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Rail Report - Summer 2007

NGFA Receptive to Proposals to Spur Investments in New Rail Capacity, Subject to Federal Oversight

WASHINGTON – The National Grain and Feed Association (NGFA) said it is receptive to proposals to provide reasonable tax incentives to encourage investments in additional rail infrastructure capacity to meet rapidly expanding demand for rail freight service, provided certain conditions are met and appropriate federal oversight is exercised.

In a statement presented at a federal Surface Transportation Board (STB) hearing, the NGFA said public funds should be used only to add new rail capacity, not simply to replace existing equipment and infrastructure. Further, the NGFA said, such funding should be part of a joint public-private partnership for which both shippers and carriers are eligible, and should be subject to prudent federal oversight.

The NGFA said it favored a “balanced” federal approach to infrastructure investment across all transportation modes, and said it believes federal legislation “could be useful in providing necessary incentives to make capacity expansion investments earlier than otherwise would occur.

“We face a critical time in the rail-served industries in the next five years to determine if the minimally regulated rail industry can successfully add to its capacity to meet what appears to be secular growth in the demand for rail service,” said NGFA President Kendell W. Keith in testimony presented at the STB hearing. “We favor the private marketplace making the decisions as to where new investments are most needed to increase rail service. But these private market decisions must have adequate federal oversight.”

The NGFA said the STB could play an important role by monitoring the nature and extent of net new infrastructure investment by rail carriers, and reporting such data to Congress and the public. In this regard, the association noted, it currently is difficult to obtain rail infrastructure investment information that is consistent across all carriers to determine how much new capacity truly is being added, or whether investments are being made primarily to replace existing capacity, such as old rail cars and locomotives.

“There is no doubt that in the last three years, we have witnessed a North American-based rail industry that has gone from surplus capacity to one where capacity is strained and sometimes rationed among customers,” the NGFA’s Keith testified. “Thus, there is a compelling need for more investment in rail infrastructure that will truly add capacity. Additional investment in infrastructure for all modes is desperately needed to ensure that the U.S. transportation network continues to be reliable to permit economic growth.”

The NGFA said that the current 10-year outlook for U.S. agriculture envisions considerably greater growth – perhaps double the growth rate of recent years – driven primarily by expansion of corn-based ethanol. Some private-sector forecasts project that rail demand to transport raw corn, ethanol and the principal ethanol co-product [distillers dried grains with solubles (DDGS)] could increase by 5 to 6 percent each year for the foreseeable future.

“The emphasis on biofuels is expected to strain truck transportation in origination markets where ethanol markets are supplied by local farmers and grain elevators,” Keith said. “Rapid growth in ethanol production will require considerable expansion in tank car capacity, as much of the ethanol is being delivered to destination by rail.”

Meanwhile, the NGFA noted that increased demand could be placed on trucks to transport cellulosic feedstocks intended for biofuels production. “Thus, truck transportation may struggle to keep up with its own expanding demand and have little capacity remaining to make up for any losses in rail service that might be caused by inadequate infrastructure investments for rail,” Keith said.

Banner Year for Industrial Development on Union Pacific Rail Lines

OMAHA – The railroad industry has long served as a catalyst for economic growth and prosperity. Last year, Union Pacific supported more than 200 industrial development projects designed to help rail-served customers start or expand their business. These facilities involved investments of $2.6 billion by Union Pacific customers and are expected to create more than 8,500 jobs.

“Industrial Development activities along Union Pacific Railroad were very robust last year,” said Steven J. McLaws, general director – Industrial Development. “We worked very closely with state and local economic development authorities on projects involving new site location and development of infrastructure to provide customers access to our rail system.”

For example, last year Union Pacific assisted Railex, a produce distribution company, with the location of a new refrigerated produce distribution facility in Wallula, Washington. From this new state-of-the-art distribution facility apples, pears, onions, potatoes and other perishable items originating in eastern Washington are being transported efficiently to the East Coast region.

The location of the new perishable product distribution facility provides shippers from several communities within Washington the advantage of the economies of rail with service equal to that of trucking, saving an estimated $4.5 million annually in transportation diesel fuel costs alone.

The 210 facilities supported by Union Pacific in 2006 included new ethanol facilities in Iowa, Nebraska, Kansas, Texas and Colorado; lumber distribution centers in Colorado, Idaho, Oklahoma, Texas and Washington; food and produce distribution centers in Washington, Arkansas, Idaho, Utah and Oklahoma; glass manufacturing facilities in Washington and Colorado; and a rail car manufacturing facility in Louisiana. Other industries that located along Union Pacific rail lines include facilities for chemicals, building products, fertilizers, plastics, food products and aggregates.

“Union Pacific welcomes business opportunities that can be accommodated at locations on our railroad where we can provide efficient service for a new customer without unreasonably affecting service to existing shippers and receivers,” said McLaws.

CSXT Development Efforts Spur Growth in 2006

JACKSONVILLE - CSX Transportation (CSXT) is developing new business and helping its customers expand through more than 140 industrial development projects begun in 2006.

Last year, the company attracted 88 new facilities to its lines and helped customers expand more than 50 plants across CSXT’s rail system. Investments totaled more than $2.7 billion and are expected to generate over 150,000 carloads of traffic for CSXT annually when the projects are fully operational.

CSXT partners extensively with state, local and economic development officials and works with 230 connecting regional and short line railroads to help companies identify sites for new facilities or to expand existing facilities. The railroad provides plant location services, including site layout, engineering and logistics assistance.

“The value of our partnership with both the short lines and communities we serve is represented by these numbers,” said Derrick Smith, vice president- Emerging Markets. “We have several strategies in place to further meet the needs of our growing customers.”

CSXT industrial development worked across a variety of markets in 2006 including:
• A new automobile assembly plant at West Point, Ga.;
• A dedicated intermodal terminal at Marion, Ohio;
• A new unit train terminal to receive perishable goods at Rotterdam, N.Y.;
• A solid waste landfill in Coalton, Ky.; and
• Staging of multiple coal facilities.

“We are proud to serve these diverse industries with rail - a more environmentally-friendly mode of transportation,” said Charles McSwain, assistant vice president - Regional Development. “We are particularly pleased they have given CSX Transportation the opportunity to serve them while they grow.”

CSX Transportation Inc. is a principal operating company of CSX Corporation. CSX Corporation, based in Jacksonville, Fla., is one of the leading transportation companies, providing rail, intermodal and rail-to-truck transload services. The company’s transportation network spans 21,000 miles with service to 23 eastern states and the District of Columbia, and connects to more than 70 ocean, river and lake ports. More information about CSX Corporation and its subsidiaries is available at the company’s web site, www.csx.com

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