Plg 2017 trb presentation 01062017 final

1Experience / Expertise / Excellence www.plgconsulting.com
Experience / Expertise / Excellence
The Energy Supply
Chain Landscape:
The New Reality and Future
PREPARED FOR:
Taylor Robinson
President
PLG Consulting

Partial Client List
Experience
About PLG
PLG Team
 Real-world, industry veterans
 Delivering value to over 200 clients since 2001
 Over 30 logistics, supply chain and engineering experts with
operational leadership experience
Core Expertise
 Bulk commodity logistics
 Rail transportation and logistics
 Energy and chemical markets
 Logistics Infrastructure Design
 Investment strategy and corporate development
Services Include:
 Investment strategy, target identification, due diligence, post-
transactional support
 Diagnostic assessments and optimization
 Supply chain design and operational improvement
 Independent logistics technology assessment and
implementation
 Site selection

The Energy Supply Chain Landscape:
The New Reality and Future
I. North American Energy Overview
II. Energy Impact to Rail – So Far
III. Crude by Rail – Faltering Future
IV. Frac Sand – On the Way Up?
V. Shale NGL Downstream and Logistics Impact
VI. North American Energy and Logistics Outlook
Today’s Presentation Agenda

I. NORTH AMERICAN ENERGY OVERVIEW

North American Crude - Tailwinds & Headwinds
Tailwinds
 OPEC/others production cuts were agreed on November 30
 WTI price has been recovering and currently in low $50’s
 IEA 2017 global oil demand growth forecasted at 1.35%
 U.S. rig count began increasing in Q4 2016
 Continuing productivity gains by shale drillers increases
global competitiveness
 Trump administration is pro-energy
Headwinds
 Markets will closely monitor OPEC/others production
volumes looking for misses to commitments
 U.S. shale production growth may offset a portion of global
cuts
 Still too much supply available globally with slow demand
growth expected
 Pipeline approval process in Canada and now the U.S.
increasingly uncertain
Steady price growth throughout 2017 not expected – Could be choppy waters if/when
OPEC/others are not able to keep reduction commitments
0
2,000
4,000
6,000
8,000
10,000
12,000
$0
$20
$40
$60
$80
$100
$120
Crude Oil Production and Prices
WCS ($/bbl) WTI ($/bbl) Western Canada Crude Oil Production (kbpd) U.S. Crude Oil Production (kbpd)
Source: EIA, NEB, CME January 2017
$/bbl kbpd
Historical and Forecast
ForecastedHistorical

Shale History and New Reality
Source: Townsend Solution
0
200
400
600
800
1,000
1,200
1,400
1,600 U.S. Land, Horizontal Rig Count
Eagle Ford Permian Williston Marcellus Cana Woodford DJ-Niobrara Others
Source: Baker Hughes, January 2017
Shale Play Late 2014 Recent % Change
11/21/2014 12/30/2016
Eagle Ford 203 44 -78%
Permian 346 218 -37%
Williston 173 33 -81%
Marcellus 77 39 -49%
Cana Woodford 40 37 -8%
DJ-Niobrara 55 24 -56%
Others 478 137 -71%
Horizontal Rig Count by Play
Shale rapid volume growth overwhelmed
domestic natural gas and NGL markets – then
impacted global oil market
Eagle Ford and Williston (Bakken) rig counts are
down over 80% from November 2014
Permian is the clearly “the play” for the future
 Rig count “only” down 37%
 Now 41% of horizontal land-based rigs
 6+ layers of shale in large sections
 Major players have bought up considerable acreage Source: Baker Hughes, January 2017

