2015 SUSTAINABILITY REPORT

serving customers

financial highlights

GRI

G4-EN31

COMMERCE

BUSINESS INVESTMENTS

$2.1 Billion in Investment

In 2014, Norfolk Southern invested $2.1 billion in capital projects and assets to maintain the franchise and expand business opportunities. The expenditures consumed about 18 cents of every dollar of railroad operating revenues generated during the year.

Operating a railroad with 20,000 miles of track and rail facilities across 22 states requires significant capital investments. The company focuses on four areas to achieve performance goals:

  • Asset renewal, such as new rail, locomotives, and rail cars
  • Service reliability
  • Operational efficiency and productivity
  • Targeted market growth

CapX Focus: Safety, Efficiency, Growth

In 2014, as in most years, the largest share of capital dollars - 65 percent - went into core business needs and rail replacement projects. The company installed 507 track miles of new rail, surfaced 5,248 miles of track with new ballast rock, and installed 2.7 million new crossties. Other core investments included support of the company’s locomotive rebuild program and freight car replacements.

Investments to support growth and operating productivity included projects to enhance network fluidity and velocity. Major projects included expansion of the Bellevue, Ohio, rail yard, improvements to intermodal terminals in Chicago to support volume growth, and the purchase of 75 new fuel-efficient, emissions-friendly SD70ACe locomotives to increase power available to trains and improve service.

Ten percent of the capital budget supported continued implementation of technologies and infrastructure associated with Positive Train Control, a congressionally mandated program that is a multiyear, industry-wide initiative. PTC is designed to improve rail safety on freight lines that also carry passenger rail trains or that move products the federal government regulates as poisonous inhalation hazards, including certain chemical products used to manufacture common household goods.

Expansion of the Bellevue, Ohio, rail yard, completed in late 2014, is an example of Norfolk Southern’s strategic investments to connect customers with long-term business growth, supply-chain operating efficiencies, and enhanced service offerings.


Bellevue: Making Connections for Growth

Norfolk Southern's rail yard in Bellevue, in northern Ohio, is located on the consumer-rich corridor between Chicago and New York. Five major Norfolk Southern rail lines run through Bellevue, making it an ideal location to handle freight moving in every direction on the company’s network.

At 620 acres and 5.5 miles end to end, the expanded yard was named Moorman Yard in June 2015 in honor of board executive chairman and retired CEO Wick Moorman. The bustling facility is the largest and most modern of the company’s 12 major yards where rail cars are sorted by destination and built into outbound trains. The expansion doubled the yard’s capacity, opened new business possibilities, and added flexibility to meet customer needs.

Bellevue is ideally located to serve key growth markets. It is at the center of rail traffic associated with shale-gas drilling in the Marcellus and Utica shale deposits in Pennsylvania, Ohio, and West Virginia. It also is in a prime spot to serve expanding industrial and manufacturing markets.

Norfolk Southern is consolidating trains in the larger Bellevue Yard that previously stopped at multiple yards to pick up rail cars as they moved from origin to destination. In addition to reducing car handlings and railroad costs, building longer trains at Bellevue enables us to cut delivery time by as much as 2.3 days for some customers. This has a cascading effect to improve efficiencies across the network, including easing congestion in the company’s busy rail yards in Chicago.

These operating efficiencies also generate environmental benefits. Cutting route miles and transit times conserves locomotive diesel fuel and contributes to efforts to reduce carbon emissions. That helps customers reduce their supply-chain carbon footprint and advance their own greenhouse gas reduction goals.

How a Rail Classification Yard Works

Think of a railroad classification yard as a 600-acre package sorting facility where the packages are 140-ton rail cars.

  1. Arriving trains go into a receiving yard. Locomotives push the rail cars up an incline called a hump, where a conductor pulls a pin to uncouple single cars or blocks of cars, based on car numbers displayed on an electronic board.

  2. A computer-controlled system records the speed of each car as it rolls down the hump into a classification track. To control a car’s speed, air-powered track equipment known as retarders - similar to automotive disc brakes - press in on its steel wheels to slow it down.

  3. A yardmaster assigns cars to a classification track based on their destination. The automated computer system routes them to the proper track, where they are assembled into blocks for outbound trains.

Bellevue Expansion by the Numbers

“Surgical” Network Investments

Norfolk Southern has systems in place to anticipate and react to changes in customer demand. To control costs and achieve optimal operating benefits, the company is surgical about where and how much to invest in rail capacity improvements. With a focus on performance-based results, the company has the people and capabilities to accomplish what customers need, execute projects on time and on budget, and do the work safely and efficiently.

Adding Capacity, Improving Service

Over the past decade, Norfolk Southern has invested close to $400 million on surgical projects to improve main line track infrastructure that adds freight capacity and network flexibility. While relatively small, these projects generate large benefits for the railroad and for customers. They include things such as rail sidings that enable trains on single-track territory to safely and quickly pass; sections of double track for two-way flow of trains; and track crossovers for trains to switch tracks as needed.

The company analyzes market forecasts to identify locations that could benefit from additional capacity. Use of computer modeling, including a custom in-house tool dubbed "LineMAX capacity analyzer," enables the company to assess traffic flow on a segment-by-segment basis to determine how improvements would impact the network. The company then examines the best combination of projects that produce the most benefits for the least cost, keeping in mind short- and long-term returns.

Some recent examples of these strategic improvements are:

  • New interconnections and improvement of existing connections between the Chicago Line and the B-Line enable the company to seamlessly flow traffic through the Chicago Gateway. Having two main lines in this corridor gives us a unique competitive advantage in the important Chicago marketplace. The high-density Chicago Line, with double and triple tracks, is our busiest main line. The B-Line offers important capacity for additional business growth. The interconnections enable the company to flow traffic between the two lines as conditions and traffic dictate. Norfolk Southern has invested more than $300 million in network interconnections, terminal upgrades, and line of road improvements in the Chicago corridor.
  • Yard expansions and gate upgrades completed in 2014 support business growth at the company’s primary intermodal facilities on the south side of Chicago. The improvements included adding 10,000 feet of support track at the 47th Street Yard and adding around 150 trailer parking spaces and a 2,000-foot connection track at the 63rd Street Yard.
  • A 3.2-mile-long siding extension in Goshen, Ind., is providing trains a route between the company’s major classification yard in Elkhart, Ind., and the Marion Branch without having to use the Chicago Line, thereby increasing freight capacity.
  • A multiphase public-private plan, the Indiana Gateway project, will improve eight separate locations over 30 miles between the Indiana and Illinois state lines at Porter, Ind. The work includes construction of 6.5 miles of new track and installation of crossovers and signaling equipment to provide additional routing options and improved network fluidity.
  • Three projects along a 20-mile section of main line out of St. Louis improve service for utility customers turning to Illinois Basin coal as a cost-effective source to generate electricity. The relatively low-cost projects were a new two-mile-long siding, a siding extension of 4,000 feet, and two radio-controlled switches leading to a coal mine. Adding automated switches eliminated 40 minutes of delay per train: Trains traveling from the main line to the mine no longer must stop for the conductor to dismount and physically throw track switches to align the route - an improvement that also enhanced employee safety. Without these additions, rail traffic delays on the district would have increased by nearly 80 percent. With the projects, traffic performance improved by almost 20 percent, providing a buffer for more business growth.