We antic-ipate being able to do so by the end o 2008.

However, we currently track the amounts o crossties, scrap steel, and batteries recycled onan annual basis.

In 2007:1.1 millionCrossties utilized or energy recovery

868,000 Crossties sold or landscaping

201,000Crossties used in internal cascading e orts179,000

Tons o metal recycled

225,000Tons o scrap steel recycled923,500

Pounds o batteriesrecycled, resulting in

465,164 pounds o lead,61,766 pounds o cadmium,

and 83,510 pounds o nickelnot disposed in land lls

LocomotiveEmissions Factors:

1,008Grams o CO2

per gallon o diesel

0.8 Grams o CH4

per gallon o diesel

0.26Grams o N2O

per gallon o diesel

595Tons o CO2e

rom the combustiono diesel uel inlocomotives permillion dollars o revenue in 2007

Data:Click on thislink or the U.S.EnvironmentalProtection Agencysreport entitled, DirectEmissions rom MobileCombustion Sources:www.epa.gov/ stateply/documents/ resources/mobile-

source_guidance.pd

U.S. railroad transportation-relatedgreenhouse gas emissions *

2005 2006 2007 56.7 58.9 58.0

Total

49.8 51.8 50.8Carbon dioxide C0 2 0.1 0.1 0.1

Methane CH 4

0.4 0.4 0.4Nitrous Oxide N

20

6.4 6.5 6.6Hydrofuorocarbons HFCs

Emissions are in million metric tons

* Includes emissions rom diesel- andelectric-powered locomotives operated by

reight and passenger railroads. 2008 datanot available.

Source: U.S. Environmental Protection Agency


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Protecting Water Sources and Related Ecosystems and Habitats Nor olk Southerns system operates throughmany areas in the eastern United States,including along large and small waterways.Several o our acilities are located on theshores o major waterways, including the OhioRiver, Lake Erie, and the Elizabeth River. Manyo our rail lines parallel smaller waterways asthey provide natural courses through hilly andmountainous terrain.

Systemwide, we have more than 168 waterdischarge permits in place that govern thequality o our water discharges and protect theenvironment. Typical water discharges rom our

acilities include treated wash water, water romrepair and maintenance operations, sanitarywater, and storm water. We continue to upgradeand install state-o -the art wastewater treatmentsystems to ensure that we meet or exceedwastewater discharge standards applicable toour operations .

From time to time, however, a train accidentoccurs that results in the discharge o substances, either diesel uel or a commoditybeing carried by the train, to a waterway. In

such cases, we respond immediately to thescene to minimize and remediate any releases,working closely with regulatory agencies torestore the a ected environment.

Reporting All Spills Our policy is to report all spills on our property,no matter how small and no matter the source.The number o reported incidents applicable toNor olk Southern does not distinguish betweenthose that may have an impact on the environ-ment and those that do not. All releases are reme-diated promptly, working closely with regulatorsto ensure that the environment is restored.

Taking Steps to Avoid

Signifcant Environmental Impacts Nor olk Southern is a railroad company thattransports a variety o commodities sa ely ande ciently across North America through theuse o locomotive power. By ar, the mostsigni cant environmental impact o transporta-tion by rail relates to uel consumption. Simply

put, diesel uel is necessary or current railtechnology and is one o our biggest expensesin providing the transportation services thatkeep our economy moving. The good news isthat transportation by rail is ar more e cient interms o uel consumption than the alternative,trucking. And that is good or the environment.

Still, Nor olk Southern employs many programs

and technologies that make us even moree cient consumers o diesel uel, saving moneyand improving the environment. For example,in addition to using the latest locomotivetechnology described elsewhere in this section,Nor olk Southern is a member o the ederalEnvironmental Protection Agencys SmartWayTransport partnership. As part o the partner-ship, Nor olk Southern and other reight


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transporters have committed to evaluating theenvironmental impacts o their operations and

have agreed to work with the EPA to developand implement plans to improve uel e ciencyand reduce emissions in coming years.

Nor olk Southern also joined the Social,Environmental and Economic (S.E.E.) Changeinitiative o Business Roundtable, an e ortamong major American companies to promotesustainable growth. Nor olk Southern is one o 32 member companies o S.E.E. Change, begunin 2005 to demonstrate how commitments tosociety and the environment can be compatiblewith business and economic growth.