Shale Footprint Reality - Concentration
Source: RBN Energy, Baker Hughes, September 2016
Production resources highly focused on a limited
number of counties in a handful of the shale plays
 Approximately 70% of all drilling activity happening in just 38
counties with 331 rigs
 Over 1,200 rigs sitting idle
 Permian is the strongest area of focus
 SCOOP/STACK in Oklahoma has grown share during downturn
Gas rig productivity has led to needing on a fraction
of previous gas rigs while production has leveled
Likely will not see rapid rig count or production
growth in 2017
Shale Drilling Intensity
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Dec-2013
Feb-2014
Apr-2014
Jun-2014
Aug-2014
Oct-2014
Dec-2014
Feb-2015
Apr-2015
Jun-2015
Aug-2015
Oct-2015
Dec-2015
Feb-2016
Apr-2016
Jun-2016
Aug-2016
Oct-2016
DUC Count in Oil Regions
Bakken Eagle Ford Permian Niobrara
Source: EIA, December 2016
Drilled but Uncompleted Wells (DUC)
 DUCs have grown since price drop
 High inventory of DUCs has potential implications
for size and time of domestic supply response due
to rise in oil price
 DUC draw-downs may start to gradually pick-up
as we cross into the $50-55/bbl range and if we
cross $60/bbl we may see this draw-down pick up
considerably (Bloomberg Intelligence May, 2016)

Shale Continuing Story - Productivity
Source: EIA, Drilling Productivity Report, December 2016
Productivity increases have continued beyond
expectations due to:
 Producers are still exclusively drilling sweet spots (known high
production areas)
 Utilizing pad drilling and high intensity fracking in growing scale
 Permian has steepest productivity improvement curve as they
transitioned to horizontal drilling in 2014/2015 (see above chart)
Producers will face some headwinds to further
improve productivity
 Oil field services suppliers still are operating at break even/negative
margins – will need price increases for long term viability
 Increased penetration of high efficiency techniques leave fewer
areas to improve
0
500
1,000
1,500
2,000
2,500
Jan-2014
Mar-2014
May-2014
Jul-2014
Sep-2014
Nov-2014
Jan-2015
Mar-2015
May-2015
Jul-2015
Sep-2015
Nov-2015
Jan-2016
Mar-2016
May-2016
Jul-2016
Sep-2016
Nov-2016
Jan-2017
Oil Production by Shale Play (kbpd)
Permian
Eagle Ford
Bakken
Niobrara
2017 expectations
 Permian likely to see continued steady growth as
major producers have bought considerable
acreage for long term production
 Eagle Ford has lost most volume, most rapidly.
Possible growth in the “wet” portion (NGL rich)
later in the year and 2018.
 Bakken will likely see further volume decrease
due to decline curve loss in existing wells and low
rig count/drilling activity.
 SCOOP/STACK and Niobrara seen as potential
growth areas.

Natural Gas remains oversupplied in U.S. –
driven by shale gas
U.S. natural gas demand will grow due to:
 Coal-fired generation plant converting to gas
 More industrial use – fertilizer, methanol feedstock
 Exports to Mexico and Canada via pipeline and LNG
export overseas
E&P companies have driven phenomenal
efficiency gains in past 5 years to ensure
sustainable cost competitiveness
 30+ year supply at ~$3-4 mm/btu
 Cost of production continues to decrease
Source: EIA for historical and CME Group Jan. 3, 2017 settlements for futures
US Shale Gas (Natural Gas)
Background and Future
55
60
65
70
75
80
2013 2014 2015 2016 2017
U.S. Natural Gas Production (Bcf/day)
Historical Projections
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Natural Gas Price at Henry Hub ($/MMBTU)
Historical Futures

II. ENERGY IMPACT TO RAIL

Shale Supply Chain - Impact to Rail Logistics
Feedstock (Ethane)
Byproduct
(Condensate)
Home Heating
(Propane)
Other Fuels
Other Fuels
Gasoline
Gas
NGLs
Crude
Sand
OCTG
Chemicals
Water
Cement
Generation
Process Feedstocks
All Manufacturing
Steel
Fertilizer (Ammonia)
Methanol
Plastics
Petroleum Products
Petrochemicals
Inputs Wellhead
Direct
Output
Thermal Fuels Raw Materials
THE NEXT WAVE
U.S. Petrochemical expansion US based on
abundant, low cost energy and feedstocks will impact other
manufacturing industries
IMPACTS TO-DATE INCLUDE
Dramatic reduction in crude imports, lower electricity costs, lower
gasoline prices, increased refined products exports
Downstream
Products
Significant rail impacts noted in red
(Coal Volume)
Note: Arrows represent 5 year
historical rail volume shipping trends
Chemicals

