SPRB Updates - 2006
Update: December 22, 2006
2006 Year-End Review
Dear Valued Customer:
As 2006 comes to a close, I'm taking this opportunity to report on the state of Union Pacific's coal operations.
Southern Powder River Basin
Union Pacific is on pace to move 12,858 trains of SPRB coal in 2006, a 7.3% increase over 2005. Thanks to efforts by our
The Joint Line is projected to move 23,875 trains in 2006, an 8.0% increase over 2005. However, total Joint Line tonnage is on track to increase 8.7%. We have increased our momentum this month and have enjoyed 37.4 trains per day during the 11-day period ending
Colorado/Utah
One
Despite the setbacks earlier this year, we expect strong performance from Colorado/Utah coal producers the rest of December and into 2007. Since the beginning of the month, we have averaged 12.3 trains per day through
Going Forward
While every year brings its own challenges to the coal business, I am proud to say that we have made significant progress in 2006. The 18-mile Joint Line capacity expansion between Reno Junction and Nacco Junction was completed in early November. The mines have added four new train landing spots, which effectively raises the capacity of the Joint Line to over 375 million tons annually, according to CANAC, the capacity planning consultant used by BNSF and UPRR. Work has already begun on the next phase of capacity, building a fourth main line on Logan Hill (located south of the mines) and a third main line north of Reno Junction. The combined investment in the Joint Line projects will be over $250 million by the two railroads. These two rail projects, when coupled with the addition of 14 landing spots by the mines, will raise the capacity of the Joint Line to over 450 million tons annually upon completion.
We're adding capacity on and near the Yoder Branch in southeast
You may also have heard about our exciting new program in
Another example of our focus on productivity is a new coal train planning and advance notification system. When complete, this new system will automatically notify and update customers of train arrivals, improving the coordination of train handling between utilities and Union Pacific. Over the next several years, it will be more critical than ever for the railroads, mines and the utilities that use Colorado/Utah and SPRB coal to work together to maximize the throughput of the entire supply chain. We all know that the coal supply chain is only as strong as the weakest link.
As the year-end approaches, the Edison Electric Institute and others are reporting the highest coal stockpiles in five years. EIA anticipates coal inventories reaching 129.8 million tons, nearly a 19% increase during 2006. Warmer-than-normal temperatures so far this winter may cause inventories to rise even further. Despite the good news on inventories, we recognize that not all customers are satisfied with their inventory levels. And we also continue to enjoy high demand from our existing customers. Accordingly, we are getting ready to move another record volume year of coal in 2007.
As I close, Union Pacific continues to invest heavily in the coal business and deliver record quantities of coal. We look forward to 2007 and beyond, as we prepare for what may be one of the strongest and most robust periods of growth in the
Merry Christmas and Happy Holidays to all of you, your families and friends.
Yours very truly,
Doug Glass
Vice President & General Manager-Energy
Union Pacific Railroad
Previous Updates
Update: October 13, 2006
SPRB Joint Line Performance for September 2006
Union Pacific loaded 1,029 trains in the SPRB during the month of September, an average of 34.3 trains per day. We loaded 43 more trains than in September 2005, when we averaged 32.9 trains per day. Last year's loadings were impacted by the impairment of the Joint Line and Hurricane Rita.
Joint Line loadings for September averaged 64.5 trains per day, compared to 60.5 in September 2005. Joint Line loadings for the first nine months of 2006 were 17,736 compared to 16,563 trains during the same period in 2005, an increase of 1,173 trains or 7 percent.
Colorado/Utah Performance for September 2006
Union Pacific loaded 344 trains in Colorado and Utah during September, for an average of 11.5 per day. This was accomplished while three mines had poor quality coal production and or mechanical issues which reduced their loadings throughout the month. This compares with 355 trains loaded in September 2005, or an average of 11.8 trains per day. During the month of October, two mines on the North Fork branch in Colorado have longwall moves scheduled. Due to year-to-date coal production issues creating lower than normal stockpiles of Colorado coal at the mine load outs, normal rail shipments do not seem possible during October. Rail shipments could be impacted by as much as one train per day. Normally 4.5-5.0 trains per day would be our NCTA target, during October the NCTA target for the North Fork branch is 3.5 trains per day.
