CSX transportation prepares for freight rail's future.

The conversion of freight traffic from highway to rail is growing, and CSX is shaping its intermodal business to harness and accelerate this modal conversion in a way that benefits its customers, the environment, and US commerce more broadly. The intermodal business--shipping containers exchanged among various modes of transportation including rail, truck and marine vessel--has been stimulated by the improving US economy, growth in global trade, highway congestion, rising trucking costs and benefits of railroad fuel efficiency.

CSX's transportation network spans 21,000 miles, with service to 23 eastern states and the District of Columbia. Along that network it connects to more than 240 short line and regional railroads and more than 70 ocean, river and lake ports. Its network connects shippers to approximately 66 percent of US consumers in a cost-efficient and environmentally friendly way.

Across the network, ambitious infrastructure expansion projects--in the case of intermodal: new terminals, upgrades and expansion of older terminals, and improvements to allow for more double-stacked trains--are part of CSX investments that are expected to total $2.25 billion this year. One of the cornerstones of CSX's capital investment strategy is an infrastructure project called the National Gateway.

THE NATIONAL GATEWAY AND CSX

The National Gateway is a public-private partnership that will create a double-stack freight rail corridor between Mid-Atlantic seaports and the Midwest. The improvement projects are designed to increase the vertical clearances at 61 locations on CSX rail lines in the region to accommodate intermodal trains carrying double-stacked intermodal containers. The National Gateway will support additional shipments of consumer goods in a more efficient and cost-effective manner.

CSX, six states, and the District of Columbia, as well as the federal government, are part of the National Gateway cooperative. More than 300 public and private sector organizations and individuals are supporting the effort.

Total project costs are approximately $850 million, and state and federal partners are investing to help secure the public benefits of improved transportation infrastructure. CSX has corn mined a total of about $575 million over several years. The projects will provide clearances in Maryland, West Virginia, Pennsylvania and the District of Columbia, including a rebuild of the century-old Virginia Avenue Tunnel in Washington, DC, to accommodate two parallel tracks and higher vertical clearances.

As part of the National Gateway project, CSX has already opened two new terminals on the corridor, one in Chambersburg, PA, and another in North Baltimore, OH, one of the most advanced in the nation. Meanwhile, CSX has completed or is upgrading or expanding intermodal facilities in Charlotte, NC; Columbus, OH; and Louisville, KY. The company also plans to develop new terminals in Pittsburgh, PA, and Baltimore, MD, as part of the project.

Construction and development of the National Gateway is already making a significant contribution to the well being of communities along the network, providing needed jobs. Once complete, the National Gateway will bring additional environmental and economic advantages largely through its freight rail efficiency and fewer trucks on the highway.

PANAMA CANAL EXPANSION TO AFFECT PORT BUSINESS

One consideration in the development of the National Gateway project, is increased global trade calling at eastern ports, most of which are served by CSX. The company serves 70 ocean, lake and river ports. These volumes are increasing as additional goods are shipped through the Suez and Panama canals. The Panama Canal is being expanded to accommodate larger ships in a project that began in 2007 and is expected to he complete in 2014.

East Coast ports are gearing up for the potential for more business and to accommodate larger and deeper draft vessels. Ports are pursuing infrastructure improvements; more on-dock rail connections, warehouse expansions and deepening of shipping channels to prepare for larger ships.

In partnership with regional development efforts--from manufactured distributors--CSX is focusing on its infrastructure improvements and acquisition of locomotives and car fleets to support what is expected to be a significant increase in rail shipments over the next several years. This volume increase is attributable to factors previously noted, including the desire for more environmentally friendly transportation that produces fewer exhaust emissions and less weal and tear on the nation's highways.

CSX PORT CONNECTION -- VIRGINIA

As one of two Class i eastern US railroads, CSX's access to import-export traffic at ports along the eastern seaboard and the Gulf Coast is essential to serve the local and inland population. A case in point is CSX's recently improved access to the busy impordexport APM (parent company of Maersk shipping lines) Terminal (APMT) in Virginia.

