The University of Nevada Brazilian Petroleum Logistics Course May 28, 2010.

The University of Nevada Brazilian Petroleum Logistics

CourseMay 28, 2010

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Agenda

Industry OverviewBNSF OverviewWhy Rail?Why BNSF?

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Rail Industry Overview

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Industry Overview

America’s Railroad Industry

U.S. railroads operate over 140,000 miles of track and earn an aggregate freight revenue of nearly $57 billion

In the United States, railroads account for more than 40%* of all freight (more than trucks, boats, barges or planes) *Measured in Ton Miles

70% of all autos produced in America move by rail 30% of all U.S. grain moves by rail 65% of the coal is moved by rail which in turn produces half of

America’s electricity U.S. Railroads move enough:

Wheat to provide every person with a loaf of bread 6 days/week Concrete to build 45 miles of new highway every day

Railroads remain the backbone of America’s freight transportation network

North American railroads form the world’s most efficient and lowest-cost freight network

Source: American Association of Railroads (AAR)

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Industry Overview A key link in the U.S. Supply Chain

71% of America's GDP is driven by the consumer

Seamless network of manufacturers, retailers, distributors, transporters, storage facilities and suppliers

Rail delivers everything Americans consume everyday:

Cars and Combines

Clothes and Shoes

Stereos and TVs

Food and Water

Lumber and Steel

Energy and Fuel

… many others, such as bread and cereal

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Industry Overview

Types of Railroads

Class I • Annual revenues in excess of $340M• Operations range from 3,200 to 32,000

miles• Typically concentrate on long-haul, high-

density intercity traffic lanes• Seven Class I railroads in North America

Regional• Operate at least 350 miles of track • Earn $40 million or more in revenues• 33 Regional railroads

Local Linehaul• Operate less than 350 miles of track• Generate less than $40M in operating

revenues• 324 local linehaul railroads

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Industry Overview

North America Rail Network

BNSFCNCPCSXNSUPFXE

Over 160,000 miles of track

Over 165,000 railroad employees

Over 500 shortline railroads

BNSF operates more than 32,000 miles of track

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ChallengesChallengesHighway Congestion

Driver Shortage

Fuel Efficiency

Rail Capacity

Environmental Solutions

Industry Overview Transportation Industry Challenges

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Industry Overview

Governing Bodies of The Rail Industry

• Association of American Railroads (AAR)

• Department of Transportation (DOT)

• Federal Railroad Administration (FRA)

• The Surface Transportation Board (STB)

• U.S. Customs

• Various State and Municipal Agencies

• Dept. of Homeland Security

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BNSF Overview

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BNSF Overview

About Us

A Berkshire Hathaway Company

Unlike other forms of freight transportation, our trains operate on an infrastructure built and financed almost entirely by the railroad

Every day, we deliver trainloads of consumer goods, agricultural products, industrial products, and coal to customers acrossour 32,000-mile rail network

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Some Predecessors of Burlington Northern Santa Fe

• Great Northern GN• Northern Pacific NP• Chicago, Burlington and Quincy CB&Q• Spokane, Portland and Seattle SP&S• St. Louis-San Francisco (Frisco) SLSF• Fort Worth-Denver FWD• Colorado Southern CS• Atchison Topeka and Santa Fe ATSF

BNSF Overview

Our Ancestry

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Our vision is to realize

the tremendous potential of

BNSF Railway by providing

transportation services that

consistently meet our

customers' expectations.

BNSF Overview Our Vision

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BNSF Overview BNSF Network

Route Miles: 32,000 Number of Employees: 40,000 Locomotives: Approx. 6,400 Average Freight Cars on System: 200,000

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BNSF Overview BNSF: Size and Scope

32,000 route miles in 28 states and two provinces

Approximately 6,400 locomotives and 200,000 freight cars

Employs approximately 40,000 people

Operates an average of 1,400 freight trains per day

Moves one fourth of the nation’s rail freight

Serves all major ports on the West Coast and Gulf of Mexico If stacked end-to-end, all the intermodal loads shipped with BNSF

in one year would reach from Los Angeles to Shanghai 6 times.

