Fred Green – President and CEO Janet Weiss - Assistant Vice President Industrialization Kathryn McQuade - Chief Operating Officer Marcella Szel - Senior VP of Marketing and Sales Mike Lambert – Chief Financing Officer Brock Winter - Senior Vice President Operations Brian Grassby - Vice President and Comptroller

Cherylin Radbourne - Scotia Capital Randy Cousins - BMO Capital Markets Thomas Wadewitz - JP Morgan Jacob Bout - CIBC World Market Walter Spracklin - RBC Capital Markets Kenneth Hexter - Merrill Lynch Ed Wolff - Wolff Research [Cecilia Comia – Platz]

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The presenters today will be Fred Green, our President and Chief Executive Officer, Kathryn McQuade, Chief Operating Officer, Marcella Szel, our Senior VP of Marketing and Sales, and Mike Lambert, our Chief Financial Officer. Also joining us on the call today are Brock Winter, Senior VP of Operations and Brian Grassby, VP and controller. Before we get started, let me remind you that this presentation contains forward-looking-information. Actual results may differ materially. We make reference to assumptions used in our guidance and we provide sensitivities to these assumptions in the appendices which can be found in the last section of the presentation material. The risks, uncertainties and other factors that could influence actual results are described on slide one in the press release and in the MBNA filed with Canadian and US Securities Regulators. Please read carefully as these assumptions could change throughout the year. All dollars quoted in the presentation are Canadian unless otherwise stated. This presentation also contains non-GAAP measures. Please read slide two. The slides are available on our website so please follow along. Here then is our President and CEO, Fred Green

Canadian Pacific experienced a challenging second quarter with rising fuel prices significant fuel recovery, economic softness, and Midwest flooding. These challenges overshadowed positive pricing gains and steady progress in operational fluidity. This morning, we updated our guidance to reflect a higher fuel price outlook for the balance of the year and the softening economy. I characterized the fuel issues as temporary with enormous effort underway to speed the transition to a fully responsive program that achieves 100% coverage of fuel expense. Excellent progress is being made across all business groups. The revenue impact of the economic slow down will not be recovered in the short-term. So I have accelerated the initiatives that we introduced at last fall’s Investor Day. I temporarily assigned our Senior Vice President of Operations Brock Winter to a full-time role, to drive expedited delivery of improvement in efficiency, productivity, and yield across the breadth of the Company. Daily comments will be reflected in the Fall Investor Day but the combination of far-better fuel recovery in expedited and broader efficiency deliverables will certainly position us for more successful 2009. With that, I am going to turn it over to the team and come back to wrap up with some closing thoughts. Kathryn, over to you to discuss the ops performance.

In Q2 we achieved improvements in operational fluidity. We focused on improving train speed and terminal dwell while keeping a tight reign on our mobile assets. It was a difficult quarter to manage with falling volume impacting train links and weights on our merchandise trains. We are continuing to adjust for volume changes and I am confident you will see further improvement in our fluidity and efficiency. : Please turn to slide seven. This quarter, saw our train speed improved by 2% and active course online improved by 6%. However, terminal dwelling core miles per day both came in flat. We started off the quarter with a strong recovery from winter and improvements across our entire matrix. But flooding in the US Midwest took our main line out of operations between Minneapolis and Chicago for 20 days and seriously disrupted our network. Typically we operate 20 trains per day on this quarter. In response, we retooled our integrated operating plan, used detours of other railroads and reroute the traffic north of the Great Lakes to keep shipments moving. This line outage and detours increased our active course on line by over 2,000 and negatively impacted our terminal dwell in car miles per day. This added an additional $3 to $4 million in cost. With the outage behind us we are back on our plan and I am confident you will see continued improvement in our fluidity. Turning to slide eight, we clearly have the near term challenges and we are attacking the operational issues associated with the flaw in economy and rising fuel cost. In the quarter, our operating expense, excluding fuel and foreign exchange impact was up by 2%. This was largely driven by higher purchase services at a resource sizing and preparation for the expected volume growth in…