Rail Industrial Volume Reality – Past and Future
2012-1 2012-2 2012-3 2012-4 2013-1 2013-2 2013-3 2013-4 2014-1 2014-2 2014-3 2014-4 2015-1 2015-2 2015-3 2015-4 2016-1 2016-2 2016-3
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
U.S. Class 1’s Carloads Originated for Coal and “Other” Industrial Related STCCs
STCC 1121 - Bituminious Coal STCCs 10, 13, 14, 28-30, 32-36, 40
Source: Surface Transportation Board, January 2017
Description 2 Digit STCC
Metallic Ores 10
Crude Petro, Nat Gas & Gsln 13
Nonmetallic Minerals 14
Chemicals And Allied Products 28
Petroleum And Coal Products 29
Rubber And Miscellaneous Plastic 30
Stone, Clay, Glass, Concrete Prd 32
Primary Metal Products 33
Fabricated Metal Products 34
Machinery, Except Electrical 35
Electrical Machy, Eqpt & Supp 36
Waste And Scrap Materials 40
Included in “Other Industrial Related” STCCsCoal continues on downward trend due to regulation and gas
competitiveness
 Coal was 18% of all rail carloads in Q1 2012; 10% of all rail carloads in Q2 2016
 Volume level could be leveling off for the future
“Other” Industrial volume moves with industrial economy
 Volume has remained at ~20% of all rail carloads since Q2 2012
Shale boom drove some incremental volume during 2013/2014
 Boom was not forecasted – it was exceptional fast growth
 Not likely to be duplicated with oil price recovery
 Only “Industrial” commodity with significant growth opportunity is Chemicals – but not
near the impact and scale of shale boom
Doesn’t include: Intermodal, Autos, Food, Ag
*18%
*20% *20%
*10%
*Note: % is of total rail carload originations

Rail Volume - Coal vs. Shale-related
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
U.S. CLASS 1’S QUARTERLY CARLOADS ORIGINATED
STCC
14413 -
Industrial
sand and
gravel
(includes
frac sand)
STCC 131 -
Crude
Petroleum
and Natural
Gas
STCC 1121
-
Bituminious
Coal
Source: Surface Transportation Board, PLG Analysis December 2016
4 Qtr. Avg. 1,754,908
4 Qtr. Avg. 77,644
4 Qtr. Avg. 1,085,254
-669,654
4 Qtr. Avg. 146,514
+68,870
Coal volume loss ~10X
shale volume gain
over past five years!

III. CRUDE BY RAIL

Correlation of Operating Rig Count With
Crude and LPG Carloads Originated Quarterly
CBR was the hottest rail growth commodity a few
years ago, volume has dropped by 63% since peak
Now equal in volume with LPG, which likely has
stable future growth curve
Destinations have changed dramatically over time
 East Coast used to dominate volume
 Now East and West Coast volumes at parity
 Gulf Coast close to zero
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
0
500
1,000
1,500
2,000
2,500
3,000
U.S. Class 1’s Carloads Originated for Crude and LPGs with U.S. Land Rigs
U.S. Land Rigs
U.S. Quarterly Carloads Originated for Liquified Petroleum Gases (STCC 2912)
U.S. Quarterly Carloads Originated for Petroleum (STCC 131)
CarloadsOriginated
U.S.LandRigs
Source: Surface Transportation Board, Baker Hughes, January 2017
“Ancient History” in CBR terms

