UP Force Majeure for SPRB Joint Line Ends

Update November 27, 2005

Dear Valued Customers & Partners:

The Southern Powder River Basin Joint Line Force Majeure condition that Union Pacific declared effective on May 11, 2005, ended on November 23 at 6:00 P.M. Central Standard Time.

– Doug Glass

November 18, 2005

Dear Valued Customers and Partners:

Union Pacific intends to lift its SPRB Force Majeure notice on November 24 assuming that BNSF finishes this year’s work on Logan Hill as currently planned. We will confirm the exact date and time that the Force Majeure is lifted.

The embargo to protect service to existing customers declared July 18, 2005, remains in place for the foreseeable future.

The Joint Line still requires extensive repair work to restore its full capacity. The plan for the next year is to undercut 91 miles, rehabilitate 25 turnouts and three bridges, and re-lay 8.4 miles of rail. When BNSF's schedule for 2006 is more definite and the impact on loadings can be calculated, we will share them with you.

Even after the Force Majeure ends, it is still necessary for all stakeholders in the Powder River Basin – receivers, producers and carriers – to work together to maximize loadings. Demand for the rest of 2005 and throughout 2006 is strong. It may exceed the capacity of the supply chain. Based on your declarations, 2006 demand by UP customers alone is more than 18% above the tons that we expect to move this year.

Union Pacific is committed to moving as much SPRB coal as possible and we are continuing to expand coal capacity in many ways. With the expectation that coal revenues will ultimately justify continued investment in our coal franchise, we have completed a number of projects and have more underway. These include:

  • Investing $30 million to extend the third mainline track north of Reno Junction,
  • Installing a Centralized Traffic Control system in Iowa and Nebraska that will improve train flow and velocity,
  • Constructing a third main track for coal train servicing in North Platte, enabling greater throughput and more flexibility to service coal trains,
  • Adding run-through track and fueling capacity in Kansas City to support the busiest coal route on our system,
  • Providing surge capacity by double-tracking at the Gasconade River bridge west of St. Louis to support coal trains moving towards eastern railroads, utilities and river terminals, and
  • Lengthening the Chouteau siding in St. Louis proper to improve coal train handling capacity.

We will also be performing extensive tie and rail renewal programs and undercutting on several of our coal lines so that they can carry your traffic in the future. This work may limit train volume or delay your trains during some periods of heavy maintenance.

The strong demand for both current and future consumption as well as rebuilding inventories will challenge all participants in the supply chain in 2006, and I know we all share the desire to move more SPRB coal in 2006 than ever before. We appreciate your patience during a difficult 2005 and look forward to serving you next year and beyond.

We will continue to share the most accurate and timely information we can provide so that you can better manage your consumption and inventories.

Thanks For Your Support,