For every truckload that is trans erred to rail,the supply chain becomes even greener throughreduced emissions and more e cient use o

uel. Nor olk Southerns carbon ootprintanalyzer, or Green Machine, illustrates howshippers can reduce emissions as rail becomesa larger component o supply chains. The GreenMachine appears on the companys sustainabilityWeb site at www.nscorp.com/ ootprints . Thecalculator shows how many automobiles wouldhave to be taken o highways, and how manytrees would need to be planted, in order toachieve air quality improvements equivalent tothose o ered by greater use o rail.

As Nor olk Southern continues its e orts toexpand and serve more markets, we anticipateadditional loads will be converted to rail, easing

tra c congestion on our highways and reducinggreenhouse gases. The continued developmento public-private partnerships, as describedelsewhere in this sustainability report, willachieve these bene ts while enhancing ournational economy.

Nor olk Southern engages in outreach e orts inthe communities we serve. These e orts include

developing and presenting training programsor local emergency management agenciesand other responders, such as local police and

re departments.

Many o these training opportunities are providedas a result o Nor olk Southerns support o theTRANSCAER program, a national e ort that

ocuses on assisting communities to prepare orand respond to hazardous materials transporta-tion incidents. TRANSCAER, which stands orTransportation Community Awareness andEmergency Response, is a program o theAmerican Chemistry Council. Nor olk Southernprograms on behal o TRANSCAER range romclassroom sessions to ull-scale outdoor drillsto special whistle-stop trains. Nor olk Southernis a multiple winner o TRANSCAERs NationalAchievement Award. Nor olk Southern alsosponsors annual training or rst respondersacross the country at the Emergency ResponseTraining Center at Pueblo, Colo.


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Responding When Accidents Occur While rare, accidents do occur that result insigni cant releases o hazardous materials tothe environment. In January 2005, a derailmento a Nor olk Southern train at Graniteville, S.C.,resulted in a release o chlorine vapor. Nor olkSouthern operating, sa ety and environmental,and police orces immediately went to the sceneto work with local emergency responders,hazardous materials contractors, and ederal,

state, and local o cials.

This was one o the most signi cant rail incidentsever to occur on Nor olk Southern. The accidentresulted in the deaths o nine people, including

a Nor olk Southern locomotive engineer. Some250 people were injured, including a Nor olkSouthern conductor, and approximately 5,400residents were evacuated.

One o the many outcomes o the Granitevillerelease has been an increased national ocus onthe sa e transportation o toxic by inhalationcompounds, which by ederal law, railroads arerequired to transport.

In June 2006, a Nor olk Southern train derailednear Keating Summit, Pa., causing a release o 42,000 gallons o sodium hydroxide to a creekin northwestern Pennsylvania. Today, the areaand waterway impacted by the incident havesigni cantly recovered.


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While these incidents were serious, the actremains that rail is the sa est orm o reighttransportation available in North America.

To ensure this, we have comprehensivesecurity plans in place, and all o our em-ployees receive regular training in sa ety andsecurity. We also coordinate closely with themunicipalities we serve, providing hazardousmaterials response training in many locationseach year. In 2007, we conducted 120 pro-grams, including drills and training classes in18 states, attended by more than 5,000 local,

state, and ederal responders rom 164cities and counties in those states andadjoining states. The programs totaled morethan 23,000 man-hours o instruction.

We work closely with the government to ensurecompliance with sa ety and security regulationsgoverning rail operations and the transportationo hazardous materials. As one notable example,

a Nor olk Southern police special agent hasbeen assigned to the National Joint TerrorismTask Force operating out o FBI headquartersin Washington, D.C., to serve as liaison to theNorth American rail industry. This arrangementimproves logistical fow o vital security andlaw en orcement in ormation with respect tothe rail industry as a whole, and has ostereda strong working relationship between the FBI

and Nor olk Southern.


