2015 SUSTAINABILITY REPORT

sustainable transportation

innovative service solutions

GRI

G4-EC7

G4-EC8

COMMERCE

ECONOMIC ENGINE

An Engine of Growth

Norfolk Southern promotes the economic health of communities by working with industries and state and local economic development officials to identify and market suitable rail-served sites for manufacturing and distribution facilities.

In 2014, the railroad’s Industrial Development Department helped locate 72 new and expand 22 existing industries in 18 states along Norfolk Southern rail lines. That represents $5.7 billion in customer investment, which is expected to create more than 4,420 new customer jobs and generate more than 205,000 carloads of new rail traffic annually.

The energy sector drove much of the economic development activity in 2014, including crude oil transportation projects serving northeastern U.S. refineries; support for Marcellus and Utica shale gas development; and new and expanded coal mines. Significant projects related to crude oil include Eddystone Rail’s $145 million investment in a terminal in Eddystone, Pa.; Phillips 66 Company’s $75 million investment in a unit train crude oil terminal in Linden, N.J.; and Delaware City Refining Company’s $60 million expansion of its Dilbit Crude Terminal/Refinery in Reybold, Del.

While coal volumes have dropped the previous two years, coal customers are continuing to make investments in the business, underscoring coal’s continued importance as a reliable, cost-efficient source of power for the nation’s energy needs. The U.S. Energy Information Administration, for example, projects that utility coal will generate about 34 percent of U.S. electricity through 2040. To meet those needs, White Oak Resources in 2014 opened a $400 million coal mine on the railroad’s network in Mt. Vernon, Ill. The mine is located in the Illinois Basin coal fields, a growing market segment, and is expected to lead to 350 new customer jobs and 8,700 new rail carloads. In a separate project, Consol Pennsylvania Coal Company invested $205 million to modernize its existing Waynesburg, Pa., coal mine, a move projected to create 375 new customer jobs and 36,000 new carloads.

An uptick in U.S. agricultural production and the stabilization of commodity prices supported the development of large projects along the railroad’s network. The Louis Dreyfus Corporation in Claypool, Ind., invested $1.8 million to expand its soybean processing plant, while Trupointe Cooperative Inc. opened a $30 million fertilizer and unit train grain elevator in Milford Junction, Ind.

“Norfolk Southern works with communities to help them understand the transportation needs of a prospective industry. Our goal with customers is to work with them to ensure that the rail infrastructure is sized and configured to make them successful.”


Jason Reiner
assistant vice president
industrial development

2014 ECONOMIC DEVELOPMENT PROJECTS

Click States For Information.

INDUSTRY INVESTMENT

$5.67B
TOTAL

JOBS CREATED

4,422
TOTAL

CARLOADS

205,731
TOTAL
  • Alabama
  • Delaware
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Kentucky
  • Maryland
  • Michigan
  • Missouri
  • Mississippi
  • North Carolina
  • New jersey
  • Ohio
  • Pennsylvania
  • South Carolina
  • Tennessee
  • Virginia

Repurposing Rail Sites to Meet Customer Demand

Norfolk Southern opened a Thoroughbred Bulk Terminal in Chesapeake, Va., in 2014, giving customers without rail sidings opportunities to receive the benefits of rail economics and service quality. TBT are specialized rail facilities that allow customers to safely and efficiently transfer a wide assortment of goods between rail cars and trucks. Norfolk Southern owns 31 TBT across the network.

The Chesapeake TBT is located on a 40-acre site that previously served as an automotive loading facility but had been idle since the 2007 closure of the automobile plant it served. The TBT terminal, with space for 104 rail cars, can handle dry and liquid bulk food-grade commodities, including flour, sugar, and grains, as well as plastic pellets, aggregates, cement, and sand.

The terminal is an example of how Norfolk Southern has repurposed facilities for new uses across the system, including TBT in Chicago; Columbia, S.C.; and Meridian, Miss. - all of which had been used to transload automobiles.

Moving Up with Ag Shippers

Agricultural shippers ranked Norfolk Southern second among the seven largest railroads for customer satisfaction on the Soy Transportation Coalition’s 2014 Railroad Report Card. That’s up from third in 2013.

The STC is composed of 13 state soybean boards, the American Soybean Association, and the United Soybean Board. Rankings on the fifth annual report card were based on anonymous surveys completed by agricultural shippers who rated the railroads’ on-time performance, customer service, cost, and other performance factors on a 1-to-10 scale, with 10 the highest score.

Shippers ranked Norfolk Southern first in several categories, including offering around-the-clock access – including weekends and holidays – to railroad officials able to resolve problems that arise. Norfolk Southern also ranked first in several cost categories, including transparency in pricing and for explaining rail service costs.

Economic Impact in Operating States

Norfolk Southern generates substantial positive economic benefits in states where the railroad operates. Employee salaries and wages are spread throughout local communities, including at restaurants, automobile dealers, and retail stores. The company purchases goods and supplies from vendors, helping to support local businesses, jobs, and economies. The railroad’s payments of local and state taxes help support education, law enforcement, and other government services.

The accompanying chart shows state-by-state breakdown of employees; payroll; total tax, purchases, and other payments; and miles of road operated.