In Q2, we delivered 5% revenue growth before FX. Price, including fuel, was the major driver, offset in weaker volume due to the soft North American economy. Looking at the second half of the year, commodity fundamentals remain solid based on global food and nutrient markets and continued strength in coal. Alberta’s energy oriented economy is also delivering consistent growth. However, with WTI at historic highs and a vulnerable North American Economy, the depths and duration of the current slow down remains a significant uncertainty. I will now review the current quarter and our outlook by market area. All numbers exclude the impact of foreign exchange. We are turning to slide eleven. Grain revenue with a loss closed to 6% due to two factors. First, a 4% decline in car loads compared with 2007. Second, a reduced regulated grain revenue entitlement based on the Canadian Transportation Agency segue 19th position. We are progressing with our legal challenge to this position. However, our Q2 reported grain revenues reflect the reduction of $2.59 a ton. As adjustment is not expected until the New Year, we are modeling this impact through the balance of 2008 and for the second half, remodeling the 2008-2009 crack year at 44.5 million metric tons, slightly below the average. We were encouraged by reports, particularly good conditions in the Southern part of our Canadian draw territory. Turning to coal, we had another solid quarter up 7%. We moved 4% more tonnage for Elk Valley in Q2. Export pricing now reflects the year-over-year gain following our rate increase on April 1, 2008. We continue to model about one-and-a-half million export tons over the 2007 actual volume and we are progressing work on our upcoming Elk Valley contracts renewal at the end of Q1 2009. Oakland Fertilizer Revenue was down…

As always I will walk you through the second quarter and give you an update on our outlook for the remainder of the year. This quarter, we again faced record highs in fuel with WTI up of 80% and crack margins up over 60% versus last year. After including fuel surcharges and delay, the net EPS impact on us was $0.12 in the quarter. Other notable items in the quarter included the flooding in the Midwest and the reduction in our grain revenue entitlement by the CTA. Removing these three impacts from our operating ratio would leave us flat with Q2 2007, an incredible accomplishment considering the challenges we faced. Now, turning to the details, I will start with our income statements on slide 15. For this chart, I will focus my comments on the FX adjusted variances which are highlighted in the far right column. Total revenues were up 4%, while operating expenses decline 10%. As a result, operating income fell 16% with fuel and the economy as primary drivers. Looking below the operating income line we gained $13 million after tax from the DM&E. Interest expense increased 35% consistent with our expectations. And income taxes fell by 36% due to lower earnings and lower tax rates in Canada. Now, on slide 16, I will reconcile our Q2 EPS starting on the left with the price of fuel which was our basic headwind and cost us $0.43 before any revenue offset. Next, the flooding in the Midwest which left our mainline out of service for about 20 days cost us approximately $0.03, the flaw in North American economy continued to impact our volume and mix story as automotive and port products both stop car loads fall by more than10%. Overall, our car loads were down by almost 2% which…

The long-term fundamentals of the rail industry and CP remain very sound and the DM&E continues to perform in line with our expectations. I will not repeat my opening comments but let me reinforce my commitment to overcoming the current obstacles and getting back on track to our sustained pattern of creating value for our share holders. Now, I will turn it over to Luke and we will take some questions.

(Operator Instruction) Your first question comes from Cherylin Radbourne of Scotia Capital. Please go ahead.

: Thanks very much and good morning. I wonder if we could get some commentary from you. We have heard about how the Midwest flooding impacted CP zone operations. Could you just speak to how the DM&E and the IC&E were impacted by the flooding and whether they fully recovered their operations as yet?

Yes. Thank you. DM&E did have some line outages particularly on the ice property. However they are back in service as of several weeks ago and they are still on plan for the financial targets that they set us at the beginning of the year.

Okay. And then just a question with respect to the confidence that you expressed in terms of the bulk volumes in the second half of the year. Can you just speak to what gives you confidence and visibility to those bulk volumes in Q4 particularly?

Sure. This is Marcella speaking. There are several factors that play into a – first, of course to the grain volume which come up with the new crop year. We expect the crop to come off a couple of weeks later than last year but we will be seeing those volumes through the second half particularly in Q4. Some of the issues that we saw with the Potash – for instance the Potash site, there was a significant mine shut down as I have mentioned, this quarter, which was unplanned and that will not, of course, not occur and so we will see more seasonal zed movement of the Potash volumes and we will continue to see the steady increase in the coal side through the second quarter as we planned.

Okay. That is my two. Thanks.

Thank you

Your next question comes from Tom Wadewitz of JP Morgan, please go ahead.

Yes. Good morning. Let us see. Marcella, you referred to Legacy contracts in 2009 and – maybe I have missed some comments right at the beginning of the call but can you elaborate on that. I think you have implied that maybe you get a chance to take off right some of the Legacy contracts earlier than expected or that there might be some benefit in 2009?

