Where We Are Today – Short Lines’ New Rules

Dave MearsAVP-Equipment & Service

American Short Line and Regional Railroad Association

Presentation To

American Car Accounting & Car Service OfficersNew Orleans, LA

November 11-12, 2009

November 8-10, 2009August 15-18, 2009

2

How Are We Doing?

3November 8-10, 2009

ASLRRA Member RailroadsASLRRA Member Railroads

481

4November 8-10, 2009

Year Employee Hours Categories* Fatalities Rate

1 2 3

2003

2004

2005

2006

2007

2008

**2009

97,122,382

98,202,880

100,074,486

101,754,349

103,120,889

102,564,916

76,410,177

1,765

1,766

1,758

1,660

1,618

1,167

426

296

270

230

258

267

142

50

4

5

5

5

5

5

1

4

5

5

5

5

5

1

4.25

4.16

3.98

3.78

3.67

3.60

3.10

*Categories: **Through August 1 = Non severe and non life-threatening injuries2 = More severe; amputations, concussions, loss of sight, hearing, etc.3 = Fatality

2003 - 2009

Class II / III Safety Performance

5November 8-10, 2009

Rail Industry Carloads 2008 - 2009

Class I's – Short Line Traffic Only

RR 3rd QTR 2008 3rd QTR 2009 Variance

BNSF 526,280 435,795 - 17.1%

CN 136,277 100,279 - 26.4%

CP 195,742 173,161- 11.5%

CSX 807,251 664,702 - 17.7%

KCS 157,391 112,004 - 28.8%

NS 742,079 569,056 - 23.3%

UP 675,000 540,000 - 20.0%

6November 8-10, 2009

Rail Health Indicators – Mixed Story for Now Energy Demands – Decreasing

Petroleum Costs – Down But Slowly Increasing

Consumer Demands – Slipping / Flat

Imports Rose in July 2009 4.7% (2 straight up months)

Exports Up 2.1% (4 straight up months)

Food Supply – Stressed Globally

Railroad Environmental Benefits – Good / Best

Railroad Growth – Network Expansion / Public-Private Partnerships – Stalled

% of Freight on Rail – Significant Decline

Railroad Rolling Equipment in Storage – Very High / Minor Improvements

7November 8-10, 2009

Rail Health Indicators

Rail Modernization and Use of Technology – Expanding

Railroad Efficiency – Lower OR, Better Speeds, and Weak Dwell Rates?

Railroad Productivity – Up

Railroad Safety Performance – Good / Excellent

Railroad Workforce – Down / Small Returns to Service

Railroad Pricing Power – Strong

Railroad Financial Posture – Solid

Investment in Railroads – Stable / Down

Railroad Unfunded Regulatory Requirements – Very High / Significant Issue

Railroad Retirement Trust Fund – Down But Healthy ($31B to $26B)

8November 8-10, 2009

Rail Health Indicators

Rail Network Regional / Geographic Positioning – Good / Excellent

Limited Ground Freight Options – Current Economics Favor Freight Rail

< 1 Ton of Freight – 436 Miles – 1 Gal. of Diesel >

The Indicators are Generally Good for Freight Rail – Will Remain Vital to the Economy for Both Near and Long Terms

November 8-10, 2009August 15-18, 2009

9

New Rules Are On The Way!

10November 8-10, 2009

Rail Safety Improvement Act of 2008 H.R. 2095

90 Industry Action Items, including:

32 New Regulations

7 Amended Regulations

8 New Plan Requirements

11 New Report Assignments

8 New FRA Studies

4 Pilot Programs

11November 8-10, 2009

Rail Safety Improvement Act of 2008 (cont'd)

1. Positive Train Control – Implement 2015; RSAC Completed: NPRM 06/09 with Short Line Exemptions; FRA Final Rule 11/09

2. Hours of Service – RSAC Completed: Final Rule 07/09; In Effect 07/16/09

3. Bridge Safety Requirements – RSAC Completed; NPRM 2009

4. Tunnel Requirements – Implement

5. Grade Crossing Inventory – Implement 10/16/09

6. 1 – 800 ENS – Implement Within 18 months

7. Risk Reduction Program – Implement

8. Top 10 States Require Xing Action Plan – Implement

12November 8-10, 2009

Rail Safety Improvement Act of 2008 (cont'd)

9. Dark Territory Switch Technology – Future RSAC

10. Broken Rail Service Failure Rate – Study

11. Certify Conductors – RSAC 07/09 – 12/09

12. Certify Carmen – Study

13. Sight Distance Law & Regulations at Xings – Implement

14. Radio Monitoring Authority – In Effect

15. Civil Penalties $25K-$100K – In Effect

16. 800 New FRA Inspectors – Implement Hiring 2009

13November 8-10, 2009

Ongoing and Significant

FRA Rail Safety Advisory Committee (RSAC)

1. Railroad Operating Rules

2. Medical Standards for Train Crews

3. Occupational Noise Standards and Requirements

4. Accident / Incident Reporting Requirements

5. Private Crossings

6. Roadway Worker Protection Rules and Requirements

7. Passenger Safety

8. Rail Integrity

9. Concrete Ties Utilization

10. Bridge Inspection and Maintenance

11. Tunnel Standards

12. Locomotive Standards

14November 8-10, 2009

Ongoing and Significant (Cont'd)

