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Talking Freight - Growth of Inland Intermodal Facilities

June 19, 2013

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Jennifer Symoun
Good afternoon or good morning to those of you to the West. Welcome to the Talking Freight Seminar Series. My name is Jennifer Symoun and I will moderate today's seminar. Today's topic is Growth of Inland Intermodal Facilities.

Before I go any further, I do want to let those of you who are calling into the teleconference for the audio know that you need to mute your computer speakers or else you will be hearing your audio over the computer as well.

Today we'll have four presenters: Dan Pallme of the University of Memphis, Grant Cothran of Norfolk Southern, Roland Miller of the City of Auburn Maine, and Ed Foley of Genesee & Wyoming Inc.

Dan Pallme is the current Director for the Intermodal Freight Transportation Institute. He has focused his career in the transportation field, with positions at Federal Express (Air), Yellow Freight System, Union Pacific, and Comtrak Logistics. During his timeframe at Comtrak Logistics, the company grew from 15 to 25 terminals. Comtrak Logistics developed into one of the largest nationally drayage providers specializing in intermodal in the country. Dan also serves on various organizations, including the Memphis MPO Freight Committee, Intermodal Freight Transportation Committee at TRB, and the Transportation Committee Logistics Task Force for the Greater Memphis Chamber. He currently serves on the Executive Committee of the Council of University Transportation Centers.

Grant Cothran heads Intermodal Development for Norfolk Southern Corporation. He works with shippers and their partners to realize the long-term logistics savings of locating facilities near intermodal terminals. Mr. Cothran's role is to hasten the transition to a more efficient, safe, and sustainable transportation system that combines the best features of multiple transit modes.

Roland Miller has over 33 years of service as Community & Economic Development Director for the City of Auburn, Maine. Prior this position, he was the Deputy Director of Community Development for the City of Oshkosh, Wisconsin. During this time taught"Land Use Law" at the University of Wisconsin - Oshkosh. He also spent three years as a Planning Analyst for the Portage County Area-wide Planning Committee in Stevens Point, Wisconsin.

Ed Foley is Vice President Sales & Business Development for the Genesee & Wyoming's Northeast Region East Roads. In this position he is responsible for the business development, marketing, pricing and sales for the Connecticut Southern Railroad, New England Central Railroad and St. Lawrence & Atlantic Railroad. Previous to holding this position, Mr. Foley was General Manager for the St. Lawrence & Atlantic and St. Lawrence & Atlantic Railroad (Quebec), a 260 mile cross border short line railroad.

Today's seminar will last 90 minutes, with 60 minutes allocated for the speakers, and the final 30 minutes for audience Question and Answer. If during the presentations you think of a question, you can type it into the chat area. Please make sure you send your question to"Everyone" and indicate which presenter your question is for. Presenters will be unable to answer your questions during their presentations, but I will start off the question and answer session with the questions typed into the chat box. If we run out of time and are unable to address all questions we will attempt to get written responses from the presenters to the unanswered questions.

The PowerPoint presentations used during the seminar are available for download from the file download box in the lower right corner of your screen. The presentations will also be available online within the next few weeks, along with a recording and a transcript. I will notify all attendees once these materials are posted online.

One final note: Talking Freight seminars are eligible for 1.5 certification maintenance credits for AICP members. In order to obtain credit for today's seminar, you must have logged in with your first and last name or if you are attending with a group of people you must type your first and last name into the chat box. I have included more detailed instructions in the file share box on how to obtain your credits after the seminar. Today's webinar is not yet available on the AICP web site but I will send out a notice once it is.

For those of you who are not AICP members but would like to receive PDH credits for this webinar, please note that FHWA does not formally offer PDHs, however, it may be possible to receive PDHs for your participation in Talking Freight if you are able to self-certify. To possibly receive PDHs, please download the agenda from the file download box and submit this agenda to your respective licensing agency.

Finally, I encourage everyone to please also download the evaluation form from the file share box and submit this form to me after you have filled it out.

We're now going to go ahead and get started. Today's topic, for those of you who just joined us, is Growth of Inland Intermodal Facilities. As a reminder, if you have questions during the presentation please type them into the chat box and they will be answered in the last 30 minutes of the seminar. Our first presenter will be Dan Pallme of the University of Memphis.

Dan Pallme
Thank you, Jennifer. First of all I'd like to say that I am actually pinch-hitting for Dr. Lipinski here at the University of Memphis who had a last minute family emergency. What that means is I will try to do as good of a job as he would have done, and any discrepancy in data is from his presentation and perspective and not mine. Just a little humor to get us started.

Thank you for the opportunity to participate and allowing me to share some perspective on inland intermodal terminal development. Some on the call may wonder why the Intermodal Freight Transportation Institute and the University of Memphis is on the webinar. We are one of the 10 tier 1 University Transportation Center grant recipients from 2012 under the CFIRE consortium headed up by the University of Wisconsin at Madison. We focus on research, education, and outreach and that is why we were asked to participate in this webinar. My objective will be to provide an overview of the topic and to set the stage for the other presenters.

First we have to have one generic definition of an inland port. There are many different definitions. Here is one example of what an inland port is. Other names they go by are dry ports, inland terminals, inland hubs, and inland logistics centers.

Here is an example of Dell computers and all the different parts of the global supply chain and the continual shifting of global supply chain. The main thing is to take a glimpse of the sheer length of haul for most of the parts that go into a Dell computer. The inland part is a relatively small piece of the transportation supply chain

The next slide is to look at the actual flow and growth of the intermodal containerization. You can see by the chart, there is real intermodal growth over the past 20 years and in 2013 the trend continues to rise. One thing that this chart shows is the amount of containers growth as compared to the trailers. This refers to domestic trans-loading so these containers, when I refer to them, are not just 20 and 40 foot international boxes but also the domestic size of 53 foot containers that are being trans-loaded on the coast.

The next slide here is the Rail Intermodal Flows. The big dark lines are the prominence of the Chicago to LA corridor. I wanted to include this chart because it shows most of the inland flows between Chicago, St Louis, and Memphis. The darker lines continue to show the growth.

This slide is a little bit busy and it shows the rails overlaid in the flows. The green side is the western railroads with a smattering of the KCS Railroads that kind of slide a little bit over to the east of the Mississippi River. The eastern coast railroads (CXS, Norfolk Southern) is highlighted in blue and the National Canadian Pacific in the red.

Now we get into the Bear Stearns quote,"Rails should have an edge on trucks over the next ten years." Why do all the goods move by rail? There are several advantages: economic, environmental, efficiency, service is extremely reliable on the railroad, which has improved over the last few years. And this has reduced the highway congestion as it goes off the road and onto the rail. However, I still want to make sure everyone realizes that for most goods, the last mile is still needed to be delivered by truck. If the supply chain can move the majority of the haul via water and rail, it does help the overall issue of the infrastructure being able to handle future growth and the volumes that are projected for the future.

Here are some other driving forces behind the growth of inland ports. One is the ability to create logistics clusters. I will give examples of this later in the presentation. It shows intermodal terminals that cover a broad range of why behind a certain terminal was selected and the location was selected. Some of our logistical in nature, some are environmentally friendly. Most were built to handle additional expansions and growth, but some were even built to reduce costs, both variable and fixed, and I will go into examples of that. The total distribution costs are also reduced when you look at why some of these intermodal terminal ports were developed in the areas they were. It is very difficult in today's world to expand operations at the ocean marine terminals and that is one reason that has led to the growth of inland ports. Obviously land on the coast is extremely valuable, in addition to the marine terminal operators that are operating out of the ports, you have trucking companies that are located near there and warehousing and distribution centers that also take up the available land in the marine terminal operations or in the vicinity of the coast. Obviously when you move terminals inland, it is less expensive and more available than the coastal region. And truth be known, on the coastal region, you also have the public that wants to take advantage of being on the coast, so you have this push and pull between the public sector and the private sector in that area.