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Environmental Penalties Paid Nor olk Southern works diligently to ensure thatour acilities and operations comply with envi-ronmental laws and regulations. We routinelyaudit our own operations to ensure complianceand to prevent the potential or unacceptableconditions to arise. Also, we are inspected onan ongoing basis by regulatory agencies and, onoccasion, ned. However, o 25 governmentalinspections conducted in 2007, none resultedin the issuance o a ne or penalty.

Notwithstanding the companys e orts to ensurecompliance with all environmental laws andregulations, Nor olk Southern sometimes payspenalties to resolve en orcement matters broughtby state and ederal regulators in connectionwith the environment.

Following are summaries o environmentallybased penalties Nor olk Southern paid in 2007.The company managed and remediated the

environmental impacts o each incident incooperation with regulatory agencies.

In August, Nor olk Southern entered into asettlement agreement with the PennsylvaniaDepartment o Environmental Protectionresolving alleged violations o state environ-mental laws in connection with threederailment-caused spills in western Pennsyl-vania. Pursuant to the agreement, a civilpenalty in the amount o $575,000 was paidto the states Clean Water Fund.

In October, Nor olk Southern and theWestern New York & Pennsylvania Railroadentered into a settlement agreement withthe Seneca Nation o Indians, which issueda pollution ticket against the two railroads

or a coal spill arising out o a Jan. 26, 2006,train derailment on Seneca Nation territory.A $25,200 penalty was paid to the SenecaNation under the agreement to coverresponse costs, restoration, and to resolvea pollution ticket.

In November, Nor olk Southern entered intoa settlement agreement with the common-wealth o Pennsylvania in connection withthe June 2006 derailment that caused arelease o sodium hydroxide near KeatingSummit, Pa. Pursuant to the agreement,Nor olk Southern paid approximately $7.35million in restitution to compensate ornatural resource damages and state agencyresponse costs caused by the derailment andspill. Nor olk Southern also pled no contestto three misdemeanor charges and paid nesin the amount o $250,000 to resolve them.


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Minimizing Hazardous Waste Generation Due to process changes and product substitutionin 2007, Nor olk Southern had only one acilitythat was considered a large-quantity generatoro hazardous waste (2,200 pounds generated inany given month). This waste consisted o wastepaint and solvents generated by painting loco-motives and business cars. There were eightsmall-quantity (220 to 2,200 pounds) generatorso hazardous waste sites on our system. This

waste consisted o bridge waste and other smallquantities o waste. Wastes generated by allNor olk Southern acilities are managed anddisposed in compliance with all applicablelaws and regulations.

Using Renewable Energy Sources Nor olk Southern constantly searches or newways to deploy renewable energy sources.For example, we installed a 50-kilowatt windturbine at our yard in Bellevue, Ohio, thatgenerates the electricity to run the yardswastewater treatment plant. The wind turbineconsists o three 24- oot rotor blades mountedon an 80- oot tower and is estimated to gener-ate more than 100,000 kilowatt hours annually.

Solar energy is used in many locations alongour rail system to power rail lubrication devicesnecessary to reduce riction and enhance uele ciency. Solar energy is used also to generatethe electricity that runs our wastewater treatmentplant in Birmingham, Ala. Our Research andTests Department evaluates all new technologiesand equipment or their capability to be poweredby solar energy.

Investing Millions For Environmental Initiatives Every year, Nor olk Southern spends signi cantunds on environmental capital and remediationprojects. In 2007, the company invested $5.8million on projects such as wastewater treatmentplant upgrades, above-ground storage tank dikeliners, tank car spill pans, and other equipmentand projects. In addition, $13.5 million was spentin 2007 on remediation projects, includingthe cleanup o spills and historic conditions,

underground storage tank removal, andbuilding demolition.

Quiet Zones Help Reduce Community Noise Locomotive horns are a key part o crossingsa ety and are necessary to alert motorists tooncoming trains at highway-rail grade crossings.

Federal regulations permit municipalities tocreate quiet zones, provided certain conditionsare met. Nor olk Southern cooperates withmunicipalities in this regard, and in 2007,25 quiet zones were in e ect on our system.In addition, Nor olk Southern complies withidling requirements imposed by ederal regulatorson our operations. Idling reduction initiativesprimarily designed or uel e ciency have the

added bene t o reducing locomotive enginenoise rom idling.