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So what – can you give us a few more thoughts on the magnitude of that? Is that kind of, 5% of your book of business or 10% of your book that this Legacy with inadequate fuel recovery?

Now, those Legacy contract were about 10% of the book, Tom, in total.

Okay. Alright and then the second one and I will pass it down to someone else. I wondered if you could, if Fred maybe comment a little more -- the outlook in second half seems pretty muted. I mean you are talking about bulk volumes being better and I think, we would say, all of the North American Railroads should be the least economically sensitive, and yet the outlook for second half seems pretty muted. So, is there, you are just trying to get guidance so it could bit more conservative or is the expense performances worse than you expect. I guess it is a little surprising to me that you would not have somewhat more constructive outlook even in fourth quarter given that the bulk outlook still seems to be pretty good.

We had to make an evaluation based on what we see happening outside the door and when we look at the lumber and panel sector, where volumes are down 39% as of this morning and when we look at the auto sector where there is – I do not know how that is going to unfold but it is clearly uncertain as to what plants will remain open and if so what the distribution patterns will be. Those are the two major sectors that we feel. Now, if I can have just maybe a broader perspective it would simply be that the US economy has been through a very tough time. The Canadian economy has been less affected. There is clearly a correlation between the demand in the United States and the activity in Canada to supply that demand. So, our belief is that there is no reason to believe at this point in time that we are going to see a resurgence of the economy in the second half and as a consequence, I don’t think I would call it conservative, I would simply say that we think it is realistic and if there is great news. If the economy grows by 2% in the US instead of maybe 1% or whatever the number maybe, then that is going to be great news for us because we have got the capability and the capacity and the resources that will enable us to leverage that and there would be more cars on the train. But I don’t want to get into a routine hoping that the economy will pick up and building a business case around that, so we are not doing that. What we are doing is saying, we accept it for what it looks like outside the door, if it gets better, great news. But we need to plan for the possibility to sustain or slightly deteriorate in that case we need to be focused on efficiency, efficiency, and when we are done with that we will focus on more efficiency.

:

Okay. That is helpful to see I guess it is a lot more the fuel than the economy sensitivity. Okay. Thank you for the time.

Thanks, Tom.

(Operator Instructions) Your next question comes from Randy Cousins of BMO Capital Markets. Please go ahead. Mr. Cousins, your line is open.

Good morning.

Hi Randy.

With reference to the DM&E, you guys basically indicated, I think this is supposed to be accretive after financing cost. But if I look at the results, year-to-date, you have got $24 million worth of contribution on net basis and if I just annualize that, that is like $48 for the full year on a $1.5 billion investment that does not look particularly accretive. Are you guys looking for just an absolutely bang-up second half or how are you supposed to think about sort of the contribution from the DM&E in the second half?

:

So, it is still $0.15 to $0.17 for the year? Could you give us some sense as to what you estimate the accretion to have been through the first six months then?

The first six months, I think we sized up on each on the quarterly calls. The last quarter, if memory serves, about $0.03 and this quarter about$0.04.

Okay. So, you guys are looking for a good bang on the second half?

That is right.

And then with reference to the fuel issue, let us look to 2009 because 2008 is a write off. You said that $0.30 is the hit. Of that $0.30 how much can you get back in 2009 if fuel prices just stabilize where they are today?

If they stabilize at where they are today I am sure we will have some joy in the second half. I do not know if you have been watching today. So, our assumption is 140 net. I think last I look it was below 130. So, let me at least mention that to you. But if it stabilizes at 140, let us call it, and then the lag impact next year will be nothing. So, if it stays where we have assumed this year, we will get no joy from the lag next year nor will we have an expense. But as both Marcella and Fred mentioned to you, we are working to get better recovery and better coverage on our fuel and so the impact next year could be significant.

But in terms of the $0.30, you said that the $0.30 is the reduction in your guidance, $0.30 of it is in fuel. Can you give us some sense as to looking into 2009, how much of that $0.30 you can get back from the customers by adjusting the fuel surcharge systems and just simply allowing the lag to catch up to the reality where pricing is?