Some of the basic characteristics or basic elements that have fostered the development of inland ports are terminals, connections, and logistics activities. In the next series of slides, I will be using examples from existing inland terminals to illustrate these points. Before we get to the design of inland terminal operations, I think it is important to realize what the railroads have done to reduce the potential bottleneck of the in-gate and out-gate process.

Here is a picture of an automatic gate system. In 1998 I worked at the Union Pacific Railroad and opened up the Union Pacific ramp in Marion, Arkansas, which was the first full terminal use of the automatic gate system after the demo project in Kansas City. Most railroads today have used this or similar technology to speed up the arrival and departure process to get the truckers in and out of the facility safely, quickly, and efficiently. Railroads continually try to improve trucker dwell time order to handle more throughput through the gate. Those bottleneck points in the yard are critical to the success of processing units and the volumes and projected volumes of the future. I'm not sure how many people on the call have expertise in the gate systems, but here are the highlights. The picture to the left is the arrival that the trucker will actually speak in there. Most of this information is updated by a finger print scan. In the picture to the right, as the driver approaches, it is taking photos through optical character recognition. The unit arrives itself, although validated by the driver. So it's brought down the dwell time from what used to be minutes to currently less than 1 minute in most major railroads. Along with this comes other benefits that you can do for reporting trailer damage to make sure the driver is correctly qualified to operate that truck on the yard. There are checks and balances that the railroads are very good at to make sure that everybody is supposed to be picking up. The process on the outside is basically the same thing. The only difference is with the pickup number for enhanced security. One thing I want to point out is that technology has changed since 1998 and some of the railroads have used GPS technology. The GPS sensors are putting the units where they belong on the yard. Thus creating quicker turn times, because the crane operator does not need to update the positioning of the unit. It is all done through technology.

Here's where I start to talk a little bit about the different railroads and specifically my talk here is on inland ports and it is geared towards the Class 1 railroads. Obviously the first is the CN. Most of this traffic is coming through the Prince Rupert, Vancouver corridor. It comes over across Canada then straight down to Chicago and then to Memphis. The interesting thing (and I'll point out one at each port) is that basically everything that comes into Prince Rupert goes straight on railcar and out of the rail facility. There are a few loads that go out the gate. It is a very low percentage and everything that does go out the gate is mostly for loads requiring customs inspection. I don't know if anyone has had a chance to look at Prince Rupert, but there's not a lot of economy driving there other than the CN Railroad. On the actual flow, another highlight that the CN Railroad did was the purchase of the Elgin, Joliet, and Eastern Railroad. It's a 198 mile"C" around the city of Chicago that moves freight around to the city. It's kind of an interesting philosophy that the railroad is actually going out of their way, because the shortest distance between two points is the usually the most efficient. The railroad has proven that it is more efficient to move around Chicago then deal with the bottlenecks of Chicago.

The next slide is the BNSF in Illinois. This is the center point in Joliet, Illinois. It is actually located in Elwood, Illinois approximately 50 miles from downtown Chicago. The actual facility itself covers 35 square miles with major BNSF and Union Pacific intermodal terminal. You will notice that I80 and I55 are in close proximity to the site. The core distribution center is a huge Wal-Mart distribution center adjacent to the BNSF facility. But as you can see by the picture, many other warehouses are also taking advantage of that area.

Here is a picture that is on the Alliance in Fort Worth, Texas. This picture only shows one third of the Alliance Center. There are three different slides that had to do with this, a specific when you take the amount of customer warehousing and distribution. You can see the highway access to the left of your screen. If you were to put all three slides together it would have been so busy that no one on the call would have been able to tell. The BNSF is actually directly to the left of this picture. Union Pacific has a small facility to the right of the picture. There is also airport access and hotels that are catering to all the different businesses that operate there. Also, note the Texas Motor Speedway up at the top of the screen. That is the big race on Sunday that is off peak period times for everything else going on in that facility.

Next is Memphis. Here's the actual BNSF facility. This is after a major expansion. Six tracks, 7000 feet long where a whole train can pull in, eight total cranes, an incredible amount of storage and facility. Here is an aerial view of the BNSF. It opened in 2009 at an expansion cost of $200 million. It spans 185 acres and 1 million lifts. All the railroads around Memphis have a different niche. The BNSF decided not to go with some green field location, but decided to expand the operation to the site primarily to the proximity of the close major customers like Nike and Williams-Sonoma. The aerial view is a perfect picture to understand all the warehousing that is all around the Memphis area. This facility is located right near the Mississippi border and that has seen another additional growth of their warehouses that is happening south of Memphis in the Mississippi. The big problem is highway 78, the major corridor that I am highlighting here down to Atlanta or Birmingham. So you have this congested effect because public transportation, the private sector, and logistics are all crowding that highway 78 corridor.

An example of private industry working together is in Willow Springs, Illinois with BNSF and UPS. UPS actually backs up to the facility and they have a back entrance so the customer is actually not even getting on the city streets, reducing congestion and the gate activity at their facility. I will point out that this is not the only facility where this happens. It is just one example, and like most of these slides, there are probably several examples at each railroad and Grant will probably go into some of those when he talks about Norfolk Southern in a bit.

As far as an example on the CSX, here is a picture of the relatively new North Baltimore, Ohio facility. 175 million and Northwest Ohio located North Baltimore. 500 acre facility. The one take away on this that I wanted to point out is to note from an intermodal perspective, the cranes actually over all the tracks are together and it leads to the quick and efficient de-ramping of the traffic in and out of the facility. Is a totally grounded facility, which is the way most railroads have gone, kind of taking the port operating procedure and moving it to an inland point. Another thing that this facility has is the technology with the cranes. The cranes actually regenerate power, which in turn gives them a credit on their utility bill. I know the BNSF in Memphis also has that capability.

This is a relatively extremely new Norfolk Southern ramp in Rossville, Tennessee. Rossville is a suburb of Memphis. As you can see from the picture, they built it in the middle of a development. The actual development is an individual that owned 3000 acres. The interesting thing about this is it kind of shows how it is no longer city or state that are operating these. The facility is built in Tennessee, but entrance into the facility is the Mississippi and they are projecting extreme growth. And I'll talk a little more about Rossville when I get into a comparison of the Memphis ramps here shortly. Another interesting point about this is the developer built a private road at his own expense to deal with overweight trucks and he will be responsible for maintaining that private road instead of using city funds to do that.

I am not going to spend a lot of time of this. The one thing to take away here is the air as compared to rail and highway access. However, the air is really not going on there, but I don't want to take away from Grant Cothran.