Leads rail industry in technological innovation

Has one of the largest computer systems in the world to manage our network operations 24 hours a day

BNSF Volume – 1st Quarter 2010

Total units and % change from 2009

2010 Q1 Total BNSF Volume 2,099 -1.4%

Thousands

ConsumerProducts

955-2.2%

IndustrialProducts

306+2.7%

Ag269

+18.5%

Coal569

-9.3%

Significant Investments In

Infrastructure Alone Are Not Enough

*1998-2009

BNSF Overview $30 Billion Invested in the Last 12 Years*

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BNSF Overview Business Unit Breakdown

INDUSTRIAL PRODUCTS CONSUMER PRODUCTS

AGRICULTURECOAL

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BNSF Overview Industrial Products Breakdown

Building Materials

LumberWallboardBricksRoofing Materials

Plastics

PVCPolypropylenePolystyrenePolyethylene

Chemicals & Waste

AcidsIntermediatesCaustic SodaMunicipal Waste

Minerals

AggregatesCementClaySand

Food & Beverage

Beer & WineCanned GoodsFrozen Fish / Meat Vegetables

Machinery

Construction EquipmentFarm EquipmentTransformersGenerators

Metals

PipeSheetStructuralScrap

Petroleum Products

Diesel FuelBiodieselAsphaltAlcohols & Solvents

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BNSF Overview Carload Solutions – Direct Rail

Carload Service – Rail transportation for single or multiple carloads

Direct connection into supply chain

Excellent for multi-truck quantities of commodities such as canned goods, steel, lumber, paper, etc. (3+ truckloads per car)

Direct Rail - Primary access to the BNSF Network directly to/from a customer facility

Unit Train Service – Trainload movements of freight from same origin and destination carrying a single commodity

Most efficient service Achieves optimal network velocity

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BNSF Overview Carload Solutions - Transload

Value – Added Services Cross docking Storage and forward storing Load consolidation Inventory management

Transload – Access to the BNSF carload network at the most advantageous points through premium providers

Advantages Rail accessibility without a large capital

investment Access to numerous value-added services

To learn more: http://www.bnsf.com/markets/extensions/transload/index.html

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BNSF Overview Consumer Products Breakdown

Domestic and International Intermodal

ClothesShoesPersonal AccessoriesBeauty ProductsFurnitureElectronicsGroceriesHome Décor ItemsSporting Goods

Automotive

VehiclesParts

Office ProductsSeasonal ProductsPaper ProductsToysBicyclesHousehold AppliancesPet ProductsBooksSchool Supplies

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BNSF OverviewIntermodal Services

Premium Container Service

International and Domestic Sustainable solution to price sensitive shippers Averages 400-500+ miles per day* Competitive daily schedules

Expedited Trailer Service

Domestic Only Fastest intermodal service in the industry Averages 700+ miles per day* Ideal for time-sensitive freight

*Measurement derived from cutoff at origin to availability at destination

Service schedules can be found at http://www.bnsf.com/bnsf.was6/siisweb/cntrl

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BNSF Overview Ag Breakdown

Grain

WheatBarleyCornSoybeansMilo

Bulk Foods

SweetenersSyrupsAnimal ProductsStarch

Other Grain Products

OilsFeedsFlourSpecialty GrainsOilseeds & MealsMalt

EthanolFertilizer

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BNSF Overview Coal Breakdown

Coal

Low Sulfur Coal (Powder River Basin)

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Why Rail?

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Why Rail? Key Benefits

Fuel Efficiency – On average, railroads are three or more times more fuel efficient than trucks.

Highway Gridlock Reduction – A typical train takesthe freight equivalent of several hundred trucks off our highways.

Cost Efficiency – In general, shippers pay less for shipping freight via rail, rather than other forms of land transportation.

Environmental Friendliness – The EPA estimates that for every ton-mile, locomotives emit roughly one-third the amount of nitrogen oxides and particulates.