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Supporting Use o Public Transit Rail is a superior orm o transportation whenit comes to mitigating tra c congestion andreducing emissions rom motor vehicles. As notedelsewhere in this sustainability report, Nor olkSouthern is pursuing public-private partnershipsand other rail capacity projects to take advantageo the e ciencies and environmental advantageso rail reight transportation.

The company also is helping its employees takeadvantage o public transit opportunities whereavailable. Through a program launched in 2006,Nor olk Southern employees can purchase passes

or mass transit systems on a pretax basis or

their commute to work.Using mass transit helps preserve naturalresources and ease tra c congestion. In addition,purchasing transit passes with pretax dollarsmeans individual savings o between 20 percentand 40 percent, depending on an individualsincome tax bracket. The Web-based system o erspasses or quali ed work-related commuting on

mass transit systems such as Atlantas MARTA,Hampton Roads HRT, Philadelphias SEPTA,AMTRAK, and others.

Nor olk Southern recognizes the interest inpromoting passenger rail services and hasbusiness agreements with several passengerentities, including Amtrak.

Four guiding principles govern Nor olk Southernsconsideration o proposals to operate passengerservice on our reight lines. They are:

Transparency o passenger train operations toour reight operations, meaning that su cientin rastructure is provided or passenger trainsand reight trains to operate without delay toeither, and to allow or the growth o both;

Fair value or use o our assets;

Full liability protection; and

No subsidy by Nor olk Southern o passenger operations.

Engaging in Sustainable Real Estate Practices Nor olk Southern protects its natural assets bypracticing environmentally sa e methods to

limit erosion and control vegetation. As a largeprivate landowner, Nor olk Southern alsocontinually looks or ways to redevelop ormerrailroad property, whether operating property or

ormer tenant land. In 2007, the nal phase o along-standing Nor olk Southern redevelopmentproject, the Carlyle redevelopment in Alexandria,Va., was begun. This 76-acre ormer railroadoperating property has been redeveloped under

the oversight o the Virginia Department o Environmental Quality and now includes mixedcommercial and residential uses and governmento ce space. In recent years, at the request o states or local municipalities, Nor olk Southernhas partnered to turn hundreds o miles o

ormer railroad rights o way into hiking, biking,and walking trails. Recent notable examplesinclude the Gastonia (N.C.) Rail Trail and the

Roanoke (Va.) River Trail.


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Nor olk Southern is committed to a vision tobe the sa est, most customer- ocused, andsuccess ul transportation company in the world.

Sa ety Is Top Priority Nor olk Southern takes special pride in itsemployee sa ety record. For 19 consecutiveyears, the people o Nor olk Southern have

earned the railindustrys top award

or employee sa ety,the prestigiousE.H. Harriman Awardgold medal. Nor olkSoutherns strongsa ety culture hasset the standard orrailway workplacesa ety.

The Harriman Awardswere ounded by thelate Mrs. Mary W.Harriman in memoryo her husband,Edward H. Harriman,a legend in Americanrailroading. Today,the awards areadministered underthe auspices o theE.H. HarrimanMemorial AwardsInstitute, with support

rom the Mary W.Harriman Foundation.

Employee sa ety has contributed to other sa etyrecords by American railroads, which reportedthe lowest train accident rate and the lowestgrade crossing accident rate in history in 2007.The total number o atalities rom all rail-relatedincidents also was at a record low.

Nor olk Southern is committed to public sa etye orts to eliminate injuries and deaths resulting

rom collisions between motor vehicles andtrains at highway-rail grade crossings, as wellas rom trespassing on railroad property. Sincethe early 1970s, the company has supportedOperation Li esaver Inc., an internationalnonpro t education and awareness programdedicated to ending tragic collisions, atalitiesand injuries at highway-rail grade crossings andon railroad rights o way. In 2007, Nor olkSouthern launched Train Your Brain, a sa etyawareness campaign encouraging people tobe smart around highway-rail grade crossings.Targeting college students and the general popula-tion, the campaign eatures a costumed Brainycharacter who makes public appearances, anda novel Web site at www.brainysworld.com .

