Railroads and Ethanol

Association of American RailroadsSeptember 27, 2007

North Americas Rail Network: Extensive, Efficient & Integrated

Todays U.S. Freight Railroad EnvironmentVast majority privately-ownedGenerally owner and operatorAccess privately negotiated, voluntaryHistorically very low government fundingFreight & passenger are separate

Freight Rail Provides Major Public BenefitsCost effectivenessFuel efficiencyReduced congestion and highway costsEnvironmental benefitsSafetyRailroad Fuel Efficiency(Ton-Miles Per Gallon)

Class I Railroad Traffic in 2006(Gross Freight Revenue)Source: AAR *Estimated. Some intermodal revenue is also included in individual commodities. Coal - $10.8 bilChemicals - $6.0 bilTransportation equipment - $4.2 bilFarm products (mainly grain) - $4.2 bilFood - $3.7 bil Lumber & wood - $2.3 bilPulp & paper - $2.1 bilPrimary metal products (e.g., steel) - $2.2 bilStone, clay & glass products (e.g., cement) - $1.7 bilNonmetallic minerals (e.g., sand, gravel) - $1.5 bilIntermodal* - $11.5 bilEthanol = ~$325 million

U.S. Ethanol Production is Rising Rapidly...e estimate Source: Renewable Fuels Association(Millions of Gallons)

...And So Is Railroad Ethanol Traffic (U.S. Rail Carloads of Ethanol)e estimate Source: STB Waybill Sample and AAR estimates

e estimate Source: Association of American Railroads, Renewable Fuels AssociationRR Carloads of EthanolEthanol ProductionHigh Correlation Between Ethanol Production and RR Carloads of Ethanol(Index 2000=100)

Ethanol Is a Small But Growing Portion of Total Rail TrafficEthanol as a % of Total Rail CarloadsSource: STB Waybill Sample

The Midwest Dominates Rail Ethanol OriginationsData are for 2005. Source: STBIL30%NE21%IA20%SD8%MN6%Others14%Origin States of Rail Shipments of Ethanol

Railroads Can Handle Rising Ethanol Shipments RRs must be involved from beginning of planningUnit trains are far more efficientEthanol competes with other traffic for slotsRRs must be adequately compensatedTerminal infrastructure

Current Train Volumes Compared to Current Train Capacity

% Growth in Trains Per Day From 2005 to 2035 by Primary Rail Corridor

Future Corridor Volumes Compared to Current Corridor Capacity2035 without improvements

Future Train Volumes Compared to Future Train Capacity2035 with improvements