"We recognized several years ago with development of the National Gateway project that we could serve our customers more effectively with on-dock services at the new APM terminal in Portsmouth, VA," said Carl Warren, CSX director of sales. "APM worked hard to ensure that CSX could get there."

About three years ago, CSX built a rail link from its lines to the Commonwealth Railway at the port (a short line road and one of the Genesee & Wyoming family of railroads). That infrastructure gave CSX on-dock access to APMT through its short line connection.

"That new connection gives our customers a strong on-dock presence in Virginia For access to markets overseas," said Warren. "These international intermodal containers are usually heavy, and the on-dock service provides customers with cost savings through avoidance of charges to dray their goods between train and ocean-going vessels." Other benefits accrue to the Virginia port area, such as less wear and tear on local roads and better air quality: through fewer exhaust emissions. Through the National Gateway project, CSX is also investing elsewhere in the Virginia port area. For example, a new siding has been built at nearby Suffolk with several tracks to provide the needed capacity to help assemble and disassemble trains for movements to and from the Virginia port.

CLOSE-UP OF PORT OF VIRGINIA OPERATION

CSX moves just about any product consumers could find at a discount retailer or big-box store through the Port of Virginia. Since Jan. 1, CSX has moved two trains a day to the port--one bearing mixed freight from the Chicago area and one with freight consolidated from many origins at CSR's new terminal in Northwest Ohio. This freight originates in major cities in the Ohio Valley, along with other midwestern cities like Detroit and Indianapolis. Rail containers handled at Port of Virginia in February 2012 jumped 13 percent over the previous year. Tonnage for that month showed a 12.8 percent increase over 2011. Combined, CSX handled 11,000 containers by rail at the port in March 2012--a new record volume of traffic, says Terminal Manager Tony Mac-Donald, based at Portsmouth, VA.

The new siding with the Commonwealth Railway, MacDonald says, was accomplished with assistance from the Commonwealth of Virginia. The new structure meets the APMT "like an offramp on a highway," he says. "We hand off trains about eight miles from the gate, and they're then switched. into the port."

Overall, the Port of Virginia has become a more efficient rail-served operation with the new rail link. "In the past only one Class I railroad [the Norfolk Southern] could reach the terminal. Now, both eastern Class I's can make that connection, and it has put the port in a stronger competitive posture against the Port of NY/NJ and Savannah."

MacDonald points out proudly that the terminal moved six divisions of Army and Marine Corps equipment by the trainload in support of the military presence in Iraq and Afghanistan in recent years. "They rapidly crossed over our network during an about 18-month period two to three years ago," he explained. "Now, we look forward to bringing them all home."

CSX AND MILITARY FREIGHT TRANSPORTATION

Because its network lies along key large military bases in the eastern US, CSX moves more military Freight than any other Class I railroad. CSX serves several large bases, including:

* Ft. Drum, NY (10th Mountain Division)

* Ft. Campbell, KY (101st Airborne)

* Ft. Bragg, NC (82nd Airborne)

* Ft. Stewart, (A (3rd Infantry Division)

CSX either directly serves the bases through its traditional carload business, where some have their own tracks and locomotives to handle the shipments beyond the gate, or moves the freight via its nearby intermodal terminals.

Trains carrying military equipment receive the highest priority so that their movements are timely. During recent deployments, frequently used port connection points have been at Blount Island, FL; Charleston, SC; Philadelphia, PA; Portsmouth, VA; Norfolk, VA; and Sunny Point, NC.

While some of the military equipment is containerized, military equipment moves on various types of rail flat cars. Materials could include ammunition, Humvees, tanks, mine-resistant ambush-protected vehicles and ambulances.

Average volume of military shipments on CSX is approximately 5,500 carloads per year.

In support of commerce and the military; CSX is a major and growing presence today and tomorrow. The company is seeing solid growth across many of its product markets and is investing fir additional growth in both the near-and long-term.

By Colonel Jon Meyer, USAF (Ret.)

CSX Senior Account Manager, Emerging Markets