I wanted to point out that since 1998, all the facilities here in Memphis have had major expansions or moved into new terminals. First and foremost was UP railroad and literally from a marketing standpoint when I was with the Union Pacific and open up that facility in 1998, the big concern was moving 16 miles across the river. Will the shippers, warehouses, and truckers even service the community? I think you have seen that in Chicago where the distance is more like 90 miles out of Chicago with the new intermodal facilities, but I guess the proverbial"if you build it they will come," and UP railroad has seen that growth. Not only that that, but the economic development that has spurred around that facility that you see now, several manufacturers warehouses, and with that comes jobs. The CN/CSX in 2005 was next to jump on the bandwagon of growth in the Memphis area. They built the Frank C Pidgeon industrial park. It is 3000 acres and also has Mississippi River access. There are some tax incentives. Several big-name companies have moved in there to have both water and rail access. Obviously with the CN/CSX it is a unique terminal operation in that they share the in-gate and out-gate and keep the communication separate when you go into the in-gate land and to the out-gate. The interesting thing about the 2010 expansion of the BNSF is they did not want to move. They just wanted to expand the footprint because they were in the middle of all the warehousing and the 480 trucking companies that were located in the area .Most are within a 50 mile radius of that BNSF ramp. And then the Norfolk Southern project and I'll talk about that here. The developer that I was talking about, he actually has planned $100 million development, from golf cart paths, town square, charter schools, shopping centers, and the homes. No one wanted to move into an intermodal facility. The homes are up to $1 million plus in the area right around the corner from actual rail yard. At this point, talking about the factors that encourage the growth and specifically to Memphis, but you can take this question everywhere else that intermodal facilities are located. In Memphis we have a multiregional approach. There are four different points that I brought up for the five Class 1 railroads. It actually affects Arkansas, Mississippi, and Tennessee. It brings jobs to the area. All the facilities together have approximately 850,000 annual lifts and have the capacity to go up to 3 million lifts. We are on the edge and ready to go as far as the economy of Memphis. Tennessee has really jumped on the bandwagon when it comes to tax incentives, like a lot of communities have. And obviously the railroads have gotten very good at service on the supply chain, which has had more of an impact from service levels so the supply chain is just-in-time. It makes it perfect for them to operate efficiently with the shippers and the truckers.

Here are some other examples of facilities that are developing. These points are on every single railroad and they all have a huge amount of capital invested in intermodal.

And in summary, here are several points that I just want to recap. Inland terminals have been the economic engines in many communities. They have used the line haul advantage of the railroad coupled with the need for the trucks to deliver the last mile. They have generated community concerns related to increased congestion, environmental impacts, et cetera. And the planning efforts involving the railroads, developers, transportation agencies, and others are required to ensure that the developments are implemented in a manner to capture economic advantages while not adversely impacting community livability. It is about the economic drivers that drive the railroads to invest and get an acceptable return on investment. However they are also good neighbors in trying to be a good steward and have a balance between the environment and their stake holders. In other words, balance the green. The dollars for the company versus the environment, so to speak. With that, Jennifer, I will turn it back over to you. I do have our contact information if anyone has any questions that they want to take off-line. Jennifer, back to you.

Jennifer Symoun
Thank you, Dan. Dan's presentation is available for download in the box in the lower right-hand corner of the screen, so I am going to take his presentation down and move on. I'll now turn it over to the next presentation given by Grant Cothran of Norfolk Southern.

Grant Cothran
Thank you. For me the tables have turned with this presentation. My typical role is working with Norfolk Southern's largest shippers during their site selection process, what it takes to locate a manufacturer or distribution center, and today I am going to be talking not about why they are located close to our terminals, but why we locate our terminals where we do.

That was a great presentation from Dan Pallme, particularly the focus on that last mile of an intermodal move. The intermodal story is a shift away from long-haul over-the-road trucking, but it is really important to remember intermodal is multiple modes and it is a partnership between railroads and trucking companies and also ocean shippers as well. I will be breaking my time into two pieces. First of all, NS is one of 8 Class 1 railroads with terminals in the US. The shift towards intermodal is a national story. I am going to focus on the big picture of customer demand and the transportation market forces that are pushing long-haul freight off of highways. The second thing is, at the same time, some railroads are more forward thinking than others. I think Norfolk Southern has a compelling story to tell. I will touch on the network and our investments in the Crescent Corridor. I will also review some of the factors that we consider when we selected slates for new terminals that we put in just over the last two years in Tennessee, Alabama, North Carolina, Pennsylvania, and New York. I am also going to see if I can work this PowerPoint thing. I am not always up on the tech.

As we begin keeping an eye on the big picture, just like an airport or seaport, intermodal terminals are economic engines for the region so they serve. The railroads -- we pay taxes and create jobs, but the real employment figures, the real massive tax base comes from industry that clusters close by. Transportation hubs are magnets for economic growth. The reason people want to locate close to a hub is it reduces cost to get to and from that hub. There is a recent study showing that transportation accounts for a larger cost in the global supply chain than rent, inventory, labor, and all other costs. When people are looking at intermodal for transportation solutions, it is about reducing their largest cost bucket.

Some of you might recognize this guy. Does anyone want to type in his name? You have about 10 seconds to do so. I will send you a Norfolk Southern calendar for 2014 when they come in. The time is up. Luke and John, you are getting calendars next year. This is Malcom McLean. He is the credited father of containerization. This is my common definition of intermodal. McLean's big thing was to standardize the equipment, large standard containers that were never reopened from the time they left the shipper to the time they got to the consignee. To do that, he had to change the mode. He had to retrofit both ships and trucks so they could accommodate those boxes. What happened since the 1950s is that revolution has moved inland and intermodal is no longer an international story; it is also a domestic story. Norfolk Southern has a number of inland ports that meet the definition. We are currently building one in South Carolina with the South Carolina Ports Authority, but for us -- the biggest story for intermodal is not moving ocean freight inland, but what we consider domestic traffic. 53-foot containers that move goods that are produced in one region of North America and consumed in another. The growth there is due to headwinds that are basically facing domestic trucking, environmental measures and increasing pressure on sustainability, and really how we are responding with infrastructure investment.

This slide is a simplification of the supply chain. Basically the point here is before modern intermodal hit maturity, which has only been in the last decade or two, inland freight really had two modes to go for. Both of them get less and less competitive as you move towards the middle of the supply chain. In the modern economy, production and consumption points are hundreds if not thousands of miles away. So the middle of the supply chain is really where we find this long-haul freight with moderate time sensitivity, which is a sweet spot for intermodal. Since I'm using Charlotte, North Carolina as a case study, some of the big shippers there, names that might represent the middle of the supply chain like Kellogg's, Campbell's are moving things into North Carolina from their manufacturing points in the Southeast and West. Then you have people who are producing things locally - Haynes, Ashley Furniture, Red Bull - in North Carolina and those are going out to the retail distribution and mixing centers for anyone you can name: Wal-Mart, Target, Sears, Home Depot -- all the big household names that we would all recognize.

For all the railroads, US Class 1s, this is the most recent week-to-date volume numbers that we have. These are publicly available numbers. As of June 8, all the Class 1's combined have originated 5.5 million containers, a little over that just in the beginning of the year. If you multiply that by an average length of haul, you are talking about 8.3 billion freight miles basically diverted off of highways through June 8. To put that in context, annually - the most recent number I could find from the American Trucking Association - Class 8 trucks moved over 100 billion freight miles annually. Intermodal is a smaller market share than trucks. Trucks are in no way going away, but we are growing market share and intermodal is also growing consistently, outpacing the general growth of the economy. To understand why that is, I wanted to look at big picture trends that are making intermodal increasingly competitive over the road.