16 www.plgconsulting.com
0
200
400
600
800
1,000
1,200
1,400
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
U.S. Bakken Region Crude Production and PADD 2 Crude by Rail (kb/d)
Bakken Region Production (kb/d)
PADD 2 Crude by Rail (kb/d)
Source: Data from EIA DPR and EIA Crude Oil by Rail, December, 2016
Historical Bakken CBR and Production
Bakken CBR share has decrease significantly since 2013 peak due to pipeline development and foreign
import competition on the East Coast
Bakken is the highest cost structure of big three shale crude plays (Permian, Eagle Ford, Bakken) and
therefore will likely be the last place for investment and rig activity
 Potentially may fall out of top tier of shale oil plays behind Cana Woodford and Niobrara basins
CBR: 71%
CBR: 33%
2013
2016 Q1-Q3

Addition of pipeline capacity will come in big blocks and will continue to decrease CBR volumes due to
superior economics
 Dakota Access was expected to have late 2016 in-service date - now 2018 with potential rerouting??
 Sandpiper in long term holding pattern
-
200
400
600
800
1,000
1,200
2014 2015 2016 2017 2018 2019 2020
Bakken Pipeline Capacity (kbpd)
Dakota Access
Double H
Existing Pipelines
Bakken Pipeline Capacity Forecast
Source: PLG
Consulting, July
2016
DECEMBER 2016 PRODUCTION AT
918 KBPD

Canadian federal government approved Trans Mountain and Line 3 on November 29th
 Still numerous First Nation, environmental and construction challenges lie ahead
Keystone XL’s chance to rise from the dead?
 Trump made campaign promise to approve Keystone
 TransCanada NAFTA challenge
Energy East has a long road due to:
 NEB panel restarted
 Massive scale and length
 Political/environmental considerations
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2013 2014 2015 2016 2017 2018 2019 2020
Maintenance Improvements
TransMountain Expansion
Line 3
Alberta Clipper Expansion
Existing Pipeline
* Note: W. Canada has
>600K of local refining
capability
Western Canada Pipeline Capacity Forecast
Source: PLG Consulting, July
2016
DEC 2016 PRODUCTION AT
3,853 KBPD
*

North American CBR Volume Forecast Overview
Source: PLG Consulting, July
2016
CBR peaked in 2014 largely driven by Bakken volume
Will not see CBR volume returning to previous levels due to:
 High cost production location
 Pipeline capability
 Foreign competition on East Coast (at current oil price levels)
Western Canadian CBR likely will not see significant growth even while pipelines being built
 May have temporary bursts of volume during pipeline maintenance or outages over next several years, but not sustainable
CBR won’t disappear but will be relegated to niche movements
-
100
200
300
400
500
600
700
800
2014 2015 2016 2017 2018 2019 2020 2021
Forecasted Crude by Rail Volume (kbpd)
Bakken
Western Canada
Niobrara
Miscellaneous
Permian
Bakken $52 - $64
Note: Based on
$40-51 WTI price

LPG by Rail movements continues steady growth
0
500
1,000
1,500
2,000
2,500
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
U.S. CLASS 1’S QUARTERLY CARLOADS ORIGINATED FOR INDUSTRIAL SAND AND U.S. LAND RIGS
U.S. Quarterly Carloads Originated for
Industrial Sand (STCC 14413)
U.S. Land Rigs
Source: STB (STCC 14413 – Industrial Sand: includes frac sand and other industrial sands, Baker Hughes, January 2017
Carloads
Originated Rigs
Shale Gas Boom
Rig Shift from
Gas to Liquids
Shale Oil Boom Oil Price
Collapse
High Intensity
Fracking
Five Phases of Frac Sand
Market to-Date
May have reached volume floor in 2016
Optimism is growing in industry for 2017