Source: AAR

Rail is 2-8 times more fuel efficient than trucks

Coal

Ag

Indust. Prod.

Intermodal

*Based on a 1,500 mile truck haul

8.2x

5.5x

4.3x

2.3x

Railroads can help reduce highway congestion

BNSF is the largest intermodal carrier in the world

Each year, BNSF moves about 4.6 million containers and trailers

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

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Dollar-for-dollar, shippers receive the best value by usingrail service:

Market pricing allows for better predictability and planning Real savings on transportation costs vs. truck Direct rail service allows movement of any size shipment

Why Rail? Best Value for Your Shipping Dollar

Rail emits a fraction of total U.S. green house gas (GHG) emissions

Rail = 2.6% of GHGs Trucks = 21% of GHGs

In 2008, BNSF moved 4.7 million containers and trailers, reducing GHG emissions by more than 7 million metric tons

Rail industry moved 11.5 million containers and trailers, reducing GHG emissions by more than 17.2 million metric tons

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Why BNSF?

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BNSF provides the industry’s broadest network to get your shipments where they need to go – safely and efficiently.

Access to 13 of 19 major U.S. Megapolitan markets

Alliances with other carriers, enabling coast-to-coast service

“Off-road” access into capacity-constrained markets, helping to alleviate highway congestion

Transload options that allow customers to use our carload service via a network of top-quality trucking, warehousing, distribution and other service providers

Why BNSF?Our Network

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Why BNSF?BNSF Carload Equipment – Industry’s Best

BNSF’s equipment is among the best in the industry. We possess the newest fleet of equipment with:

Great efficiency

High available capacity

Strong reliability

Broad availability

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2002 2003 2004 2005 2006 2007 2008 2009P

Year-End Fleet Inventory

Why BNSF? Powerful Fleet of Road Locomotives

3,851

4,2434,510

4,8125,050

5,189 5,175 5,087

American Honda Motor CompanyPremier Partner1998 – 2004Team Performance2007, 2008

Logistics ManagementQuest for Quality Rail/Intermodal Service Providers2006

GLOVIS America (Hyundai/KIA)Outstanding Rail Service Award 2003, 2005

Toyota Logistics Services Railroad Customer Service Award 2003, 2004Excellence in Quality Performance2005, 2006

Best BuyQuality Partnership Award 2004

The Home DepotRail Partner of the Year2004Only rail carrier that has received this recognitionRail Carrier of the Year2006Platinum Partner Award2008

Wal-Mart Stores, Inc.Rail Carrier of the Year1998 - 2004Only rail carrier that has received this recognition

TargetVice President’s Award 2002Only rail carrier that has received this recognition

Landstar LogisticsRailroad Carrier of the Year 2004

United Parcel ServicePerfect Peak1995, 1997-1999, 2002-2004, 2007

FedEx GroundQuality Supplier 2002

FedEx Supply ChainRail Carrier of the Year 2002, 2003, 2005Only rail carrier that has received this recognition

Evergreen AmericaRailroad Company of the Year 2003

Owens CorningIntermodal Carrier of the Year2006, 2007, 2008

Why BNSF?Achievements and Awards

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“Safe production” Critical Path briefings – Transportation Five Critical Decisions – Engineering Employee participation Fatigue countermeasures Technical training

Employee

Train Movement

Design and detection of infrastructure and rolling stock

Load and Ride Solutions helps blocking and bracing

Electronic Train Management System

BNSF

Certified member of C-TPAT Tightened access to facilities/structures,

including surveillance cameras and identification procedures

Action Plans in place including notice of alert level, training, and trespasser abatement

Safe freight handling with seal and carriage bolts placed on all in-gated containers and trailers

24-hour resource operations call center

Rail Industry Six task forces created relating to rail security Contingency planning based on vulnerability,

risk assessments and threat analysis Active relationship with national intelligence

community

Safety Procedures Security Procedures

Why BNSF? Commitment to Safety and Security

BNSF Network Operations Center, Fort Worth, TX

Thank you for your time.

Q&A