I will kind of move around this wheel a little bit, and I am going to ignore that top bubble for a second. The recession caused a wave of trucking companies either closing shop or merging with each other. This has contracted the overall truck supply. It's a narrower field, which means better long-term health for the players, but it also means overall less supply. The better long-term health is good with the economy kind of on the mend, GDP is growing and transportation along with that, and again intermodal is growing faster than overall economy. That is because we are taking market share. But the next thing is the trucking industry has always had difficulty with recruiting and also turnover with the drivers. Driver demand is at an all-time high. Part of that is a lifestyle choice. We could kind of get into that, but essentially most middle schoolers don't wake up with the idea in mind that they want to be a long-haul truck driver, even though trucking can be a very lucrative career for them. It is just not a lifestyle choice that a lot of young people are making. Increasingly, as an aside to that, you have the drivers but you also have the fleet of trucks itself. Basically during the recession, a lot of trucking companies deferred new tractor purchases. Now that they are out of the hole and profitable again, the problem is that new tractors using a T4 emission standard are substantially more expensive than the tractors they could have purchased a few years ago. The average age of tractors is older than it should be and it is more difficult than it used to be to get that down. Those rising emission standards are one example of increasing government regulations that are headwind to trucking. The other two big ones come from the Federal Motor Carrier Administration. There have been a series of changes called Compliance Safety and Accountability (CSA). It is a list of rules a mile long, but the goal of these regulations, which they have already begun to achieve, is really safety, making highways safer and better for all Americans. The first big piece is a national ranking system where driver incidents are actually assessed to their employers. Carriers are looking to be in compliance with that, so over the last couple years there has been a purging of drivers with violations on the record. That is a great thing for safety, but it has exacerbated the existing problem of driver availability. The other major change that going into effect is weeks away and we will hear more and more about this in the news, if you have not already, is Hours of Service. There are a number of pieces to Hours of Service, but a good rule of thumb is that a driver's seven-day work week is going to be cut by about 12 hours over a week. So the real question there is how many additional drivers are going to be needed to fill that gap, in addition to the existing shortages? I did see the employment numbers for April and May and trucking companies have been more aggressive with hiring in the last couple months than they have been in the last five years.

With all these headwinds, we have not even talked about fuel prices. If anyone knows where the prices are going, get off the call immediately and sink all of your money into fuel futures. I don't know where they are going. What we have seen as a company is some relatively good news:diesel prices have stabilized. The bad news is that they have stabilized just shy of four dollars per gallon for diesel, which we use as a railroad and which trucking companies use. And those are costs that get passed on to the shippers and consumers. All of this said, trucking companies are a vital part of the economy, but they are facing some real pressure, and intermodal transportation has really been a release valve for some of those headwinds. For freight that fits into the model, it makes sense to convert the freight. As a railroad we are doing all we can to be a good partner; we are expanding route capacity, adding new terminals, and we will talk about that in a few minutes, and we are also ramping up some other activities that kind of ease the burden. At the same time, this is not railroads intruding on market share. It really is a partnership. Trucking companies like JB Hunt are looking to intermodal as a way to better utilize the drivers and equipment. One driver, one truck: you can either go all day and night to deliver a single container, or you can stay within the local radius, which a driver would probably like. He can make three or four turns in a day, and be home for dinner. It really is meeting the broader needs of transportation, but as a share, intermodal is still a minority share.

The big picture for intermodal rail is that we are consolidating freight at specific points and we want to locate terminals where the people are. Which is why it is useful to look at a national map and actually look at the population centers. We are looking for places where there are major manufacturing centers or get reasonably close to capture all the freight within a certain kind of circle or radius, and we are also looking for major consumption centers. These dots that I just put on the map, these represent more than 200 intermodal freight terminals across North America. Not every terminal is shown. They do show all the markets that are served by intermodal terminals. The network of terminals has become denser over the last years. America is growing, also as a freight mode we're growing.

Something that is important to point out is that growth is not happening uniformly. Let me go back. The US Census has actually reduced the estimates down, but they are estimating by 2050 the US population is going to hit 400 million. That growth is 80 million new people in the United States. It is not going to happen uniformly across the country. It is going to happen more in urban centers, and they are going to expand. The mega-regions are going to expand. Mega-regions are a useful way to think about freight flows because, generally speaking, freight within a single mega-region is probably going to be best served by trucks. You're talking about a few hundred miles to serve a region's broader population. That works pretty well with a truck but as a national economy, intermodal is a vital link that connects these economies to each other. The national average of length of haul is about 1500 miles. In the east, NS and CSX operate routes much shorter than that, the average is much shorter than that. Our shortest length of haul is 181 miles. That is an inland port move and there are other factors at play there. The critical thing is we link up one side of a mega-region to another, or different mega-regions to one another.

This is a Norfolk Southern intermodal route map, and I will be moving into the second part of the presentation. We serve 53 terminals. We serve all of the major East Coast ports. Miami should actually have a triangle over it. We go through the FEC to serve Miami. We connect with the Western railroads through these inland gateways, Western Gateways we call them. And then we also have a number of inland points. The story is a conversion away from long haul trucks.

I am going to go to the mega-region map again. These aren't just points; they overlay very nicely where population centers are and where manufacturing and consumption is happening. As we look to expand our network and put in additional nodes, we are really looking at where those population centers are and maybe where the gaps are in our network.

A specific example of where intermodal works very well would be in this example. This is freight moving from Tuscaloosa, Alabama to York, Pennsylvania, which is a real move that we do. A trucking company has two parts in intermodal to play, both at origin and destination, the final mile that Dan was talking about. How far you are willing to drive freight on each side really depends on how far the total journey is. A good rule of thumb, an internal metric that we use, is a move where 60% or more of the total distance is rail miles we can describe as"actionable." It does not always mean we will get the business, but it is competitive. Where the rail miles are 85% or more is"highly actionable." A customer does not need to be directly next to the terminal. It doesn't need to be in their backyard for them to use it. They just need to be able to be reasonably close, on one or both ends, to make the math work.

Here is a map of our Crescent Corridor, which is a major project for us. It is a $3.5 billion project, the largest in our history and one of the largest freight infrastructure projects in American history for that matter. I realize that the Crescent Corridor does not touch everyone on this call, not all the communities or your clients, but it's a good example of Norfolk Southern's dedication to what we are planning for the future. In 2013 we added over 30 new intermodal lanes. These lanes connected markets in the Northeast and Southeast that had never had intermodal transportation as a viable option. Again, you look at these dots, you can think back to the mega-region thing: here is one mega-region economy up here, you have the Southeast, you have that Texas service, and then also very important you have this Mexico service. Mexico is important; it's a partnership with the Western railroad, KCS. Mexican markets are increasingly important for the domestic freight picture (categorized as"domestic because they move in 53 foot containers) because of a trend that Stifel Nicholas, a consulting firm, recently described as"the most important trend for 2013 and beyond." If you remember back to one of the first slides, transportation was the biggest cost bucket in the global supply chain. As labor and other costs in Southeast Asia and other places continue to rise, manufacturing in North America has begun to hit this critical inflection point where the transportation savings of being close outweigh those other costs.

