Testing the Hypothesis

Testing the Hypothesis

Bill SchaferBill Schafer

Director, Strategic PlanningDirector, Strategic Planning

March 21, 2007March 21, 2007

Can Rail Reduce Congestion?

Can Rail Reduce Congestion?

Discussion PointsDiscussion Points

How Rail Intermodal Works TodayHow Rail Intermodal Works Today

Where It WorksWhere It Works

Where It Doesn’tWhere It Doesn’t

Where It ShouldWhere It Should

How NS Is Testing the HypothesisHow NS Is Testing the Hypothesis

ConclusionsConclusions

Intermodal TodayIntermodal Today

> 500 Mile Hauls> 500 Mile Hauls

Once a Day FrequencyOnce a Day Frequency

Average Speed ~ 25 mphAverage Speed ~ 25 mph

Reliability ~ 60-70%Reliability ~ 60-70%

~ 10% Annual Volume Growth~ 10% Annual Volume Growth

Intermodal TodayIntermodal Today

Customer-FocusedCustomer-Focused Organic GrowthOrganic Growth Internally FundedInternally Funded Benefits to Customers, Employees, OwnersBenefits to Customers, Employees, Owners Discipline of the MarketplaceDiscipline of the Marketplace

No Incentive to Reduce Highway CongestionNo Incentive to Reduce Highway Congestion Better Freight Replaces Good FreightBetter Freight Replaces Good Freight Capital Improvements Enhance Shareholder Capital Improvements Enhance Shareholder

ValueValue

Intermodal Not Intermodal Not Keeping Up With Keeping Up With

GrowthGrowth

Key QuestionKey Question

Can Rail Reduce Truck Can Rail Reduce Truck Congestion?Congestion?If So, How Much?If So, How Much?

What is Needed?What is Needed?

How Much Will It Cost?How Much Will It Cost?

Where Will Money Come From?Where Will Money Come From?

Where It’s Already Where It’s Already HappeningHappening

Chicago-CaliforniaChicago-California As Much As 80% Penetration in Some As Much As 80% Penetration in Some

LanesLanes BNSF Betting the FarmBNSF Betting the Farm

New York-ChicagoNew York-Chicago ~ 30% Penetration~ 30% Penetration NS and CSXT Have High Capacity RoutesNS and CSXT Have High Capacity Routes

Medium- to Long-Hauls, >750 MilesMedium- to Long-Hauls, >750 Miles

High VolumesHigh Volumes

Where It Isn’t Where It Isn’t HappeningHappening

Shorter Hauls, <750 MilesShorter Hauls, <750 Miles

Fragmented Origin-Destination Fragmented Origin-Destination Flows Flows

Where It Could Where It Could HappenHappen

500 – 1500 Mile Hauls500 – 1500 Mile Hauls

Neither Truck Nor Rail Has Clear Neither Truck Nor Rail Has Clear AdvantageAdvantage

How NS Is Testing How NS Is Testing The HypothesisThe Hypothesis

““Intermodal Expressway”Intermodal Expressway” (Working Name)(Working Name)

In-House StudyIn-House Study

Network of New Intermodal ServicesNetwork of New Intermodal Services

Between Northeast and TexasBetween Northeast and Texas

Target Market: Dry VansTarget Market: Dry Vans

Byproduct: Effect on I-81 CongestionByproduct: Effect on I-81 Congestion Virginia DOTVirginia DOT Virginia DRPTVirginia DRPT

Goal: Better ServiceGoal: Better Service

Faster Average SpeedsFaster Average Speeds

Higher FrequencyHigher Frequency

Greater Levels of ReliabilityGreater Levels of Reliability

Goal: Additional Goal: Additional Assets Assets

Track and StructuresTrack and Structures

TerminalsTerminals

EquipmentEquipment

PersonnelPersonnel

Goal: Additional Goal: Additional BenefitsBenefits

Public Public Highway UsersHighway Users Freight Shippers Freight Shippers

PrivatePrivate Norfolk SouthernNorfolk Southern Truck LinesTruck Lines

Goal: Public-Private Goal: Public-Private PartnershipPartnership

Heartland Corridor ExampleHeartland Corridor Example Federal Federal StateState LocalLocal RailroadRailroad

Next StepsNext Steps

Complete the StudyComplete the Study Train SimulationsTrain Simulations Cost of New ServicesCost of New Services

Identify Additional AssetsIdentify Additional Assets Identify Sources of FundingIdentify Sources of Funding Begin OutreachBegin Outreach

Federal-State-Local PartnersFederal-State-Local Partners Potential CustomersPotential Customers

ImplementImplement

3-Phase Analysis 3-Phase Analysis ApproachApproach

1. Preliminary Assessment of Feasibility

2. Detailed Analysis

Q: Do benefits justify the costs? Use traffic diversion and benefit models3. Decision-Making

Q: Is this project better than alternatives? Use benefit/cost and multi-criteria analysis

Q: Can rail help relieve congestion? Use simple sketch planning tools

ConclusionsConclusions

We Believe Rail Can Help With We Believe Rail Can Help With Highway CongestionHighway Congestion

Benefits Will Be Perceived ByBenefits Will Be Perceived By ShippersShippers ShareholdersShareholders Motoring PublicMotoring Public