2014 Economic Contributions By State ($ in thousands)

State
Total # of
Employees Paid
Total
Payroll
TOTAL TAXES,
PURCHASES &
OTHER PAYMENTS
MILES OF ROAD
OPERATED
(12/31/14)
ALABAMA 1,673 $ 113,282 $ 85,622 1,304
DELAWARE 122 8,385 9,538 203
DISTRICT OF COLUMBIA 8 674 19,018 13
FLORIDA 177 10,155 81,230 149
GEORGIA 4,735 349,216 426,744 1,719
ILLINOIS 1,625 109,192 1,437,588 1,256
INDIANA 2,584 181,884 142,789 1,445
IOWA 15 868 4,554 43
KENTUCKY 1,154 76,752 103,994 429
LOUISIANA 70 4,868 7,199 76
MARYLAND 153 9,381 51,954 269
MICHIGAN 767 53,305 48,689 487
MISSISSIPPI 236 15,269 18,443 211
MISSOURI 622 39,197 169,399 409
NEW JERSEY 206 13,351 93,894 931
NEW YORK 366 26,352 88,850 751
NORTH CAROLINA 1,284 83,369 330,496 1,193
OHIO 3,992 271,132 741,137 2,172
PENNSYLVANIA 5,216 339,640 1,044,170 2,279
SOUTH CAROLINA 664 47,269 41,709 762
TENNESSEE 1,774 120,723 129,415 844
VIRGINIA 4,704 383,199 287,138 2,004
WEST VIRGINIA 988 67,426 49,892 806
ALL OTHER 69 3,367 972,569 4
TOTAL 33,204 $2,328,256 $6,386,031 19,759

Year 2014 Notes:
Employment based on W-2’s state of residence. Payroll figures are not included in purchases column.
Taxes include state income, property, sales and use, franchise, and other miscellaneous taxes.
Total purchases includes any payments that were processed through Norfolk Southern’s voucher A/P system (including capital items, rolling stock, joint facility, employee claims, legal fees, etc.) based on payment remittance address.

Promoting Business in Trade Associations

Norfolk Southern participates in rail industry trade associations, chambers of commerce, and other trade organizations. These organizations promote collaboration among the members and provide a forum to focus on issue advocacy and promote best practices in safety, operations, and business.

A sampling of organizations that Norfolk Southern held membership in during 2014 is as follows:

  • Association of American Railroads, an industry trade group representing the major freight railroads of North America and also including Amtrak and some regional commuter railroads as members.
  • American Coalition for Clean Coal Electricity, a partnership of industries involved in producing electricity from coal and supportive of investments to bring advanced clean coal technologies to the marketplace to further reduce emissions - including the capture and safe storage of CO₂ emissions.
  • State chambers of commerce and other state-level business groups that promote jobs and economic development.
  • Business Roundtable, an association of chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy.
  • U.S. Chamber of Commerce, the world's largest business organization, which represents more than 3 million businesses of all sizes, sectors, and regions and advocates for pro-business policies that create jobs and grow the economy.
  • National Association of Manufacturers, the largest manufacturing association in the United States and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States.
  • Georgia Allies, a partnership between Georgia and private corporations that help drive economic development in the state.

How Norfolk Southern Supports Growth

When CertainTeed, a roofing shingles supplier, decided to invest in a new manufacturing and distribution facility in the Midwest, rail service was a prime consideration. The company, headquartered in Valley Forge, Pa., conducted a multistate search for property within a 100-mile radius of St. Louis, considering 40 to 50 sites served by all seven of the largest railroads before zeroing in on a Norfolk Southern-served property in Jonesburg, Mo.

The Norfolk Southern site won out thanks to the railroad’s record of customer service with CertainTeed and a close working relationship with local and state government officials.

“One of the first things we did was to get someone from Norfolk Southern’s Industrial Development Department in the process,” said David Banks, CertainTeed’s transportation manager. “We’ve had very good communication with them, and they’ve been involved every step of the way.”

Construction of the approximately $100 million distribution facility - including a 60,000-square-foot manufacturing facility and a 150,000-square-foot warehouse - began in late 2013. The warehouse was completed in 2014, and the main line rail switch to the facility was installed in spring 2015. The facility is expected to go into full production late this year or early 2016.

A Team Effort

Norfolk Southern worked with Missouri’s business recruitment organization, a local economic development consulting firm, and a consultant representing CertainTeed to identify a suitable site. Those partnerships were essential.

“A big part of our jobs as industrial development managers is to work with the local community and find out what sites are available,” said Jacob Weir, one of the managers who worked on the project. “We are there to connect Norfolk Southern to the community and to the company.”

Other Norfolk Southern departments play crucial roles, including marketing, sales, engineering, transportation, and government relations.

“We’re tasked with finding a site, getting a rail plan in place, and getting the facility built,” Weir said, “but it’s a group effort. Marketing and sales get rate information to the customer, and we work with transportation to schedule rail service. We all work together to give a complete package to the customer.”

Norfolk Southern developed conceptual plans for the site, including aerial photographs and track layout, along with estimated costs. “That got the dialogue going and set the tone,” said Paul Jeffers, another industrial development manager who assisted. “We modified it multiple times, but you could tell the consultant and the company valued those plans. They were encouraged that Norfolk Southern offered to help them.”

As construction on CertainTeed’s facility progressed, other companies started looking at the area for expansion possibilities.

“It’s led to the area’s being viewed for other projects,” Weir said. “It brings in a lot of investment and opens the door for future development.”