As we get into the core of this message, the site selection process for Norfolk Southern or other Class 1 railroads when we are building an intermodal terminal, every market is different, but the principles are pretty universal. I thought the best way to show this was with a case study. I have a couple minutes left and a couple slides. I wanted to focus on the factors that caused us to build our very newest intermodal terminal, which is in Charlotte, North Carolina. It will open this December. Whenever we build our terminals, we need four basic things. The first is intermodal mainline track. We operate as a railroad about 20,000 miles of track. Only about 8,500 miles is intermodal mainline, and a big part of the Crescent Corridor project was upgrading track to the standards that are needed for the higher speed intermodal trains. One of our coal trains is not going to be going as fast as a train carrying high-value goods, whether it is iPads, or shoes for Nike or whoever else, and an intermodal train needs to be time-competitive with trucks. Intermodal track is going to be a higher standard. So, here we have the intermodal mainline track in Charlotte. This is a line that goes from Atlanta to Greensboro and Virginia and other points on the eastern seaboard. We have that. The second thing is market demand. We know that Charlotte had an existing market demand because we actually have an existing terminal there. It is called the Uptown Terminal. We cannot expand the terminal at the same time that Charlotte expands its downtown; the Uptown Terminal has become directly next door to downtown. They pretty much butt up against each other and down town is expanding, which is a very high-value purpose for the land. Uptown terminal has development all around it; it just cannot be expanded anymore. We need to build capacity not for the next year or two or five years - and this is the same story with Memphis and why we have two terminals there - we need to be building intermodal terminal capacity for the next several decades. This is a long-term play. We want to secure land when we can, where we can, now, for future demand. This brings up the third point, developable land. You already saw Dan's map, so it should not be too big of a surprise: in the Charlotte market where there is a lot of sprawling development, retail use, a lot of housing, and so on - you can see that in the background of the map - one of the only places we could identify where we could find 200 developable acres of land in the Charlotte market ended up being at the airport, oddly enough, between the two runways. The new outer runway has been completed, and it is a very unique project. You will be hearing a little bit more about this in the news, but the entire thing - the FAA basically required this buffer around the new runways , and it just so happened that we could fit an intermodal terminal very snugly in there. It has some special things about it because we have to comply with the FAA and with airport needs. For example, the whole terminal is built about 45 feet below the runway grade. It is not quite subterranean, but the reason for that was the lighting could not interfere with pilots landing and taking off. Safety is really paramount. The last thing we needed was close interstate access. You can see to the north there is I-85 running through there. This is a good spot for intermodal having highway access. Highway access is important because trucks are either at the origin or the destination of the intermodal move. Whether freight is using the terminal for origin or destination, trucks are going to need to get on and off highways and drive it out to its final destination as soon as possible.

Looking at the terminal itself, it passes these main criteria. I won't go into too much detail, but it really is a world-class facility. It is one of our best and newest. It is a $92 million investment. It is going to be complete later this year. There were some state and federal funds included in that. I suppose you could include money as another criteria for building a terminal. But if these other main criteria are met, we will build a terminal where it makes sense, where we see the freight market is underserved. Back to the facility layout, there are loading tracks that are going to total about 9000 feet. The intermodal trains departing from here will be about 8000 feet or so. You can see the tracks and this other stuff. Over 1300 trailer parking spots for trucks coming in, dropping off freight to go to another market, or a place for us to put that container until a truck is able to pick it up. It is a big project. We are going to have a lot of capacity well above what our uptown facility offers, and there is also, in partnership with airport, another expansion opportunity for another hundred acres. Again, decades out we might end up needing those acres.

The Crescent Corridor for North Carolina has a lot of benefits. I will direct you to these two numbers at the bottom: 7000 jobs created, $10.5 billion in investment by 2030, over the next two decades. Those jobs, and that investment, just a little bit of it is Norfolk Southern directly. Where that comes from is because terminals like Charlotte act as magnets for economic development and for growth of other private industry they keep the US economy going strong. With that, if there are any questions, I would be happy to take some at the end of our time together, but thank you so much for your time. Oh, this is a picture of a terminal we just built in Greencastle, Pennsylvania. It is what a modern intermodal terminal looks like once it is complete. Jennifer, I will hand it back to you.

Jennifer Symoun
Thank you. Our next presentation is going to be by Roland Miller from Auburn, Maine, and he will be followed by Ed Foley of Genesee & Wyoming Railroad.

Roland Miller
Thank you, Jennifer. We are going to be talking about in land intermodal port in a different scale than some of the previous presenters. The information that led us to invest in the port was based on the factors you've already heard from Dan and Grant. The intermodal facilities that you are looking at on the screen right now, the city of Auburn invested in this purely from an economic development perspective. That port is about 42 acres in size, about 32 acres of the 42 that we secured were developable, and 10 acres had wetlands and other challenges around them. The intermodal port that you see on that screen was developed in two phases. The first phase was about an 18 acre development and as the market and traffic continued to increase we expanded by an additional 14 acres. This is a publicly owned facility and publicly financed facility. Our partners in this effort were the US Department of Transportation, FHWA, State of Maine, and Emmons Transportation Group out of York, Pennsylvania. Emmons was a company that was a short line operator and everyone leasing company saw an opportunity here and were really the prime movers in this. They subsequently have now been purchased by the Genesee and Wyoming Railroad. That purchase was accomplished in 2002, well after we had finished the terminal. CNN was another partner in this, and the city of Auburn. Let me talk a few minutes about the city of Auburn just so people know where we are and what we are doing.

This is just a map for orientation purposes. You can see where Auburn, Maine is. The red line that you see on here is the St. Lawrence and Atlantic Corridor that we will be referencing throughout this presentation. It runs from the Portland waterfront and connects north of the border through Quebec and to the East-West movements of Canadian National which runs all the way across the country and gives us direct access to the port of Montreal. Being located where we are in Maine, there is a saying"you can't get there from here." One of the challenges that we have with being tucked up in the northeastern United States is logistics and connecting to the world markets. These were some of the factors that I will be talking about in a few minutes. Let me talk about the city of Auburn. It is a relatively small city. Geographically we are relatively large, about 67 square miles within our municipal boundaries, but we are relatively small in population, about 23,000. Within the Lewiston Auburn Metropolitan statistical areas, there is about 106,000. This is a lot smaller than many metropolitan areas that we have been talking about being served by some of the mega centers. We are a community that has had comprehensive planning since 1919, zoning ordinances since 1935, and growth control for land-use restriction since 1960, which has helped us address some of the challenges and having land available for types of the development when opportunities arise. And we were able to secure this particular project because we will have protected land and it was available for this type of development. The infrastructure that we have within the city that made intermodalism attractive to us was three railroads. The St. Lawrence and Atlantic, now the Genesee & Wyoming Railroad-owned railroad. That railroad was the former Canadian National grand trunk and Emmons Transportation Group bought that from Canadian National when they were divesting themselves. We also have Pan Am Rail, the former Main Central Railroad Company, which runs primarily North and South and hooks onto Norfolk Southern on the southern extremities. We also have a locally owned railroad company that the citizens of Lewiston and Auburn built to connect to the mainline. It subsequently was turned over to both cities. Municipal Airport is adjacent to our facility, and we have Turnpike access for Interstate 95.

Some of the factors that we looked at were our physical connectivity. What kind of ports did we want to connect to so that the outgoing shipments could reach their final destinations if they were offshore and the incoming goods could reach us. We looked at what deep water ports we wanted access to and the ones we decided on which were the most logistically successful for us were Prince Rupert and Vancouver on the west coast, Halifax on the east coast, and Montéal in the center. You will see from the red line, it runs from Auburn to the east-west Canadian National mainline near Montéal. Subsequently we also looked at these various ports and the capacities that they had, the cost competitiveness that they had, and the connection the Class 1 rail.