As of – let me remind you. The sensitivity we put out there last quarter and what we are reaffirming this quarter, in terms of our recovery. We are recovering, when you exclude the impact of lag. We are recovering in the mid ‘80s in terms of percentages. By year end, essentially every contract that we have will have some sort of fuel recovery built into it. And for modeling purposes next year, I think on average you could still model about 90% coverage but the coverage is still imperfect in the sense that by year-end we are going to have 50% covered on crack and the balance on some sort of WTI metric and by next year are hoping to have 75% coverage on crack and of course the balance on WTI. So, for this year we have modeling that for every $2 WTI impact cost us a penny. Next year, that will go down and the lag of course, will affect everybody.

Okay. Great. Thank you.

Your next question comes from Jacob Bout of CIBC World Market. Please go ahead.

Good morning. The question on the fertilizer and sulfur division, I think you said previously here that revenues will be up by about 10% by year end. Have you factored in anything for the Potash strike at the three of Potash Corps’ mine and then does higher potash pricing playing at all for the improvement that you are expecting for the second half? What I am trying to gauge here is just your leverage here to Potash pricing.

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Okay. And then my second question, just more of a general question. As far as the switch and freight volumes from truck to rail, what has been the impact that you have seen to date on your book of business?

We have been seeing some modest change moving from truck to rail in the shorter haul markets, Jacob. A lot of that is massed by the general economic environment because while that short-haul environment is also affected by the economy, the move is between the cross boards or the move’s particularly Canada and United States but we have been seeing some migration to rail.

Can you quantify what you think you are picking up as far as market share is?

You know, Jacob it is really tough for me to quantify just because we have also got the impact of the economy on those same sectors so it is very tough for me to do that.

Hey, Jacob. It is Fred. One of the things that is worth noting is that, the more sustained, the higher fuel prices are the greater the likelihood that people will make those kinds of choices to do a modal shift. People are hesitant to kind of abandon their supplier of choice which is sort we may have been trucks, for instance, the medium hall. But if it becomes apparent that the price of fuel is going to be sustained at a hundred dollars plus. I think after a couple of quarters of that experience, the decision makers in the shipping community are going to be much more prepared to make those leaps. Because there is a leap of faith to give up on our past supplier and move to different mode and I believe you will start to see that manifest itself as we go through the next couple of quarters.

Okay. Thank you.

Your next question comes from Walter Spracklin of RBC Capital Markets. Please go ahead.

Thanks very much. Good morning.

Good morning.

The first question I guess would be on your Canpotex announcement on the new supply. There was a great, great news item there almost doubling that. We are looking at Neptune and just wondering where yours is a Brownfield rather than any Greenfield project. Have you had any talks with Canpotex as to when they will be looking to roll that out and when you might see some impact from that and how long that time frame would be for that project and ability the Canpotex what you expect the Canpotex spend will be?

I would be happy to address that – let me just refresh you on the Canpotex side and that is, under the contract that we have with Canpotex today, they have committed 100% of their volumes to Canadian Pacific through to June of 2012. So we got a full four years of 100% of their volume and we currently move those export volumes to the ports of Vancouver and Portland. Now in terms of the volumes that we have moved, again to give you some perspective of the history of the Canpotex, in 2004 we moved about 8 million metric tons and in 2008 we expect to move about 10.5 million metric tons. So, over a four-year period we have seen a 30% bulk in the volumes. And again, we have got four more years in the contract to go through the ports of Vancouver and Portland where they do have capacity to grow. Their expected Brownfield, their announcement around their Vancouver expansion, if indeed as you say very exciting news, and we have been working with them and in discussion with them on how we can continue to position Vancouver and Portland for the majority of their volumes. Their announcement indicated that they expected to see the port in place by about 2012.

Okay. What kind of CapEx would it be for you to get set up for that Brownfield expansion?

I do not think, Walter at this point in time that there is necessarily any capital requirement with regard to the Brownfield expansion. I never reject that possibility I guess if there is a business case to be had but our future interest in particular would be to ensure that we have sufficient capacity with regards to local motors and with regard to track capacity between the ports and the source of the product. So, we believe that it is very early. I mean, four years to run on the contract. So, we will get into dialogue, we are in discussion today and what comes out of that remains to be seen but I will not speculate other than making sure that with regard to the main line we will be there with capacity if that is what needed of us.