Current Frac Sand Market Conditions
 Overall market is significantly oversupplied – at 40-50% of capacity
 Pricing remains challenged – hints of price increases finally being heard
 Logistics represents ~75% of frac sand total delivered cost
‒ Rail represents largest share of delivered cost of sand
‒ Railroads have cooperated by lowering some freight rates
 Quality of sand used has changed
‒ 100 mesh lessens need for high crush strength – used as reservoir coating agent
‒ Allowing for regionalization of frac sand movements – increased direct trucking
‒ Eagle Ford and Permian able to source sand trucked from nearby in Texas and
shorter rail movements from other parts in Texas, Oklahoma, Arkansas
‒ Quicker turns and increased trucking means lower railcars needed
Source: Proptester
Looking Forward
 Volume and sand pricing have hope for moderate growth in 2017
 Continued focus on lowering logistics costs either through unit trains or local mines with direct
trucking
 Will local mines continue to take share from Northern White franchise or will Northern White
reclaim some market share if crude oil prices increase?
 High intensity fracking likely has several years of expansion remaining throughout market
 No one price for crude at which drilling “turns on”
‒ E&P companies don’t look at break evens for a whole shale play
‒ Different acreage in the same shale play will have significantly different breakevens
‒ The drilling will not come back all at once with different economics for different acreages, believed to
slowly come back if prices recover and are sustained
Frac Sand Industry Overview

High Intensity Fracking Increases Sand Usage –
and Crude Production!
High intensity fracking trend continue to expand
 Technology leaders have already been using this technique for
past two to three years for both gas and oil well fracks
 Sand volumes continue to increase –
– Devon Energy completed a well in the STACK with 27,000
tons of sand (~270 rail cars)
 Requires more 100 mesh sized frac sand to coat reservoir
with coarser sand for infilling
 “Followers” are still implementing the technique
Will drive increase sand usage per well for several years
Source: US Silica, Goldman Sachs Investment Research
Source: ceramic-proppant.com
Source: Fairmont Santrol, December 2016

V. SHALE NGL DOWNSTREAM AND LOGISTICS
IMPACT

2008 2010 2012 2014 2016 2018 2020
Phase III – “Manufacturing”:
Raw material cost driven
Phase I – Industries using natural gas (“dry”) as
primary feedstock have global cost competitiveness;
new U.S. factories being built
Phase II – NGL (“wet”) downstream products require
significant processing facilities investment and lead
time
Phase III – U.S. material cost advantage will enable
traditional manufacturing to return to the North
America (Mexico first) as about 65% of the cost of
manufactured product is material cost
Phase II - Downstream Products:
Petrochemicals, Resins
Phase I - Gas & Power-intensive Industries:
Fertilizer, Methanol, DRI pellets
Shale Gas Phased Impact To N.A.
Industrial Renaissance
Ratio > 15.6 is favorable for gas-based Petchem
0
5
10
15
20
25
30
35
40
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Crude / Natural Gas Price Ratio
Oil and Gas near
parity or oil
advantaged
Source:
Gas advantaged
Source: Townsend Solution

U.S. NGLs Currently In Oversupply – But Supply
Likely Will Tighten In Coming Years
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2012 2013 2014 2015 2016 2017
Production from Natural Gas Processing
Plants (MMbpd)
Natural Gasoline
Butanes
Propane
Ethane
Source: EIA STEO, October 2016
U.S. “liquids” shale plays currently have an abundance of
NGLs, especially ethane and propane
 Production rose by 1 MMbd over past five years driving widespread ethane rejection
 “Richest” NGL shale plays include Marcellus wet, Utica, and Eagle Ford wet
 NGL oversupply has led to low price NGLs in U.S.
 Gas processing, fractionation, and pipeline infrastructure mostly in place
 Gas processors will likely decrease ethane rejection by ~300 Mb/d as demand
grows over next five years
Current ethane oversupply will be reduced due to:
 Growing domestic petchem demand – 600 Mbd to be added in next three years
 Growing exports - 300 Mbd from 2016 to 2018
 Potentially flat/slowing production if in low crude price environment over next five
years (NGL is sympathetic to oil & gas volume)
NGL pricing expected to rise as supply/demand tightens which
raises new questions:
 If NGL prices rise significantly, will shale drillers be able to react and target NGL-rich
shale zones to drive higher overall returns?
 Will the increased supplies have pipeline access to adequate processing and
fractionating capacity? And have adequate pipeline capacity to Gulf Coast?
 Key opportunity – increase NGL pipeline capacity from Marcellus to Gulf Coast
U.S. NGL cost advantage will be reduced in the next several
years as demand increases rapidly and prices escalate