Some of the challenges that we wanted to examine before committing to this project were what type of impediments were there to double stack container shipments. We knew that piggyback trailer movements could be accommodated by the height clearances, but double stack containerized shipments were necessary for cost competitiveness and efficiency and we wanted to identify if there were any physical obstructions that were in the way between us getting goods in and out. We found that there were two locations where that were present. One of the locations was in New Hampshire, and we worked with the New Hampshire Department of Transportation to get that one taken care of. Subsequently, north of the border on the Québec side we worked with the jurisdictions up there to get that taken care of. It took us a number of years for that to be done, but we were able to do it. Another factor we had to examine is how the U.S. Customs was going to treat the shipments in and out. The border crossing for this railroad is in a very remote rural place called Island Pond, Vermont and we knew that we could not have tagged inspections happening at Island Pond and still be responsive to customers, so we knew we had to work with U.S. Customs and do that with the help of our legislative delegation. It took us about eight years, but eventually we were able to work out a relationship so that our facility today is directly serviced by customs.

In the interim period prior to that, after we had opened the facility, we had to accommodate customs inspections by reloading those items that were tagged for inspection, taking them down to the Portland port of entry, having them inspected, and then moved back. Every time you pick up and move it is expensive. Customs was going to be a prime ingredient in our mix. Connectivity to the LA railroad line and other supporting modes, the airport, and the Turnpike, were also examined.

A major factor area and something that has been talked about earlier, what were the market forces at work? I was particularly interested in some of the material presented by Dan because we recognized that we did not understand this market. People at the local unit of government just don't know and are not experts in international logistics of shipping. We needed to talk to people who were. We met with both of our railroad short line operators and our long-haul Class 1 and asked for freight movement studies to be done. Both agreed to do that. We examined those studies. We also talked with freight forwarders and other people involved in the logistics scheme to find out what was happening as far as trends. We saw some of the slides that Dan presented the projected growth for oceangoing containers and other containerized types of moment was something that we felt in the long-term could really serve us very well as a connection of Maine to the international economic base of the world. We further the assessed what type of possibilities there were to have full loads going in both directions. Anytime we have to move empty, we knew that this would introduce a level of inefficiency and cost that we wanted to avoid, and we found that we could expect a pretty good balance of freight moving in and out at the same time. Another thing we identified was we wanted dedicated service so the customer base would know that the trains were going to be moving and now the materials were coming in or going out on a prescribed schedule rather than having periodic service and we got that commitment from our Class 1 operator. The other operational support and required resources, we wanted international marketing be to be done with a commitment from the Class 1 that our link in the logistics chain would be a part of their marketing connection. We needed single line haul rate pricing structures so that people would not have to be the negotiating and freight forwards wouldn't slow these down, and most of all we needed rolling stock. Both of the intermodal truck trailers to move them big back and oceangoing container shipment equipment, and that again was committed by our Class 1. With all of those commitments, we wanted to examine intermodalism from an economic development perspective and we began this investigation back in the 1980s. At that time, there was no funding sources available other than the type of investments that you heard about from Norfolk Southern in the private companies. Because Maine was a relatively modest area, we could not attract that level of interest from a Class 1 carrier that sort of viewed us as a backwater area. With the passage of Ice-T and Emmons Transportation Group purchasing the line from the Portland waterfront, to the northern border of Vermont, we saw some ingredients in the passage of Ice-T and made funding available to us for the first time ever. We began to seriously discuss it once again. Furthermore, under Ice-T, there was a congestion mitigation air-quality component that was present, and we knew that we could qualify this by taking all the truck traffic and truck miles off the road and subsequently could make it eligible. In May of 1993 the Auburn Council approved a local share commitment if funding could be secured from FHWA and we received that authorization by July of '93. By October of '93 we had finalized our agreements, contractor for environmental and geotechnical services. In January of '94 we had the final design completed. In June and July of '94 we had all the permits in place. We advertised and awarded construction for the facility, and finalized our lease with Emmons Transportation Group. We opened the facility in October of 1994. Genesee and Wyoming purchased Emmons subsequent to that.

Results: The economic development goals that we had for ourselves have been realized. We've had over $50 million of development occur in the immediate vicinity directly transportation-related and we have over $200 million of development in ancillary types of businesses that have been located in the southwest quadrant of our community. Over 2000 jobs have been located here, and we are continuing to invest. Ed is going to talk about the Rangeley project, which is another publicly funded expansion for train formation which is adjacent to the intermodal facility and a new industrial park.

I don't know why this has happened, but all of a sudden this last slide that was going to summarize the productivity and how the intermodal facility sits kind of took off on its own, but let me just talk about it a little bit. The Maine Turnpike is in the bottom right-hand corner. That is Interstate 95. Immediately to the left of that you will see on the slide and notation, and that is the city's first industrial park. The Auburn airport is located to the left of that and at the top of the picture is where the intermodal facility is. The yellow lines that run from the middle bottom to the upper right-hand corner are the former Canadian National, now St. Lawrence and Atlantic Corridor. That line that runs from that Corridor up to the top right-hand corner of the slide, that is the Lewis and Auburn railroad company and as you can see we built the intermodal facility along that line. The red areas are the new industrial park that we are just currently developing. We are investing $4.2 million in that park and immediately adjacent to that is the location of the Cascade Auburn Fiber also using the rail infrastructure for their operation. They are a de-inking facility for high-grade paper and recapture pulp for paper production. There is about 100 acres immediately to the left of the intermodal facility that is available for development. As a matter fact, most of the ethanol that is being brought into the state of Maine now goes into that area. It continues to be a center of investment activity for us.

With that, I will turn it over to Ed Foley, our partner with the Genesee & Wyoming Railroad. We have a pine tree zone around this area, a foreign trade zone, which is activated, and there is the 100 acres of development. With that, Ed, it is all yours.

Ed Foley
Thank you. I will go over an overview of who we are, the use of our intermodal terminal, the importance in additional investment in and around the terminal, and our future and next steps.

To start off with, the SLR is part of the Genesee & Wyoming group of companies with the recent acquisition of the Rail America railways. We are listed on the New York Stock Exchange with a market cap of $5 billion. We have 111 railroads, we employ nearly 4600 people and serve 2000 customers with 1500 miles of track and 1000 locomotives. We provide rail service to the US, Canada, Australia, the Netherlands, and Belgium.

Acquisition works well for the main focal purpose and the reason behind it is the nine North American operating regions already in place. If you look over to your upper right-hand corner in the Canada region, which is where the St. Lawrence and Atlantic falls under the Canada region, the purple line SLR/SLQ, that is the previous discussion that Roland had brought up. We run from the Northern border in Norton, Vermont down into Auburn, Maine. That is going to be our focal point to talk about today.

Consistent improvement in safety. The number one key for any railroad company is the success in our people and the only way we are going to succeed is by getting them home safe every night. When you start looking at the consistent improvement in safety, we are not just leading the railroad industry; we are leading the world of transportation in terms of what we are doing, just under 0.5% in 2012.

A little bit more about the performance per 200,000 man-hours. We get it done because we have boots on the ground, we're focused, we're accountable in the process, and we all know in our industry that safety is never fixed.

A decentralized operating philosophy is another real focus of our company. That's how we've been successful here. We have a regional marketing approach where we try to be experts in our regional markets in working with our Class 1s, and by doing so, if we run a safe operation and a focused operation, we know we will lower operating costs. It will be an efficient use of capital and keep things moving in the right direction.

Getting into the nuts and bolts of our focus here, strategies will change from year-to-year and being an operator here with the St. Lawrence and Atlantic over the years, 60% of our business is related to forest products, and we know what that has done to our business in New Hampshire. With two paper mills closing in Groveton, another paper pulp mill in Berlin, Auburn has definitely been the highlight. We are working extremely hard with our economic development groups in New Hampshire and Maine. We only handle a little bit of traffic in Vermont with the lumber reload, but we are really focusing our attention on those projects that can come to our region and stressing the importance of good quality rail service. On the energy side, we get an awful lot of propane. We are very fortunate that we have that business to handle. Two large terminals, which we'll see in Auburn, Maine. Export opportunities for propane and for fiber, which we'll see in a moment that we send out, both containerized, as well as in boxcars. We believe that if you look at this map we are the vital connection to economic viability in Northern New England.