Norfolk Southern

Employee Injury DataFor 2007:

2Work-related atalities

1.16Injuries per 200,000

man-hours

370People injured

15People withrestricted activity69

People requiringmedical attention

286People who lost time

due to injury

Our Social Performance Indicators

Overview:As a major U.S.corporation with more than

30,000 employees nearly 85

percent of whom are members

of labor organizations and

covered under collective

bargaining agreements and with operations in 22

states and the nations capital,

Norfolk Southern recognizes its

responsibility to foster

a safe work environment

that treats everyone withrespect and cultivates

diversity as a strength of the

organization while enhancing

the quality of life in the

communities it serves.


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Training Strengthens Operations Training is essential to Nor olk Southernsoperations. For every new hire in the agreement(union) work orce, that training begins at thecompanys training center near Atlanta. New

employees spend between 40and 320 hours there. Trainees inthe companys management andoperations supervisor programsalso attend classes at the acility.

Employee training and develop-ment does not begin and endwith new hires. ThoroughbredSchool, Nor olk Southernsinnovative approach to work-

orce development, opened inFebruary 2007. Managementemployees rom across thecompany gather in Nor olk or

our-day sessions that help themgain a broader understanding o Nor olk Southern rom nan-cials to operations to the globaleconomys impact on thebusiness. Nor olk Southern also

supports employee education and developmentthrough a tuition reimbursement program.

Supporting Equal Opportunity and A frmative Action Nor olk Southern complies with all applicablelaws, regulations, and executive orders concerningequal opportunity and nondiscrimination, andthe company o ers employment, training,remuneration, advancement, and all otherprivileges o employment on the basis o

quali cation and per ormance, regardless o race, religion, color, national origin, gender,age, status as a covered veteran, sexual orienta-

tion, the presence o a disability, or any otherlegally protected status.

The explicit intention is to assure equal treatmentand opportunity or all employees and employ-ment applicants beyond simple compliancewith the letter o civil rights legislation, andto make every e ort through a rmativeaction to comply ully with the spirit o equalemployment opportunity.

Consistent with the corporations commitmentto equal treatment and opportunity or allemployees and employment applicants, thecompanys EEO sta meets with departmentsupervisors to make certain the corporationsEEO policy is being ollowed. Companyrepresentatives explain the EEO policy thoroughlyin employee orientation and managementtraining programs. The EEO sta also developstraining programs and conducts special meetingsto explain the content o the policy and individualresponsibility or e ective implementation,making clear the corporations commitmenton EEO matters.

The EEO sta is responsible or auditing imple-mentation o the corporations O ce o Federal

Contract Compliance Programs a rmativeaction program. The auditing process includes:(a) monitoring records on re errals, applicants,hires, promotions, terminations, and trans ersat all levels to ensure nondiscrimination;(b) evaluating each acility periodically concern-ing the degree to which projected goals havebeen met; (c) reviewing the results o eachevaluation, as necessary, with appropriatelevels o management; (d) advising seniormanagement periodically o program e ective-ness and appropriate remedial action.

Selected training data: Average annual number o

training hours per management

employee is 62 . Average annual number o training hours per unionemployee in the TransportationDepartment is 26 .

Average annual number o training hours per unionemployee in the MechanicalDepartment is 75 .

Average annual number o training hours per unionemployee in the EngineeringDepartment is 92 .


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The EEO sta maintains a record o complaintso discrimination. A monthly report is generatedshowing the numbers and status o complaints

handled during the month. The report is circulatedto appropriate personnel in the corporation.

Nor olk Southern Embraces Diversity Diversity is the collective mixture o similaritiesand di erences that impact our work orce, work-place, and marketplace. Managing diversity is a

continuous process to recognize, cultivate, anduse all the best talents o our employees. Diversityproduces better business outcomes by usingeveryones talents and perspectives to improveservice and the bottom line.

Through diversity, we create an environmentin which everyone is treated airly and withrespect, in which all people are recognized andrewarded based on their unique abilities andcontributions, and in which everyone has equalopportunity or growth and advancement.

The Diversity Council at Nor olk Southern is acorporate-sponsored group o selected employeeswho represent a demographic cross-section o the organization. The Diversity Council assiststhe companys e orts to create a more inclusiveand productive workplace. It works to oster aclimate o airness, mutual respect, and pro es-sionalism or all employees.