Issues Impacting SPRB Performance
During September, UP experienced 173 missed loading opportunities in SPRB. The breakdown attributes 82 to the Joint Line, 53 to the Union Pacific, 35 to mines, and 3 to miscellaneous causes. These were offset with 32 extra loadings during the month. A variety of incidents on the Joint Line disrupted service and reduced train loadings. These include a heavy maintenance schedule, trains stalling or breaking-in-two, signal outages, and repeated failures of a switch at MP 72.5. We have been in constant communication with BNSF about the flow of UP trains onto and off the Joint Line in order to maximize loadings each day. Mines encountered various planned and unplanned mechanical breakdowns and inspections by the Mine Safety and Health Administration (MSHA), resulting in missed loading opportunities for the mines.
Joint Line Capacity
During September, work continued on the installation of signals and crossovers between tracks on the new third main between Reno and Milepost 58 on the Joint Line. This project is scheduled to be completed in late October.
4th Quarter Outlook
Union Pacific remains focused on moving as much coal as possible. We sent additional operating and mechanical personnel to the Joint Line to enhance the ability to recover after train failures occur.
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We are also starting to see benefit of one of our continuous improvement initiatives at our North Platte Service Unit. Inspired by NASCAR pit crews, teams of Union Pacific personnel swarm to accomplish maintenance on locomotives, repairs or spare equipment requests on run-thru coal trains. The In-Train repairs and express lube type service has decreased the time the coal trains spend in the North Platte Terminal. As you can see by this chart, coal train dwell YTD 2006 has improved from 2004-2005 levels and dwell has continued to improve during 2006.
Heavy maintenance scheduled for October will continue to challenge the number of loadings and could impair cycle times.
Update: August 4, 2006
SPRB Joint Line Performance for July 2006
Union Pacific loaded 1,101 trains in the SPRB during the month of July, an average of 35.5 trains per day and an all-time record high for any July. We loaded 73 more trains than in July 2005, when we averaged 33.2 trains per day. Last year’s loadings were impacted by the impairment of the Joint Line. Another all-time record high for Union Pacific SPRB loadings was set for the first seven months of 2006, with 7,484 trains. This was 403 trains greater than the same period in 2005.
Joint Line loadings for July averaged 66.0 trains per day, compared to 61.2 in July 2005. Joint Line loadings for the first seven months of 2006 were 13,787 compared to 12,936 trains during the same period in 2005, an increase of 851 trains.
Colorado/Utah Performance for July 2006
In Colorado/Utah, UP loaded 350 trains during July, for an average of 11.3 per day. This was accomplished while three mines had mechanical or maintenance issues which reduced their loadings. This compares with 360 trains loaded in July 2005, or an average of 11.6 trains per day. Most Colorado/Utah mines are forecasting normal production for August.
Other Issues Impacting Performance
Several incidents occurred in recent weeks which impacted train loadings and service. During July, 50 SPRB loadings were missed due to various mechanical issues at the mines. On July 17, sun kinks in the rail, caused by high temperatures, resulted in a 29-car derailment in Kansas, which delayed Colorado coal trains. On July 19, a severe storm in St. Louis caused a 42-car derailment on the MacArthur Bridge, which delayed coal trains in the St. Louis corridor
Joint Line Capacity
Work continues on installation of signals and crossovers between tracks on the new third main between Reno and Milepost 58 on the Joint Line. This project is scheduled to be completed in September. Undercutting on the Joint Line ended in mid-July. So far in 2006, 42 miles have been undercut, extending south of Antelope Mine on various segments of Tracks 1, 2 and 3. The undercutter is scheduled to return in October. Undercutting remains to be done north of Shawnee Junction, mostly on Track 3, and between North Antelope and Reno on Track 1. Meanwhile, rehabilitation and replacement of switches will take place.
Update: July 18, 2006
SPRB Joint Line Performance for June 2006
Union Pacific loaded 1,079 trains in the SPRB during the month of June, an average of 36.0 trains per day and an all-time high record for any June. This compares to May 2006, when we loaded 1,090 trains or 35.2 trains per day. We loaded 154 more trains than in June 2005, when we averaged 30.8 trains per day. Last year’s loadings were impacted by the impairment of the Joint Line in the wake of a snowstorm, two major derailments and widespread slow-orders. Another all-time record high for Union Pacific SPRB loadings was set for the first half of 2006, with 6,383 trains. This was 330 trains greater than 2005, which held the previous record for first-half coal loadings.
Joint Line loadings for June averaged 66.5 trains per day, compared to 58.5 in June 2005. This broke the previous record of 65.8 trains per day, set in February 2005. Joint Line loadings for the first six months of 2006 were 11,742 compared to 11,039 trains during the same period in 2005, an increase of 703 trains.