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Walter, it is Mike. I will take the first part of that just to level set everybody on the numbers. In terms of our FTE, the average is up 345 and the period end base was up 687. If you think back a year, our conference call a year ago, I saw it stop the impact of the strike and I said last year the impact on our average was 400 FTEs and on a quarter end balance it is 784 so we still have not come up to those levels. But essentially be argued that our FTEs on expansion basis and capital basis, we are essentially flat, up until at the end of the first quarter we have always had productivity gains. This quarter was very difficult to get productivity gains just because the volumes did not come in as we have planned. And maybe I will turn it over to Kathryn to get some colors.

Yes, Walter. This is Kathryn. Yes, I think I have mentioned in my speech that we did have some re-sourcing that we are beginning to do in this quarter in anticipation of our fourth quarter heavy bulk. So, you should see productivity improvement in the fourth quarter when the heavier volumes come in.

Okay. That is great. Thank you very much.

Thank you.

Your next question comes from Bill MacKenzie of TD Newcrest. Please go ahead.

Thank you, Mike just a qualification on the guidance, so much to understand that it is right, that you guys had have about $0.13 of tax benefits year to date for the reevaluation of your income tax balance sheet and that $0.13 is included in the range. Is that correct?

Yes, it is, Bill. But in the first quarter in terms of our guidance in the first quarter we had some of that benefit already built in. You may recall that the BC tax rate was lower in the first quarter. That helped us in the first quarter. And the second quarter of course we had the Manitoba, tax benefits. That was a little bit less and so that is why I am saying that the economy upset somewhat by a reduced tax rate cost us a dime.

: Okay. And then the tax guidance of 26% to 27% for the year I guess includes that. So, next year, would you expect the tax rates to get back to that original guidance range that you are expecting prior to these benefits?

Yes, it is the short answer. The longer answer there is a couple of things. The two tax rate reduction B.C and Manitoba helped us by about 1.5% to 2%. That is a one-timer and the DM&E has a higher tax rate and so that will also have some upward pressure in terms of our tax rate. But the Canadian rates are coming down; it will be an off set. So, our original guidance this year is actually good for your model next year.

Okay. Great and just going back to the fuel recovery program as much in that roughly 80% of your business is covered by fuel recovery program covered by fuel recovery program and you expect that to get up in 90% next year. Just to be clear on that, is that 80% -- mid 80% of your business has some form of fuel recovery or 85% has got full recovery. So, for example, if you have a contract that might be tied to WTI but had a cap in it, would you include the full revenue benefit or just the portion that you are covering on or for example if you have contracts that are tied to CPI you might not get the full fuel recovery. Just help me understand that 85% and 90% number, whether that is based on customers or actual fuel exposure.

: . :

Bill I will answer that. What I think you are getting at which is for every incremental dollar of fuel, how much do we get back in terms of fuel revenue? When you take the light impact both at current assumed WTI and assumed crack margins we are in the mid ‘80s in terms in that kind of recovery. I think that is essentially what you are trying to get at?

: Yes

:

Okay Great. That was helpful and just one follow up on that if I could. How much of that is based on monthly recovery programs versus any programs for example, cane regulated grain at price resets on one thing, how much of that mix of business would be monthly versus the annual resets?

Obviously you have hit one of the key areas Bill which is our regulated grain area but most of the book raps the coverage is around monthly program which, of course lags a month. We do have the Legacy contract which we spoke about earlier which represent about 10% of the book and then you got your regulated grain on top of that.

Thank very much

You next question comes from David Newman of National Bank Financial. Please go ahead.

: Good morning folks.

Good morning David.

He has mentioned in the – Bill said you are looking at a rigorous process to improve productivity efficiency in yield. Any specific areas that you are looking to address and any measures out there you are looking to take?

David, it would be a little premature with regards to the quantification. My commitment is that by the time we present in the fall, you will get a very definitive quantification. But you will recall that in the investor presentation last fall we introduced a series of initiatives that I would call preliminary. We had IOP and others that were real progressed, well quantified and we gave you either EPS or opening income benefits that we thought come of those. But we also introduced a few others. So, one of which was [Frances] finance ahead of the curve which was a complete reevaluation of the finance department, its processes, its efficiency, where technology could help us. We introduced engineering excellence. We believe as well we learned some things during the strike last year about how to get more off haul at phase time, work time on the track to make our people more productive by changing processes inside. We introduced another evaluation of how to be more efficient in the yard and we introduced lean approaches within the yards which were over and above the earlier work we have done in some of the yards. We spoke about railway of the future and how we though there were whole series of items with regard to inspection technologies, ECP breakings, fuel efficiencies, to things like trip-off the mines of other vehicles. And we also spoke about in-train repairs and how we can progress and push that harder and faster. So, those are examples, the point that I am trying to make David is that, culturally, I think my assessment is that while we are doing good work, the speed between concept and generation of benefits to our shareholders has been to slow and whether it is in operations finance yield or administration within this Company we need to elevate the speed and expedite the process between concepts and generating benefits for our shareholders. So, the initiative that we are pursuing and that Brock is assigned to full time, across the breadth of this Company is to shrink that timeframe and generate benefits. I hope and believe we will see some early benefits in the last half of the year but my primary focus, very candidly is to make sure we get ourselves in great shape so that we can really get a full year run rate of those types of efficiencies across the full year of 2009.

