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

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Presentation on theme: "A Shippers Perspective on the Ever Changing Railroad Industry March 14 th, 2007 Badger Mining Corporation."— Presentation transcript:

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

2 The Beginning of Railroading 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 ,000 miles of track –The Golden Age of Railroads ,000 miles of track

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.

4 Elkins Act of 1903 Strengthened the Interstate Commerce Act of 1887 Imposed heavy fines on railroads offering rebates and shippers accepting them.

5 Surface Transportation Board (STB) Replaced the ICC in 1995 Shift in Control from Shippers to the Railroads

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

7 Shipper Advantages Mandatory Interchange –Interchange traffic w/out discrimination –Contract-like preferences were illegal Nonnegotiable Tariff Rates ICC Enforcement

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.

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

10 Bankruptcy Northeastern Railroads Midwestern Railroads Lead to Congressional Involvement!

11 Consolidation from 1980 Avoid Bankruptcy or simply increase profits WP & MP merge into UP 1985 – Milw Rds & Soo Line = CP – Seaboard System, B&O, C & O =CSXT 1988 – DRGW & SP 1988 – MKT = UP 1995 – CNW = UP 1995 – ATSF = BN 1996 – SP = UP

12 Staggers Rail Act of 1980 Nationalization OR Deregulation Deregulation was chose.

13 Post Staggers Rail Act sOver 40 Class I Railroads TodayOnly 7 Class I Railroads Of which 4 control over 95% of the U.S. railroad business.

14 Staggers Act Worked For Class 1s From the brink of bankruptcy in 1980 The free market place conditions allowed by Staggers produced th 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

15 Consequences Shippers captive to a single railroad. Lack of Competition

16 Railroad Classification Today 2006 Class 1 Railroads >$277M OR Class 11 Railroads > $20.5 M OR Class 111 Railroads < $20.5 OR

17 Classifications Rarely Used Regional Railroads 350 miles $40 M Local Railroads Non-regional feeder railroads Switching & Terminal Railroads BRC 28 MILES

18 Why short lines are needed In ,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

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

20 Operational costs 6 of the 7 class 1 railroads intend to spend over 1 in 2007 on Maintenance of Way, Infrastructure, & Horsepower Without State & County help the WSORs could not compete or stay in business.

21 Operation Comparison Class 1 2m onlymi TRACK ONLY Class 1 New Track 2m per mile Rehab track $250, per mile WSOR $10, PER MILE

22 Private vs. Railroad Owned Equipment North America Rail Fleet Class I Railroad PrivateShort Line Million37%58%5% Million25%69%6% Data Source: AAR Umler File, Ownership Mark

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