Testing the Hypothesis Bill Schafer Director, Strategic Planning March 21, 2007 Can Rail Reduce Congestion?

Discussion Points How Rail Intermodal Works Today Where It Works Where It Doesn’t Where It Should How NS Is Testing the Hypothesis Conclusions

Intermodal Today > 500 Mile Hauls Once a Day Frequency Average Speed ~ 25 mph Reliability ~ 60-70% ~ 10% Annual Volume Growth

Intermodal Today  Customer-Focused  Organic Growth  Internally Funded  Benefits to Customers, Employees, Owners  Discipline of the Marketplace  No Incentive to Reduce Highway Congestion  Better Freight Replaces Good Freight  Capital Improvements Enhance Shareholder Value

Intermodal Not Keeping Up With Growth

Key Question Can Rail Reduce Truck Congestion? If So, How Much? What is Needed? How Much Will It Cost? Where Will Money Come From?

Where It’s Already Happening  Chicago-California  As Much As 80% Penetration in Some Lanes  BNSF Betting the Farm  New York-Chicago  ~ 30% Penetration  NS and CSXT Have High Capacity Routes Medium- to Long-Hauls, >750 Miles High Volumes

Where It Isn’t Happening Shorter Hauls, <750 Miles Fragmented Origin-Destination Flows

Where It Could Happen 500 – 1500 Mile Hauls Neither Truck Nor Rail Has Clear Advantage

How NS Is Testing The Hypothesis “Intermodal Expressway” (Working Name) In-House Study Network of New Intermodal Services Between Northeast and Texas Target Market: Dry Vans Byproduct: Effect on I-81 Congestion  Virginia DOT  Virginia DRPT

Goal: Better Service Faster Average Speeds Higher Frequency Greater Levels of Reliability

Goal: Additional Assets Track and Structures TerminalsEquipmentPersonnel

Goal: Additional Benefits  Public  Highway Users  Freight Shippers  Private  Norfolk Southern  Truck Lines

Goal: Public-Private Partnership  Heartland Corridor Example  Federal  State  Local  Railroad

Next Steps  Complete the Study  Train Simulations  Cost of New Services  Identify Additional Assets  Identify Sources of Funding  Begin Outreach  Federal-State-Local Partners  Potential Customers  Implement

3-Phase Analysis Approach 1. Preliminary Assessment of Feasibility 2. Detailed Analysis Q: Do benefits justify the costs?   Use traffic diversion and benefit models 3. 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

Conclusions We Believe Rail Can Help With Highway Congestion Benefits Will Be Perceived By  Shippers  Shareholders  Motoring Public