Ethane Cracking Downstream Products and
Associated Logistics Modes
Ethane
Ethylene
80%
Fuel Gas
13%
Polyethylene
(LDPE, HDPE)
60%
Ethylene Oxide
14%
Ethylene
Dichloride
12%
Ethyl Benzene
7%
Others
7%
Ethylene
Glycol
Polyethylene
Glycol
Polyvinyl
Chloride (PVC)
Styrene /
Polystyrene
Steam Cracker
Flexible
Packaging,
Bottles, Bags
Rigid Packaging
Misc. Solvents
and
Intermediates
Others
7%
Construction
Pipes, Bottles,
Flexible Films
Pharmaceuticals,
Detergents,
Toothpaste
Anti-freeze,
Polyester Fibers,
Fiberglass
Pipeline Integrated Facilities / Pipeline -> Rail Rail / Truck
Transportation
Continuum

REPORT OUTLINE - >100 pages of content
New Comprehensive Polyethylene Report
I. Report Summary
II. Polyethylene Background
III. Impact of U.S. Shale Revolution on the Global Polyethylene Industry
IV. Downstream Plastics Converters Impact
V. Global PE Supply / Demand Outlook (2017 ~ 2026)
VI. North American and Global Logistics Challenges
VII. U.S. Export Packaging Market Overview
VIII. Global Polyethylene Cost Competitiveness Analysis
IX. Global Polyethylene Impact and Conclusions
• Global Supply, Demand and Capacity Forecast and Analysis (2017-2026)
• Global Total Delivered Cost Analysis - By Region
• Comprehensive North American PE Supply Chain Synopsis
• Regional Trade Flow Forecasts
• International Logistics Implications
• U.S. Export Packaging Industry Expansion Analysis
Report Includes:
JUST RELEASED!
www.polyethylenereport.com

U.S. Plastics Production Growth Will Outpace
Demand Growth In Several Products
Polyethylene (PE) and Polypropylene (PP) account for
almost 1/2 of global plastic demand
 PE is generally used for film and packaging
 PP is generally an industrial plastic or fiber
Next four plastics account for next 1/3 of demand
 PVC – pipes, door/window profiles flooring, bottles
 Polystyrene – food packaging, appliances, electronics, construction
 PET – liquid and food containers, clothing fiber, manufacturing
 Polyurethane – Furniture, thermal insulation, elastomers, footwear
Plastics rely heavily on rail transportation as key mode
domestically
North American PE expansion will spur export growth due to
domestic oversupply and global cost competitiveness
 Five new U.S. world scale crackers will be coming on line in next three
years
 U.S. market only needs 1-2 new crackers for demand growth during that
timeframe
 Where will the rest end up? How will it get there?
Global Plastics Demand by Type
Source: American Journal of Polymer Science, January 2016, Hisham A. Maddah
Denotes ethylene-based plastics which
will have highest production growth

Shale Gas Industrial Investment Forecast
As of September 16, 2016
PLG’s experts predict that the North American petrochemical
industry will invest ~$129B in industrial facilities as a result
of shale gas by 2025
 Commissioned since 2011 - $21.7B of investment
 Likely start up by the end of 2019 - $74.8B of investment
 2nd Wave – Likely start-up between 2020 and 2025 - $32.8B of
investment
 Not Likely - $97.8B of announced investment
50
projects
54 projects
Product Category Breakdown
All Announced Industrial Projects in SHIELD
Shale Gas Industrial Investment Forecast
Total Announced Projects - $227B

