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United States Department of Energy Quadrennial Energy Review

Rail’s Role in Energy Infrastructure and Utilization August 8, 2014

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Overview

What we burn: •  Rail is a large energy consumer continually improving

efficiency

What we haul: •  Rail is critical to the transportation of energy and energy

savings

Reliability of rail: •  Rail investment to safely and efficiently meet existing and new

demand

What we burn: Rail is a large energy consumer

•  BNSF uses 1.3 billion gallons of diesel per year •  Second largest user behind U.S. Navy

•  Newest locomotive fleet in industry with approximately 7600 units, improving fuel efficiency and lower emissions; in last 10 years:

•  New: Over 3,300 units •  Remanufactured: Over 2,800 units

•  Increasing use of Automated Gate technology and electric wide-span cranes at BNSF intermodal facilities

•  Reduces idling emissions and eliminates local emissions from cranes

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What we burn: Liquefied natural gas-- BNSF pilot •  Burlington Northern successfully tested natural gas locomotives using LNG tenders in the early

1990s

•  Current testing is “duel fuel” – optimizes fuel consumption and maximize operating range on parts, or all, of network

•  BNSF is independently working with test locomotives from both of the primary domestic locomotive manufacturers—GE Transportation and EMD/Caterpillar

•  Revenue service dynamic testing underway in Colorado and California utilizing diverse operating conditions

•  Regulatory issues include siting and operating natural gas fuel infrastructure, locomotive and tender-specific regulatory issues, including Environmental Protection Agency (EPA) engine emission criteria, FRA rail operating rules, PHMSA tender design and Surface Transportation Board (STB) economic regulation

•  Economic value based on diesel-LNG price spread

•  Successful implementation not dependent on public incentives, and will lead surface transportation conversion

• 

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Sources of BNSF Growth

2013 Units

What we haul: Traffic mix has changed 2006-2013

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(2,315)   (2,535)  

(2,230)   (956)  

(558)  

(183)  

(1,874)  

Volume  in  Thousands  

2006  Volumes  =      10,637  2013  Volumes  =      10,093  

Domes&c  Intermodal  represents  largest  number  of  units  and  growing  rapidly.  

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What we haul: Intermodal fuel efficiency

From an environmental, economic, congestion and safety perspective, rail is the best way to move goods – today and in the future *

One BNSF intermodal train removes more than 280 long-haul trucks from our nation’s highways

Each year BNSF’s customers reduce carbon emissions by 30 million metric tons vs. highway

Rail is over three times more fuel efficient than long-haul trucks

• US coal demand strong- Western coal pricing, natural gas pricing and economic demand up

• Coal generation up almost 7% year-over-year through May.

• BNSF has invested to ensure resilient and efficient coal network: $3.5 billion since 1996 to ensure reliability of coal network.

• Historic $9 billion capital plan (2013-14) provides capacity on key coal routes.

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What we haul: Growing coal demand

What we haul: Coal sets in service begin rise in mid-2013

Source: Internal BNSF data

300

350

400

450

500

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What we haul: Efficient transportation enables PRB coal use

Source: Ventyx

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What we haul: BNSF Ethanol Destination Franchise

Unit Train Destinations Existing Watson, CA Birmingham, AL East Coast – via Chicago Texas - Ft Worth & Texas Gulf

Manifest Lanes Northern California Pacific Northwest Mountain Zone – UT, NM, MT, CO IL / MO – Chicago, St Louis

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What we haul: North American oil production

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

12,000

Q1 - 2010

Q2 - 2010

Q3 - 2010

Q4 - 2010

Q1 - 2011

Q2 - 2011

Q3 - 2011

Q4 - 2011

Q1 - 2012

Q2 - 2012

Q3 - 2012

Q4 - 2012

Q1 - 2013

Q2 - 2013

Q3 - 2013

Q4 - 2013

US & Canada Oil Production US & Canada CBR Shipments

3,333

980

Total US & Canada oil production growth Kbls/d

US & Canada RR CBR growth Kbls/d CBR handled

about 1/3 of the increase in oil production

What we haul: Crude-by-rail origins & destinations

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1 Origin Facility 2009

1 Destination Facility

3 Origin Facilities 2011

5 Destination Facilities

9 Origin Facilities 2012

15 Destination Facilities

10 Origin Facilities 2013

10 Destination Facilities

7 Origin Facilities 2014

10 Destination Facilities

Reliability of rail: Rail is providing unique value

•  Market Distribution Flexibility allows producers to ship in multiple constructs and to refineries throughout the U.S.

•  Investments in infrastructure, people and process ensures Reliable Transportation Services for producers.

•  Decades-long commitment to Safe Operating Practices helps prevent accidents in the first place.

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Reliability of rail: Investing in infrastructure to support demand

$ Billions

$2.3 $1.9

$2.1 $2.0

$2.6 $3.1

$3.8 $3.4

$3.4 $3.3

$2.7 $3.6

$3.6 $4.0

$5.0 $46.8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F Total

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Capital Commitments 2000-2014 Total

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Reliability of rail: Ensures Capability and Dependability

46%

18%

32%

4%

Core Network and Related Assets Expansion and Efficiency Locomotive, Freight Car, and Other Equip PTC

BNSF’s 2014 Capital Commitment $5 Billion

$2.3 billion

Core Network and Related Assets

$1.6 billion

Loco, Freight Car & Other Equip

$900 million

Expansion & Efficiency

$200 million

PTC

Reliability of rail: North Dakota- expanding capacity to meet demand

363,601 Total Carloads

Over $600 million in infrastructure investment (2013-2014) 115 miles of new track

4 new sidings

0 10 20 30 40 50 60 70 80 90

100

2011 2012 2013 2014 2015 2016 2017 2018 2019

Line capacity and projected volume (trains per day)

Glasgow subdivision (Minot - Snowden)

Forecast

Capacity

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Reliability of rail: Continuous risk reduction

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BNSF vs. Industry Reportable Rail Equipment Incident Rate (Incidents per Million Train Miles)

3.4 3.6

3.5 3.3 3.3

3.2

2.6 2.6 2.7

2.2 1.9

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

BNSF RREI Rate

Source: FRA Ten Year Overview – 2013 Data Through October

Reliability of rail: Crude by rail safety

•  2013 and 2012 safest years on record, with record volumes

•  Growing crude volumes delivered safely (99.997% shipped without incident)

•  •  Over 65,000 first

responders trained in their BNSF communities since 1996; 1,500 oil incident trainers trained by rail industry in 2014

DERAILMENT PREVENTION

MITIGATION: APPRIOPRIATE

TANK CAR

EMERGENCY RESPONSE

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Reliability of Rail: Industry leadership and careful regulation

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•  Reasonable train speeds are essential to commerce

•  Feasible and effective DP braking systems

•  Crude fleet transition first priority

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What will ensure reliability?

What’s needed to fully capture the potential that rail holds for energy reliability:

!  Tank car regulations that can be implemented creating certainty in the marketplace;

!  Reasonable speed restrictions that enhance safety, but do not encumber 95% of the freight traffic on America’s freight rail network;

!  Regulatory agencies to cooperatively work with us to facilitate the conversion to LNG.

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