Starting off with the economic development, we have a Rangeley branch project with the state of Maine, and you can see on the left in the picture we have the intermodal terminal and we have a $3 million investment to tie back this old Rangeley branch line. You see that on a map and you say, well what does that really mean? MD Bark in the upper right hand corner is a 180 acre facility. We're going to tie a track in there. We are going to be able to bring in used ties from our line. Those will be chopped down and shipped and sent back up to the paper companies to use as fuel. POA is Port of Auburn, another privately owned facility. 147 acres of rail-fed facility where we believe future growth will happen. All this investment, as you can see, is happening in and around the intermodal terminal, and that is what we would like to stress. I think that Roland hit it with over $80 million in economic development; over 2000 jobs depend on these kinds of logistics businesses in and around our terminals.

We then move on to exports and talk about the paper and pulp industries. They rely on us heavily to get the products to Halifax, Prince Rupert, and the two smaller ports in Vancouver.

Our intermodal terminal shown here in this picture, this is an import load for L.L. Bean. It is one of our largest importers within the state. We also do a lot of business with FMC Biopolymer and all of the main paper companies. In 1994 we opened a terminal and 100% of the business was domestic US to US points, bridging through Canada. Today 95% of it is import and a small percentage of that is import/export. 5% is domestic freight. When this was built in '94, there was no Norfolk Southern there. The competition was Boston or Wurster. As you saw in the previous presentations, there is an awful lot of focus and attention to the Northeast market. This is probably one of the more strategic and difficult markets to compete in. We know we're a niche player in a niche market, but there are a lot of challenges in the market. We are only 165 miles north of Boston. The challenges are hours of service, terms per shift, capacity, fuel cost, and we believe all those in time will allow us to expand the business here in Auburn.

As we bridge into energy, the energy growth on propane continues. Expansion in this facility is DCP Midstream in Auburn. We will see an increase in business, as well as increase in capital to expand their gantries. Currently they have five. This fall, we are told they will move to seven gantries which we hope will bring more business with it.

Our next slide shows another propane facility, Dead River Propane with a recent expansion, several car spots, and more throughput capability.

The next slide shows Savage Safe Handling. This facility was born nearly 20 plus years ago, but some of the customers that we handle here today, Poland Springs, if you are drinking that bottle of water, that might a car that one of the pellets that produced that bottle came out of. We are handling world class companies. They have located here. Nalco Chemical Titles handles a lot of the water treatment that comes into New England for distribution. These facilities are only 2 miles from the interstate.

This is a unique slide. Imports come in from China. We add water to them, mix them up and play the mad scientist, and then we ship rail cars as far as Wisconsin and Michigan and locally in Maine. It is important to add that all of the slides that I am showing happened in concert with the initial investment of the intermodal terminal.

As start going down this path, we start asking ourselves what are we doing to grow our business and maintain it? One of the things that we have been able to do at Genesee & Wyoming Railroad is every other year, we go out with a survey to our customers. We find out just how good we are doing. Are we doing as well as we think we are? We are due to do this again this fall, but in 2011 we had 8.7 out of 10 on commitment to safety, 8.5 on professionalism. When it put us up against the industry, in the industry we were at 6.5, we were 7.6 in the trucking industry. We have to continue focusing on our customers. Part of that is expanding products and working well with our Department of Transportation, local cities of Auburn, and different state governments in the states which we pass through.

What are our next steps, capacity improvements? Our longer-range sustainability is to make sure we keep pace with investment. We have done a pretty good job thus far in working with the states of Vermont and New Hampshire. We have a current Tiger V grant application in with a 45% match. The industry continues to move at a higher capacity, so we have 20 miles of track that we need to upgrade in New Hampshire and Vermont, and we are hopeful that we will be successful in getting a grant. Our successfully comes by enabling small business to succeed. That is not just a line. That's what we believe. We hear from our customers all the time that we are the conduit or connectivity for the world markets that they deal in.

Finally, there is nothing better than to get support from your customers. Sometimes that support you get comes with a silver lining, and the one line that I would take out of this is customer's perspective is the cost of shipping 263 versus 286 on their line. This costs a supplier time and money, lowers the volume shipped per car, which lowers efficiency and increases our costs. Our focus and attention started off the discussion talking about intermodalism and we have bridged into our focus on how we can grow our success in public and private partnership. Our future success is going to be in keeping pace with capacity required to grow the business. I thank you for the time.

Jennifer, I would am open for any questions that you might have.

Questions & Answers

Jennifer Symoun
Thank you. We are going to move on to questions now. I'll ask the presenters to be as succinct as possible in answering questions so we can try to get to all of them. I think I will move up to the top and start there. The question is for Dan. The first question is when are you moving international traffic out there?

Grant Cothran
Is this for Rossville, Tennessee?

Jennifer Symoun
I believe so.

Grant Cothran
That is a good question. We are not currently planning on moving the international freight. In Charlotte it was a little bit of a different story, but in Memphis, basically the existing forest yard terminal in downtown Memphis is adequate to handle our international volume. We were stacking boxes, which is not a good thing, up until last year because of the additional domestic freight. The plan for Rossville is currently to have it be a domestic terminal and by having it out there, it really allows the international freight at forest yard downtown to move as it should.

Jennifer Symoun
Thank you. Our next question for you is did I hear correctly that intermodal cranes generate power and create a power credit for the facility? If so, how do they generate power?

Grant Cothran
I think that was actually a question for Dan. I am not probably qualified to answer it.

Jennifer Symoun
Yes, it was for Dan.

Dan Pallme
I don't know how it does. I just know from conversations that I have had with BNSF that they have one bill that is their power usage and then they get a credit from MLG&W here locally and it is all categorized and the ramp manager told me that he was shocked at the amount of money that comes back to them. I will also mention as another point, the interesting thing at BNSF is they actually have their own power grid because they cannot afford for it to go down, so they have backup power generation. They have two different power grids for the city of Memphis so that if one goes down they can still stay operational, including the generator backup.

Jennifer Symoun
Another question, Dan. How do you measure the performance of an inland port and what are the prerequisites for inland ports to be successful in fully integrated into current supply chain strategies?

Dan Pallme
That is the nature of the beast when it comes to the actual railroads and looking at what numbers they have in actual flows. Obviously Memphis is known as the North American distribution center, so I am sure when the railroads invest in anything they look at the potential growth, the impact, all the variables, land, a lot of the things that the other presenters mentioned to make the best assessment for that. As far as the actual number, I am not privy to that information why they specifically do it, but Grant's presentation talked about that extremely well about the variables of the proximity to the mainline, where the customer base is, all the variables that are taken into consideration.

Jennifer Symoun
Grant, if you want to jump in.

Grant Cothran
I thought that pretty well answered it. There are a number of factors that we have to weigh against one another. Actually, there was another question further down with all the focus on the Northeast, and I can also answer that one.

Jennifer Symoun
Okay. If the Northeast is one of the most growing regions, then what will the railroads do in this area of limited land?