Colorado/Utah Performance for June 2006
In Colorado/Utah, UP loaded 340 trains during June, for an average of 11.3 per day. This was accomplished while one of the Craig Branch mines was undergoing start-up issues resulting from a longwall move which reduced their loadings by about a train per day. This compares with 367 trains loaded in June 2005, or an average of 12.2 trains per day. Most Colorado/Utah mines are forecasting normal production for July.
Joint Line Capacity
Work continues on installation of signals and crossovers between tracks on the new third main between Reno and Milepost 58 on the Joint Line. This project is scheduled to be completed in September. Undercutting continued on the Joint Line. So far in 2006, 42 miles have been undercut, extending south of Antelope Mine on various segments of Tracks 1, 2 and 3. The undercutter is moving to a previously scheduled project in Montana, but is scheduled to return in October. Undercutting remains to be done north of Shawnee Junction, mostly on Track 3, and between North Antelope and Reno on Track 1. Meanwhile, rehabilitation and replacement of switches will take place.
Update: June 2, 2006
SPRB Joint Line Performance for May 2006
Union Pacific loaded 1,090 trains in the SPRB during the month of May, an average of 35.2 trains per day and the second-highest level in the past 14 months. This compares to April 2006, when we loaded 1,020 trains or 34.0 trains per day. We loaded 205 more trains than in May 2005, when we averaged 28.5 trains per day. Last year’s loadings were impacted by a snowstorm, two major derailments and the impairment of the Joint Line.
Joint Line loadings for May averaged 65.4 trains per day, compared to 53.5 in May 2005. Joint Line loadings for the first five months of 2006 were 9,748 trains, compared to 9,284 trains during the same period in 2005.
Colorado/Utah Performance for May 2006
In Colorado/Utah, Union Pacific loaded 347 trains during May, the most in six months, for an average of 11.2 trains per day. This was accomplished while one of the Craig Branch mines was undergoing a longwall move that reduced its loadings by one train per day. Union Pacific set a record in May for trains off the North Fork branch, with 160 coal trains loaded.
Joint Line Capacity
On Tuesday, May 16, we began operating trains over about 18 miles of third main line track between Reno and Milepost 58 on the Joint Line. The third main track is providing additional capacity on the Joint Line while work on crossovers between tracks and signal cutovers continues. Full operations will begin in September, when all of the crossovers and signal work has been completed.
Future
Union Pacific is responding to the increased demand for coal and coal transportation by investing $650 million in the Joint Line, infrastructure and operations supporting the SPRB coal business in 2005.
On May 8, 2006, Union Pacific and BNSF announced plans to begin another significant capacity expansion on the jointly owned rail line serving the SPRB. Both railroads have agreed on preliminary work to construct more than 40 miles of third and fourth main line tracks, at a cost of about $100 million over the next two years, to meet current and future forecasted demand for Wyoming’s Powder River Basin coal.
This project is in addition to the construction of 14 miles of a third main line track completed in Spring 2005 and an additional 18 miles of the third main line recently placed in service and to be fully operational in September 2006. The total cost of this nearly 75-mile capacity expansion will be about $200 million, which is split between the line’s two owners, Union Pacific and BNSF. (Read the complete press release.)
Union Pacific is also progressing other capacity projects, including a third run-through track in North Platte, and double-tracking the Gasconade bridge in Missouri, which is a primary coal-hauling route. Union Pacific is installing additional Centralized Traffic Control along its lines across Iowa, and making interchange improvements with eastern connections at East St. Louis. The company also is completing the Marysville, Kansas, bypass project which will allow us to meter up to 100 trains per day through Marysville, and eliminate all road crossings. In Colorado, capacity projects include the Winter Park Grade separation, and sidings at Yarmony and Tolland, all designed to increase capacity and coal-delivery reliability.
UPDATE: March 8, 2006
Dear Valued Customers:
This is a report on a number of developments in our coal operations, including our progress on Coal Dust Mitigation studies and capital spending plans for our railroad.
Southern Powder River Basin
January’s performance on Southern Powder River Basin coal set a record for train loadings on Union Pacific Railroad and established a strong start to the beginning of 2006. As reported earlier, we finished January with 1,123 trains for an average of 36.23 trains per day, 2.2 trains per day stronger than January 2005. This level was achieved despite the train-impact associated with implementation of BNSF’s new Train Management Dispatch System (TMDS) on January 4, 2006.
February began and ended well, but weather-related problems reduced loadings for a week in the middle. During the first 14 days of February we averaged 37.29 trains per day or one-third train per day higher than the average for February 2005. On Wednesday, February 15, 2006, near-record cold temperatures hit northeastern Wyoming and Nebraska, with temperatures at Gillette, Wyoming, dropping to minus 18 degrees by that weekend. These extreme temperatures caused mechanical and operational problems for the both the railroads and mines.