So, it is Brock the line personnel and working in a capacity to really do operational, I know for lack of a better word,, audit and kind of new level of diligence on it. Is that the take away?

The way you phrased it almost sound administrative but what I want you to understand is that Brock and I, together, a number of years ago worked on several major initiatives and we will be taking the same rigorous process approach with intensity and with deliverables. So, there is not a lot of audit and overview, it is more action oriented.

Okay.

I think we have done a lot of the research now it is time to bring them to life.

And the second question with the operation 1 the West end quarter you are putting some initiatives in place in election quarter obviously you are looking for a very robust look in the second half and into Q4 on the bulk side. Are there any measures that you need to take to handle the increased level of volume to ensure that the network is fluid?

We feel confident that we have adequate capacity in terms of our mobile assets, in terms of our crews and in terms of track on the Western quarter. I think I told you in the past, we have been powering up our coal trains. We have powered up our potash trains. We have also mentioned the longer trains, potash trains as well, which will add capacity. We have ECP breaking that for two train steps that we are implementing and in terms of crews and locomotives we are still very comfortable to handle the bulk that Marcella is projecting for the fourth quarter.

Is there a number that you can put on in terms of storage capacity utilization that you are at right now and what you might scale up to, in Q4 by taking various initiatives?

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So, you do not see phase 2 western quarter expansion in the next several years, Fred?

I think the secret is that if we can predict with comfort and certainty what the coal company wants to do, then we could consider that. I do not know what the coal company wants to do with regard to volumes so that is a bit of an unfortunate situation. So, we cannot go out and make a major expansion and then hope somebody ship things.

Right

What we have been doing is being much more selective in places where we got good long term relationships and contracts, potash is a good example, and we are putting the capacity in place – in places where we cannot get priority or certainty from our shippers such as the coal situation. We need to keep our capacity very tight and if at some point in time we can get commitments from those shippers with regard to their intentions and a price that makes sense to us. We create the capacity.

Excellent. Thanks folks.

Thank you

Your next question comes from Kenneth Hexter of Merrill Lynch. Please go ahead.

: Great. I just want to go over, Mike, some of the numbers. If we go back to last April at the end of last quarter when you lowered the target of 440 to 460 from 465 to 480, that was a $0.20 to $0.25 reduction and you would say it is because of the CTA adjustment on the car rental cost. So, I guess that meant about $0.05 to $0.06 per quarter. If I take a look at this quarter with, as much as yields were down, it seems to be about a $25 million hit to revenues or about $0.10 for the quarter. Am I looking at that the right way where yield is hit in a bigger way than you would have been anticipated on the grain side or is there something else within those numbers?

No Ken, I think that we did quantify the CTA adjustment as a nickel. But it was a nickel to our original outlook. It was only $0.05 or less than $0.05 a quarter. It was only $0.05. So, no we have not been surprised by the amount and that is not what is causing us to reduce our guidance right now. It is, of the $0.40 reduction, it is $0.30 related to fuel, $0.20 of that is just in the price and $0.10 is on the lay.

But I am not arguing the reaction this quarter. I fully understand what you were saying about fuel. I am going back to last quarter when you have lowered last quarter. I though that you have said in the first quarter conference call that the reduction was due to the CTA. Was it also due to other things?

Yes. We only reduced the guidance by a nickel related to the CTA.

So, of the reduction only a nickel was due to CTA in the first quarter?

Yes, that is right.

So, that is what I am at. Then it would seem like the actual impact it seemed like even a little large in there, almost twice as big as that then? If I go between first quarter and second quarter revenue impact or even what a normalized gross rate would have been on a year-over-year basis if you would have yields flat.

But Kenneth – but we are not sure we understand the question you are asking specifically about grain, are you?