Nor olk Southern also has a womens network,WiNS, that is open to all employees. WiNSgives Nor olk Southern a competitive advantageby empowering employee leadership, develop-ment, and networking.

Nor olk Southern has identifed several diversity goals to support the companys business objectives:

Maintain an inclusive work environment that promotes respect amongemployees throughout all levels o the organization, thus enhancing thesa ety, creativity, productivity, and job satis action o every employee.

Capitalize on diversity as a business practice that improves thebottom line.

Develop everyones best abilities and ully recognize everyones talents. Make Nor olk Southern the employer and service provider o choice.

Attract and retain a quali ed and diverse work orce, and cultivaterespect ul and e ective leaders. Participate in community and customer outreach. Promote the development o diversity by educating employees on the

bene ts o a diverse work orce.

Norfolk Southern Work Force Demographics

T O T A L

M A L E

F E M A L E

C A U C A S I A N B L A C K H I S

P A N I C

All Employees(as o Aug. 2008) 30,206 28,155 2,051 25,488 4,170 31

Senior Management(board-appointed o fcers) 31 28 3 26 3 2

Board of Directors 11 10 1 9 2 0

Governance and

Nominating Committee 5 4 1 5 0 0Audit Committee 4 4 0 2 2 0

Compensation Committee 4 4 0 3 1 0

Executive Committee 5 5 0 4 1 0

Finance Committee 5 4 1 4 1 0


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O ering an Attractive Employee Benefts Package Nor olk Southern o ers a comprehensive ben-e ts package to care or our employeesand their amilies today and to help them plan

or their uture.

For our unionized work orce, called agreementemployees because they are covered by collec-tive bargaining agreements, Nor olk Southernparticipates in the Railroad Employees NationalHealth and Wel are Plan, which is a collectivelybargained wel are bene t plan providingmedical, mental health and substance abuse,prescription drug, dental, vision, li e, andaccidental death and dismemberment bene ts

or virtually all unionized employees o thebiggest rail carriers, called Class 1 railroads.The company contributes annually per employee

or these bene ts, and employees contributeannually as well. More than hal o the railroadsunionized employees are covered by one o several short-term disability supplementalsickness bene t plans, to which the railroadcontributes annually per employee. Unionizedemployees also are eligible to participate in a401(k) pretax savings plan with a company match.

For management employees who are notmembers o a union, called nonagreementemployees, Nor olk Southern provides medical,mental health and substance abuse, prescriptiondrug, dental, vision, and li e insurance bene ts.The company contributes annually per employee

or these bene ts a ter a salary-based contributionby the employee. Nonagreement employees canelect other bene ts, such as accidental death anddismemberment insurance, health and dependentcare reimbursement accounts, and long-term

care insurance, with employees paying the ullcost or such bene ts. Nonagreement employeesare eligible or salary continuance bene ts or

one to six months based on length o service.Long-term disability bene ts, plus other quali y-ing bene ts, designed to pay a portion o anemployees salary i total disability occurs,add up to 50 percent o basic monthly salary.Nonagreement employees also are eligible toparticipate in a 401(k) savings plan in whichthe company will match 100 percent o the

rst 1 percent contribution and 50 percent on

additional contributions up to 6 percent, or atotal o 3.5 percent o eligible pay. The de nedbene t retirement plan or nonagreementemployees is ully unded by the company.

For all employees, Nor olk Southern o ers amatching gi ts program designed to encourageemployee support o eligible nonpro t educa-tional, cultural, and environmental organizationswhere employees can receive matching gi tssupport or eligible contributions o up to$35,000 per calendar year. Nor olk Southerncontributes on average approximately $50 peremployee. The company also o ers an employeeeducation assistance program designed to help

urther an employees education that is availableto all ull-time employees with six months o service and provides a maximum individualbene t o $5,250 per calendar year. There are11 paid holidays, and all eligible employeesearn vacation ranging rom one week to veweeks based on length o service.


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Employees in the railroad industry pay RailroadRetirement Taxes instead o FICA taxes underSocial Security. While payroll taxes or Railroad

Retirement are slightly higher, the bene ts atretirement are signi cantly greater. In additionto a retirement bene t that is equivalent toSocial Security, railroad employees receive anadditional bene t based on railroad earnings.