Grant Cothran
Exactly. That is a good question, and I guess the answer is we are going to become more creative, and not all the levers pull down in the same way. As soon as you pull one lever, it makes another one move around. I guess what I mean by that is there are a number of factors that we have to weigh against each other. One of the things we're doing in the Northeast as part of the Crescent Corridor is we built a terminal in Greencastle, Pennsylvania about 10 miles North of Hagerstown, Maryland. One of the main purposes of building an additional terminal in Eastern Pennsylvania is divert freight from our Hagerstown terminal, which there are already two of those, both of those cannot be expanded. Greencastle is almost 60 miles away. Greencastle is not at a perfect center where we would like to serve our customers from, but it meets the other criteria. The other good example is in Bethlehem, Pennsylvania. We are strongly considering, and have put it out publicly, that we would do an inland port move from the port of New York, New Jersey, to avoid congestion there to Bethlehem. If we go through with that, and we could turn it on in about 45 days, it would become the shortest length of haul of intermodal service anywhere in our network. Even though it is extremely short length of haul, shippers are willing to pay for that in order to avoid ingestion in other areas of the Northeast. We really have to be more creative and make different choices than we probably would have made if different land was available.

Jennifer Symoun
Thank you. Another question for Grant, are same truck emission standards being applied to real local motive engines?

Grant Cothran
Good question. We are subject to different standards. We are subject to standards for locomotives. From my perspective, probably the take away there on freight is that we are more efficient per unit move. When you are comparing over the road to intermodal move, the fuel uses and omissions are reduced by roughly 1/3.

Jennifer Symoun
Thank you. Grant, another question, and I'm not sure I am reading the question right, but the 5.5 million containers, is this 20 foot container the same measurement as import volume?

Grant Cothran
The short answer is no. That number really cannot be converted to TEUs. 5.5 million total units originated by all American Class 1s. That includes a 20 foot container, 40 foot, and 53 foot combined. I don't actually have the data that would allow you to segment that and then have you be able to translate it to a TEU number. The big take away is it does translate to a number that is comparable to the number of over-the-road trucks that would have been moving and the miles that it would have been moving had this not been operated by Class 1 railroads.

Jennifer Symoun
Thank you. Another one for you. Did you say the new intermodal facility in Charlotte in the airport buffer zone? If so, I wonder what aspects of buffer function the rail intermodal facility fulfills?

Grant Cothran
It is in the restricted use area around the airport. If you could see -- I don't know if we can go back to the presentation -- it is located parallel to the Western and Eastern runways, which is to say it is not in the flight path of airplanes. They have a different word is airport. It is not crashed. At the end of the red light there is a special"no use zone" that basically extends the runways out parallel. The terminal is not in that airport. Someone kind of answered this question. They were talking noise and flight. That is exactly right. The other big piece of why we are able to use this particular piece of land is because we also have very high security standards at our terminals. It is not like someone at our terminal could get up and walk onto the runway. We already have security checks in place. If you had a gas station between this, pretty much anyone could just walk up. The area is fenced and contained. There are all kinds of security measures in place that work very well with the airport. It is a complementary use. From an industrial zoning perspective, they are very similar in terms of their needs.

Jennifer Symoun
Thank you. I think this question might have been for Roland and Ed but I'm not sure. What is the minimum intermodal volume per terminal for each to be viable?

Roland Miller
One of the things we did to take a look at viability was we looked at what the investment was, we looked at the volumes, and we created a lease for the publicly owned facility to our railroad partners that was going to allow for a very low cost entry as volumes were low and then as volumes increased would help us generate more revenue so we could maintain the facilities. And we subsequently turned over during that interim period a lot of the maintenance for public inspection over to the railroad companies. That's not an easy question to answer because of the market place and what's available but each terminal will be dependent upon its success and how much traffic it can accommodate and then how you can finance future expansions as the business grows. Our terminal was really exploratory. We were the first terminal funded under ICET and I think we were the first publicly-funded intermodal terminal in the nation like this. That's a very difficult answer to come about which is just across the board.

Jennifer Symoun
We're going to wrap up with one last question for all presenters. How have you sold the idea for the need for inland ports to the local community and government?

Dan Pallme
It's really not about selling. I'll tell you a little history and the only reason I know is because I lived it. In 1998 when Union Pacific moved out there, in those days there was no such thing as tax incentives. The city of Memphis wouldn't do anything. Now I think the city, the public sector and the private sector, you've kind of seen a lot of that going in the future with Tiger Grants and things of that nature. The economic recovery that's generated jobs, it's really a focus of public and private to get together to develop these inland ports, much more so than it was in 1998 and especially in the last 2-3 years it has gotten very aggressive.

Grant Cothran
I would agree with Dan. It's not too hard a sell because our interests and the local interests are aligned. There are some mitigating factors that come with one of these terminals especially the really big ones. That is true. But as we've developed new terminals we really try to be good neighbors. We go out of our way to be good neighbors. As we develop new terminals I think you can look back at a series of case studies and really see that that's the case. So it's really just about being a strong partner in the community and having that track record.

Roland Miller
I know I was on the front lines of presenting this to my city council. If you can imagine, we were doing this discussion in '90-'91. And if anyone thinks back to what '89 through'92 was like as we were falling off the cliff one last time, it was not an easy investment for a city council to make, even though we were looking at only a 20% cost share. It still was half a million dollars for a city like ours it was still a significant investment. The way it was sold was we took a look at terminals and the growth around terminals in the US. That was some of the reinvest search we had done in the 1980s when we were looking for a way to fund it and capitalize on our transportation infrastructure. We took that data and said this is what we can expect if we create the hub of Maine in Auburn. If we can become a shipping hub we are going to see a whole bunch of investments including expansions by our existing manufacturing industries. We have a lot of manufacturers that are still here like International Paper, Form Fiber Technologies, Proctor and Gamble, General Electric, all of these companies are here. We wanted to logistically connect them to the world so we had support from our base and we took that to our elected representatives. It was not that difficult of a decision. They were making a long term investment in the future of our city and our economic development opportunities. And it turned out it's been a very good investment.

Ed Foley
To add on to the others, I just have to look back at 2000. In 1998 we decided to buy the other portion of the St Lawrence & Atlantic which was a 98 mile short line called the St Lawrence Atlantic Québec. One of things we were successful at was rebuilding a 1.5 mile spur that became a bike path into an industrial park. To get everyone on board with what that meant we brought them to Auburn, Maine. We showed them the success we had in Auburn and the growth in jobs and businesses. And today we have 3 warehouses and a bulk reload all in the same industrial park. And we're bringing in a few thousand carloads of business and bringing jobs for that small sleepy town called Richmond, Quebec. Nothing changes people's minds like success and a fieldtrip and that's how we were successful in getting that done.

Jennifer Symoun
Thank you, Ed. I know there are 2 questions we haven't had a chance to answer but we're out of time so I think we're going to close out now. But if the presenters have a few min to stay on after and type responses, feel free to also send them out in an email to the presenters and I'll get the responses out to everyone when I send out information. I do want to thank all 4 presenters for today's webinar. We had a great turn out and this is a very popular topic. I think we had some really good presentations there. The recording and the presentations from today will be available in a few weeks on the Talking Freight Website. And I will send out an email once they are available on there. The next seminar will be held on July 17th and more information about the topic of the seminar and a link to register will be available soon. I always send a notice out to the Freight Planning listserv once registration is open for each seminar so if you haven't joined it, the web address at which you can to do so is on the screen. In addition to the Talking Freight seminars, the listserv is used to share freight information. There are over 1000 members so it's a great place to exchange information about freight transportation and find out what others are doing. So with that we're going to close out for today. Thank you everybody and enjoy the rest of your day.

Updated: 07/24/2013
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