1. “A National Discourse on Transportation Policy and Regulation” National Center for Intermodal Transportation May 27, 2009 Policy Perspectives from the Freight Rail Sector George Avery Grimes, P.E., Ph.D. CIH Capital Partners Denver, CO

2. Economic Regulatory Goals Use current economic theory and techniques Incorporate actual industry practice and experience Promote long-run investment and welfare of all users Promote private resolution of disputes Adjust to changing conditions but minimize short-run winners and losers

3. P = dFCF/dQ + OpEx V + CapEx V Relationship of Price & CapEx Where: P = Price FCF = Free Cash Flow Q = Quantity OpEx V = variable operating expense CapEx V = variable capital expenditure declining prices = declining CapEx

4. Price = change in Free Cash Flow + variable Operating Expenses + variable Capital Expenses Relationship of Price & CapEx

5. Regulatory Treatment Public Funding Tax Policy Investor Perspective Public Policy Perspectives: Operating Expenditures and Capital Spending should be treated similarly