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A Shippers Perspective on the Ever Changing Railroad Industry March 14 th, 2007 Badger Mining Corporation

Mar 26, 2015

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A Shippers Perspective on the Ever Changing Railroad Industry March 14 th, 2007 Badger Mining Corporation Slide 2 The Beginning of Railroading 18271 st Railroad in North America The Baltimore & Ohio 18402,800 miles of track 5 of the 6 New England States, Kentucky & Indiana 18509,000 miles of track U.S. World Leader 186535,000 miles of track The Golden Age of Railroads 1916254,000 miles of track Slide 3 Interstate Commerce Act of 1887 Interstate Commerce Commission (ICC) Formed Subjected railroads to comprehensive federal economic regulation. Controlled railroad operations for the next 108 years and nearly destroy the industry. Slide 4 Elkins Act of 1903 Strengthened the Interstate Commerce Act of 1887 Imposed heavy fines on railroads offering rebates and shippers accepting them. Slide 5 Surface Transportation Board (STB) Replaced the ICC in 1995 Shift in Control from Shippers to the Railroads Slide 6 The Peak Period of Railroads In 1916, there were over 1,500 railroads operating in the U.S. They operated on about 254,000 miles of rail Employed 1.8 million people. Largest U.S. Employer Slide 7 Shipper Advantages Mandatory Interchange Interchange traffic w/out discrimination Contract-like preferences were illegal Nonnegotiable Tariff Rates ICC Enforcement Slide 8 Government Intervention Federal Government seized control of railroads during World War I 1920s returned to private ownership Rundown condition By 1940s Unregulated Competitors Automobiles, buses, trucks, planes, pipelines, etc. Slide 9 Bankruptcy in the Future After World War II, railroad invest billions New locomotives, freight equipment, passenger trains, etc. Rail market share continues to decline Deferred Maintenance in the Billions Operate at Reduced Speeds Standing Derailment Slide 10 Bankruptcy Northeastern Railroads Midwestern Railroads Lead to Congressional Involvement! Slide 11 Consolidation from 1980 Avoid Bankruptcy or simply increase profits 1982 - WP & MP merge into UP 1985 Milw Rds & Soo Line = CP 1986-87 Seaboard System, B&O, C & O =CSXT 1988 DRGW & SP 1988 MKT = UP 1995 CNW = UP 1995 ATSF = BN 1996 SP = UP Slide 12 Staggers Rail Act of 1980 Nationalization OR Deregulation Deregulation was chose. Slide 13 Post Staggers Rail Act 1980 1980sOver 40 Class I Railroads TodayOnly 7 Class I Railroads Of which 4 control over 95% of the U.S. railroad business. Slide 14 Staggers Act Worked For Class 1s From the brink of bankruptcy in 1980 The free market place conditions allowed by Staggers produced 2006 4th quarter profits: BNSF $519 million Canadian National$499 million Canadian Pacific$145 million CSXT$347 million Kansas City Southern$88 million Norfolk Southern$385 million Union Pacific$485 million Slide 15 Consequences Shippers captive to a single railroad. Lack of Competition Slide 16 Railroad Classification Today 2006 Class 1 Railroads >$277M OR Class 11 Railroads > $20.5 M OR Class 111 Railroads < $20.5 OR Slide 17 Classifications Rarely Used Regional Railroads 350 miles $40 M Local Railroads Non-regional feeder railroads Switching & Terminal Railroads BRC 28 MILES Slide 18 Why short lines are needed In 1916 250,000 miles of track 1,500 + railroads 2006 500, regional & local rail roads (short line) railroads feeding the 7 class 1s 150,000 miles of track Slide 19 The Role of The WSOR & Feeder R R WSOR is one of 34 Regional Railroads 700 miles of branch & mainline track 21 counties in Wisconsin Made up of defunct WI & C, M R, C&NW runs over UP & CP track Connects with 6 Class 1s BNSF, CN, CP,UP,CSXT,NS Slide 20 Operational costs 6 of the 7 class 1 railroads intend to spend over 1 B @ in 2007 on Maintenance of Way, Infrastructure, & Horsepower Without State & County help the WSORs could not compete or stay in business. Slide 21 Operation Comparison Class 1 2m onlymi TRACK ONLY Class 1 New Track 2m per mile Rehab track $250,000.00 per mile WSOR $10,000.00 PER MILE Slide 22 Private vs. Railroad Owned Equipment North America Rail Fleet Class I Railroad PrivateShort Line 19971.4 Million37%58%5% 20041.6 Million25%69%6% Data Source: AAR Umler File, Ownership Mark