Additional Logistics Originations From Likely Output
Expansion – Not Including Further Downstream Movements
Source: SHIELD by PLG
Project
Start Year
Truck
Shipments
Annually
Rail
Shipments
Annually
(Carloads)
Railcar Fleet Required
Hopper Tank Total
2015
(planned) 198,000 30,400 1,200 2,100 3,300
2016 96,600 32,300 3,400 1,700 5,100
2017 236,500 68,600 9,600 3,000 12,600
2018 153,800 44,900 5,300 1,500 6,800
2019 24,800 14,700 1,100 1,100 2,200
Total 709,700 190,900 20,600 9,400 30,000
Downstream logistics growth from shale gas industrial expansion not as rapid
or large as CBR/frac…
…But will grow with domestic chemical/plastics growth as these investments
have 30 to 40 year investment horizon

TX, $40B,
39.0 MMTPA
LA, $22B,
20.7 MMTPA
IA, $8B,
5.5 MMTPA
ND, $6B,
4.0 MMTPA
ID, $6B,
4.0 MMTPA
MS, $4B,
0.1 MMTPA
IL, $3B,
3.2 MMTPA
Other, $8B,
14.0 MMTPA
Investment by State with Product Volume
Railroads, States Affected by New Production
Carrier Access
Annual Outbound
Rail Shipments
(Carloads)
UP 97,000
BNSF 29,000
BNSF / UP 20,000
CSX 12,000
BNSF / KCS /
UP 9,000
CN 5,000
KCS 5,000
KCSM (Mexico) 4,000
NS 4,000
UP / CP 4,000
Not Announced 3,000
Total 192,000
Source: SHIELD by PLG

VI. NORTH AMERICAN ENERGY AND LOGISTICS OUTLOOK

Key Points from EIA Long Term Energy Outlook
Natural gas looks to be big winner over the
long term
 Shale gas production process has become incredibly
productive which has made the cost globally competitive
 U.S. will become a net gas exporter due to pipeline growth
to Canada/Mexico and LNG exports
 Marcellus will continue to expand due to it’s
competitiveness and location
 Will support continued plentiful and low cost electricity and
eventually promote LNG/CNG as transportation fuel
Renewables also will have significant growth
with wind and solar drivers for next ~ five years
Oil looks to have limited growth runway due to:
 Low cost Middle East competition
 Slowing demand in the long term with electric vehicle
growth
Coal generation has a less negative story if
CPP does not happen
 Power generation volume from coal could flatten out
around recent volumes
 Will face headwinds from continued coal power plant
retirements over next five years

Winners
Frac Sand
Plastics
Chemicals
LPG
LNG?
Loser
Crude By Rail
Jump Ball
Coal
Fertilizer
U.S. Energy / Petchem Surface Transportation Outlook
Volume Growth Next Five Years
Frac sand
 Has become strategic commodity for fracking process for all three hydrocarbons
 Volume per well will continue to escalate
Plastics / Chemicals
 Domestic and export growth seen over time horizon
LPG – continued steady growth with NGL processing
LNG – via rail is now happening in Alaska; niche opportunities?
Coal
 Volume appears to be maintaining without CCP
 However, additional plant retirements in next five years
 Shale gas will be a formidable competitor from a cost, synergy with renewables
and availability perspective
Fertilizer
 Shale gas enabling fertilizer renaissance over next decade
 Net trade balance will move from 50/50 (dom/import) to 80/20 over that time but
logistics flows will likely flip without significantly more surface transportation
Crude By Rail
• Bakken was always the epicenter – Bakken production faltering
• CBR is not competitive without WTI/Brent differentials
• Western Canada may have some fair intermittent CBR volumes until additional
pipelines are built

Looking Forward To Your Questions!
Thank You!
For follow up questions and information, please contact:
Taylor Robinson
President
PLG Consulting
+1 (508) 982-1319 | trobinson@plgconsulting.com

Plg 2017 trb presentation 01062017 final

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