I am. I am. Yes.

Okay. Sorry. That is maybe …

Yes. So just to give you a round numbers, grain was a nickel, fuel was about 12 and a half volume with around 12 and a half.

I think Ken’s question is with regard to grain, when he looks at the outlook or the numbers on the Q2, he was seeing like a big grain miss and Ken that is largely volume. There is the grain haircut, we call [Inaudible] haircut. But what you are really seeing with regards to the reduction in grain activity is the fact that the prices were so high that big farmers shipped, I will not say pre-ship but the advanced ship in an awful lot of product and now we are basically faced with about 50% to 60% of our normal volumes during July and August.

That was helpful, Fred. That was actually the second part of my question was why volumes were down but what I did on the math is I held volumes flat with year-over-year and then using kind of a flat sequential pricing or even flat year-over-year pricing. It still seemed that revenues were down about $25 million which seems to be about $0.10 a quarter so it seem like the pricing was also maybe bigger than the pricing reduction of a 7% decline year-over-year. I am sorry 6%.

Let me quantify the haircut for you. The haircut in dollars is about $11 million a quarter and we had planned for some of that and that is why we provide the guidance only by $0.05 in total.

Okay

Yes. So, I am sorry Ken that was the missing part.

The quantification of the hit is quite large but we have planned for that in our original plan when you saw the nickel, the nickel only reflected the differential that we were surprised by.

:

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It is 8% index increase.

So, last year -259 a ton plus the 8% price increase. That is as simple as that. That we are accruing that in the expectation that we have to take it but if we win our case then obviously that will be a good news story.

And then it comes back

Okay. And I just want to wrap up on that that subject and you were talking about the 44.5 million metric tons market as your outlook for the next crop year and that starts when?

August 1, 2008.

August 1, 2008. Okay. So, with the new contract. Okay. Thanks for the clarifications.

Thanks, Ken.

Your next question comes from Ed Wolff of Wolff Research. Please go ahead.

: Yes. Hey guys. You know, it has been a long call. I will get you off line. Thanks.

Okay. Thanks, Ed.

Your next question is a follow up from Randy Cousins of BMO Capital Markets. Please go ahead.

One quick question. Your real estate or other income was down. Can you give us some guidance for the second half?

Yes. Randy, if you may recall in my commentary in the first quarter, I had alerted everyone that the second quarter would be lower than last year. Essentially, we will be down for the total of the year modeling – it is just the impact of this quarter, for the balance of the year we should be flat.

Okay. Thank you.

Your next question comes from [Cecilia Comia of Platz]. Please go ahead. [Cecilia Comia – Platz]: Good morning. There have been reports that more US coals are moving to Asia because of the unprecedented rise in coal prices and this US coals are said to be railed some as far as Utah to the rest terminal in Canada. And it has been stated in this webcast that your Company cannot predict what coal companies want but could you just guide us about your Company’s plan of action if this development continues and how it can benefit from it in light of D&E?

Cecilia, at this point in time, of course, we do not source any US coal. We occasionally will terminate some coal at facilities on the current CP or should there be some on the DM&E. So, the answer is that, until such time that we consider whether we ever want to be a railway that sources the Powder River we are not at that point in our decision making at this time. There is no impact whatsoever on either the DM&E or on the Canadian Pacific franchise.

My second question. Your Company’s move – as has been said – 7% more Elk Valley coal in Q2 2008 is this largely a result of increased demand for the material in Asia. Do you expect to move more tonnage for Elk Valley and for other Canadian Coal producers?

:

But to say for the second half, yes, we do expect good strong demand. It is within the range that we had foretold the streets cannot remember the exact numbers if it is 21 or 21.5 million tons total for the year. We are pretty much right on target for what we thought would happen and there is no reason to believe that will be different unless Elk valley shares that with the market place and they will share it with us at the same time.

Twenty one to 21.5 is this for the second half or it is for the whole year?

I believe that was full year, absolutely full year but I don’t remember the exact number.

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And ma’am, that is just for Elk Valley.

Yes

What about for the other Canadian coal producers?

We are not going to make a …

Metallurgical coal?

We are not involved with anybody … …except Elk Valley.

Okay. Thank you.

Thank you.

This concludes the question-and-answer-session. Mr. Green, please continue.

Well, thank you everybody for spending time with us. We look forward to getting together again at the quarter and Luke, thank you for all your help.