Future of Freight Rail

National Association of Counties 2011 Rail Conference

Commissioner Francis P. Mulvey April 28, 2011

STB Basics

• Independent economic regulatory agency for the railroad industry

• Jurisdiction overRailroad rate and service disputesRailroad mergers and acquisitionsRail line abandonments and constructionFreight/passenger rail relationshipsLimited jurisdiction over other modes

Board Structure

• Comprised of 3 Board members

• Ann Begeman confirmed on April 14, replacing Chip Nottingham

• All members have rail transportation backgrounds– Elliott: United Transportation Union– Mulvey: House T&I staff; DOT IG for

rail; GAO transportation group – Begeman: Senate Commerce staff

STB STAFF

• Highly educated professional staff - lawyers, economists, financial analysts, environmental and railroad operational specialists

• Named #1 small agency - annual federal employee survey for past 2 years

• “One of the most obscure corners of the federal government . . . . train geeks and experts” Washington Post

Future of Freight Rail Hard to Predict

• Positive state of rail industry today not predicted 10 years ago

• 5 years post-Staggers, industry was still struggling

• Many variables in 25-year outlook

• Past is not necessarily prologue

Recent increase in rail volume

• 14 straight months of traffic gains• Nearly all commodities up from the

same period 1 year ago• Grain, Coal, Chemical, Motor

Vehicles up

BNSF, UP, NS carload volume increases greater than 5% (vs. same week 1 year ago)

CSX, KCS, and CN all in positive territory CP decline due to recent service issues

Intermodal at near-record highs

• CSX, NS, BNSF, KCS and CN post gains of 8-10% (vs. same week 1 year ago)

• UP gains smaller (2.5%)

• More commodity types moving via intermodal (e.g., some forest products migration from boxcar to intermodal)

Future Traffic Growth

• Rate of continued traffic growth unknown

• Capacity may become issue 1930 – 250,000 Class I route miles

2009 – 90,000 Class I route miles 1940 – 1.6 million Class I employees

2011 – 161,000 Class I employees

Future Traffic Growth

• Railroads continue to increase infrastructure investments 1995 –$6 billion Class I capital expenditures 2009 – nearly $10 billion capital expenditures 2011 - $12 billion planned capital expenditures Most capital expenditures for replacement, not

expansion

• Rail market share growth; barge/pipeline decline

• Not clear whether rail could handle substantial traffic shift from trucks

Energy Policy

• Significant percentage of rail revenue derived from coal transport

• Changes in coal/energy policy could impact – Traffic volume– Destination (export vs. domestic usage)

• Push for renewable energy could change traffic makeup

• Ethanol policy

Trade Issues

• Impact export volumes

• Will a growing percentage of U.S. coal go to Asia?

• Will there be larger overseas sales for U.S. automotive manufacturers?

• Will worldwide grain shortages send more U.S. grain overseas?

Changes in Transportation Policy

• PTC implementation and experience

• Changes in safety regulations

• Changes in legislative/regulatory economic regulation

• Budget cuts/increases in federal programs that support rail industry investment

Changes in Rail Industry Innovation

• Likely future productivity and efficiency improvements

• Last 25 years have produced– Increased train speeds

– Longer trains; more emphasis on unit trains

– Changes in employee functions/crew size

• Productivity gains were passed on to shippers via lower rates; this has changed in past few years

Growth of Passenger Rail

• High speed rail investment– Will it happen on a large scale?– Will it impact freight rail capacity in the

short or long term?– Funding?

• Growth in transit ridership and potential impact on freight rail capacity

Local Gov’t Influence on Rail Industry

• Participation in STB proceedings– CN/EJE merger proceeding - hundreds of local

comments on safety, environment, oversight

– Local officials/citizens comment in many proceedings

• STB’s Rail Customer & Public Assistance Program

• Community/state purchase of rail lines– Maine recent purchase of 200+ mile line

– 3 Indiana communities bought line being abandoned; trail use now and possibility of rail use in future

Thank youAny Questions?