Sel -Imposed Checks and Balances on Political Contributions The Nor olk Southern board o directors hasauthorized the company to make contributionsto state and local candidates or public o ce,political committees and political parties, and

or other political purposes, subject to anylegal limitations and applicable reportingrequirements, up to $500,000 per calendaryear. Such contributions are made pursuantto a procedure whereby:

at least two authorized individuals initiate acontribution recommendation;

the recommendation is reviewed and, i appropriate, approved by an attorney in thelaw department;

the recommendation is reviewed andapproved by the vice president law; and

a check is drawn against a separate accountmaintained and unded solely or the purposeo making such contributions and signed bytwo authorized individuals.

Nor olk Southern utilizes the services o anoutside vendor to provide administrativesupport and backup review o applicable legalrequirements and restrictions, and to assist inmeeting all reporting requirements.

Nor olk Southern also has established a separatesegregated und under ederal law, the Nor olkSouthern Corporation Good Government Fund.

The GGF is a nonpartisan political und thatprovides nancial support to candidates ando ce holders, regardless o party a liation,whose views match the interests o Nor olkSouthern. The GGF is unded entirely throughvoluntary contributions, primarily rom NSemployees, and is governed by a steeringcommittee consisting o NS employees.GGF contributions are made pursuant to a

procedure whereby: at least two authorized individuals initiate

a contribution recommendation;

the recommendation is reviewed and, i appropriate, approved by an attorney in thelaw department; and

a check is drawn against the GGFs accountand signed by two authorized individuals.

The GGF utilizes the services o an outsidevendor to provide administrative support andbackup review o applicable legal requirementsand restrictions, and to assist in meeting allreporting requirements.


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United Way o South Hampton Roads 2007Community Impact Award.

Clean Business Award presented bythe Nor olk Environmental Commission

or employee volunteer e orts towardsite maintenance and beauti cation,recycling, water and energy conservation,and litter cleanup.

2007 Global Logistics Supplier InnovationAward presented by Eastman ChemicalCompany. The award recognizes Nor olkSouthern or the development and imple-mentation o a new process or deliveringcoal to Eastmans Kingsport, Tenn., chemi-cal manu acturing plant. Nor olk Southernscreative redesign o its service plan or theplant resulted in signi cant improvements indelivery schedules, consistency o opera-tions, and e ciency or both Eastman andNor olk Southern.

Toyota Logistics Services 2007 PresidentsAward or overall logistics excellenceamong rail carriers, Toyotas highest awardgiven to a logistics provider.

Toyotas Logistics Excellence Awardor On-Time Per ormance among rail

carriers. Nor olk Southern has won the

award seven times. Tom Reese, national account manager

intermodal, was the recipient o one o Target Corp.s All Star Awards at theannual Target Carrier Con erence.

UPS recognized Nor olk Southern or itscommitment and dedication to providingconsistent and reliable service throughoutour network in 2007.

Triple Crown Services Company, part o Nor olk Southerns intermodalnetwork, was named the nations 2007 top Rail/Intermodal Transpor-tation Service Provider in Logistics Management magazines 23rd

annual Quest or Quality survey o transportation pro essionals. Thedistinction marks the sixth time in the past seven years that Triple Crownwas voted the nations top provider in the rail/intermodal category.

Nor olk Southern Receives 2007 TRANSCAER National Achievement Award Nor olk Southern received TRANSCAERsNational Achievement Award or 2007 or its

dedication to sa e hazardous material handling.The award recognizes extraordinary achievementin support o the TRANSCAER initiative thatextends beyond the geographic boundaries o any one region.

TRANSCAER Transportation CommunityAwareness and Emergency Responseis the voluntary, nationwideoutreach e ort that helps communities prepare or and respond to

possible hazardous material transportation incidents. Volunteersrepresent chemical producers, distributors, carriers, rst responders, andgovernment agencies.

Nor olk Southern was recognized or organizing and assisting with multipleevents that trained more than 5,000 emergency responders. A total o 196training classes and drills were held during 120 events, totaling mor

Documents

Ns Sustainability Report 2008