13. ECP Brake Specifications and Requirements

14. Pressure Tank Car Specifications

15. Positive Train Control Implementation, Standards, Rules

16. Conductor Certification

Other:

*17. HazMat Risk Assessment / Routing Rules

*18. Emergency Escape Breathing Apparatus Requirements

*19. Emergency Call Numbers at Grade Crossings 24-7-365 Call Centers

*20. At Grade Crossing Inventory

*21. Continuous Welded Rail Standards

*22. Narrow Band Radio Frequency Change and Equipment

23. Locomotive Horn Testing and Record Keeping

* Not RSAC

15November 8-10, 2009

Legislative and Regulatory Focus 2009 “Big 6”

Positive Train Control (PTC)

Final Rule Will be out This Year – November ( ? )

Short Line Exemptions:

+ SL’s can Operate on PTC Equipped Territory Up to and Beyond 20 Miles But Not More than

4X Day

+ Non PTC Loco can Cross PTC Equipped Territory at Diamonds But Requires Split Point

Derails

+ 2020 Requirements – SL Operations Beyond 20 Miles must have PTC Equipped Locomotives

Short Lines with Passenger and TIH Moves Have Other Considerations

Hours of Service (HOS)

2 FRA Requests Submitted by ASLRRA:

+ Petition for Waiver – 280 Short Lines Approximately 5,000 Covered Employees (T & E)

– FRA Response Anticipated Oct. 2009

+ Petition for Exemption – 155 Short Lines (974 T & E) With Fewer than 16 Employees

– FRA Response Oct. / Nov. 2009

Until FRA Approves Requests New HOS Rules are in Effect

16November 8-10, 2009

Legislative and Regulatory Focus 2009 (Cont’d)

Reregulation

Bottle Neck, Terminal Access, Paper Barriers are Central Components of Reregulation

Rockefeller Rereg Legislation is Uncertain This Year

Short Line and Class I Positions were Consistent and Mutually Supportive

Antitrust Legislation

Kohl / Baldwin Legislation (S. 146 / H.R. 233) May be Incorporated into any Senate Reregulation Legislation

Short Line Tax Credit

Expires December 31, 2009

Extension Efforts Proceeding Well:

+ 218 House Members are Sponsors of H.R. 1132

+ 48 Senate Members are Sponsors of S. 461

+ Short Line Members Engaged in State Delegation “Fly-In” All Summer to Lobby Members

“Extenders Bill” in Nov. / Dec. Looks To Be a Potential Option This Year for our Tax Credit Extension

17November 8-10, 2009

Legislative and Regulatory Focus 2009 (Cont’d)

Truck Size and Weights

Safe Highways and Infrastructure Preservation Act (SHIPA) Bill H.R. 1618 – Rep. James McGovern (MA)

Safe Highways and Infrastructure Preservation Act (SHIPA) Bill S. 779 – Sen. Frank Lautenberg (NJ)

Both Bills:

+ Freeze Truck Size and Weights on National Highway System to 80K lb Trucks+ Freeze Longer Combination Vehicles (LCV)

Co-Sponsors:

+ 120 in the House Bill (H.R. 1618)+ 7 in the Senate Bill (S. 779)

State TSW Initiatives:

+ FL – Weight Increase for Cattle Trucks + ME – Pilot Project for 100K lbs in Appropriations Bill Now

A Truck Size and Weights Bill is Not Expected to Move this Year ( ? )

18November 8-10, 2009

Near Term Short Line Legislative and Regulatory Compliance Expenditures

Positive Train Control: $ – Yet to be Determined

Hours of Service: $ – Hire More Personnel

Emergency Escape Breathing Apparatus (EEBA): $ – 3 Units Mounted in each Loco Cab Moving TIH / EXPLOSIVE / Radiological

Radio Narrow Banding: $ – 12.5 KH Radio for: New Base Stations, Locomotives, Vehicles, Mobile Radios & Antennas, etc.

Grade Crossing Inventories and Signage: $ – Inventory All Public Crossings. New Signage on all Crossings

1 – 800 Call Centers $ – Contract for or Hire and Equip a Call Center

Bridge Inspections and Reporting: $ – Inventory, Inspection, Filing, Load Capacity Determination, Reporting

Conductor Certification: $ – Train Conductors to Standard

19November 8-10, 2009

Near Term Short Line Legislative and Regulatory Compliance Expenditures

Locomotive Horn Testing and Recording: $ – Contract for Horn Testing

Medical Standards: $ – Yet to be Determined

Occupational Noise Standards and Requirements: $ – Hire Contractor to test, Record, Maintain Records

HazMat Risk Assessment Routing (TSA): $ – Evaluate Movement of TIH by Routing Tool, Report and Reroute

Security Training, Chain of Custody for TIH (TSA): $ – Training

New D&A Requirements: $ – Testing of All Personnel at Random

Training Standards: $ – Yet to be Determined

Locomotive Horn Testing and Recording: $ – Contract Horn Testing

20November 8-10, 2009

American Short Line and Regional Railroads

Connecting America's Communities

Strengthening America's Economy

Protecting America's Environment

21November 8-10, 2009