As a result of the weather, coal and train production declined and the Joint Line generated only 51.8 trains per day, with UPRR averaging 27.8 trains per day between February 15 and February 20. From February 21-28, train loadings climbed back to an average 36.6 per day for UPRR and 66 for the Joint Line. Storm preparation activities on Union Pacific’s North Platte Subdivision paid dividends in a fairly rapid recovery of these operations.
Colorado/Utah
In late December 2005 two western Colorado mines temporarily curtailed operations. One suffered a roof collapse and the other encountered heat and gas problems. As a result, our North Fork Branch coal operations have been reduced by 3.6 trains per day – a situation that is expected to continue until sometime in late March. These unplanned events have not only impacted the mining companies and the railroad, but also the utilities. Thanks to a lot of hard work on behalf of the mines and UPRR, we have been able to make up some of the shortfall with increased loadings off the Craig Branch, as well as in Utah.
Forecasted Coal Supply/Demand
Seven years ago a collaborative effort among the western railroads, the mines and the utilities developed a monthly forecasting system for coal. The process is a disciplined method for matching coal production by month with utility and industrial user demand, managed under the sponsorship of the National Coal Transportation Association. Both UPRR and BNSF utilize the forecast for short term planning, as well as for train "slotting" by mine and customer on a daily basis.
As demand for SPRB’s low-sulfur coal has increased to record levels and capacity becomes constrained, this seven-year old system needs refinement. We are working with BNSF and the mines to make further improvements to the forecasting process to insure that mine production reflects a level of output that can be achieved day-in and day-out and is properly aligned with rail operations, so that resources and delivery expectations can be managed more accurately.
Missed Loading Opportunities
As you all know, the entire coal supply chain must operate as a cohesive transportation and distribution system if we are all to succeed in delivering as much coal as possible in 2006. Union Pacific Railroad measures missed train loadings by cause as a means of identifying opportunities to improve coal deliveries. During the month of February, Union Pacific Railroad experienced a total of 110 missed loading opportunities. Several factors contributed to missed trains in February, including severe cold weather, unplanned equipment breakdowns at the mines, minor derailments at the loading sites due to coal spills, scheduled mine maintenance, and late arrivals at the mines caused by train congestion on the Joint Line.
Coal Dust Mitigation Analysis
With the goal of eliminating a major threat to track integrity, three teams are evaluating methods to reduce the amount of coal dust deposited in the Joint Line roadbed.
Through a collaborative effort with the National Coal Transportation Association, the mines and the BNSF, an improved coal-loading chute has been designed. The new chute distributes coal more evenly and produces a load with a lower profile above the side sills of the railcar. Preliminary test results have demonstrated a 30-60% reduction in coal dust blowing off the top of the car during the early portion of the route. The results are so encouraging that all of the mines have agreed to adopt the new design, which will be implemented over the next few months and fully completed by the end of the year. More analysis will be necessary to evaluate the longer-term impact of the redesigned chutes on actual coal dust mitigation.
Another NCTA team is analyzing other sources of coal dust being deposited onto the roadbed including various locations on the railcar and the bottom gates. Of particular interest is the discovery that rapid discharge cars introduced in significant quantities to the Joint Line fleet over the last few years tend to lose more coal fines through the bottom gates than conventional gondolas. This team has also determined that 2-inch coal may produce more fines than 3-inch coal, but more analysis is required.
A third team is studying the efficacy and feasibility of surfactants applied to the top of the load. It is addressing questions of water availability and the chemical interaction of the various options with utility boilers.
Union Pacific’s goal in working with NCTA and BNSF is to better understand how coal dust is deposited on the Joint Line and, using scientific methods, develop the most cost-effective methods for coal dust mitigation and control. We are confident that the consumers, producers, carriers and consultants working collectively on this issue will determine the best solutions for maximizing tonnage.
Going Forward
The challenges of 2006 make it more critical than ever for the railroads, the mines and the utilities that use SPRB coal to work together to maximize the throughput of the entire supply chain. For our part, we continue to invest capital in tracks, signals and locomotives to support the coal business.
For example, the Marysville Bypass is now open, reducing delays on our key corridor to Kansas City. We are also installing a third run-through track in North Platte for coal train processing, extending sidings and adding staging capacity for coal moving to river terminals, as well as improving line capacity by adding centralized traffic control across Iowa.
In conjunction with BNSF, we are expanding the Joint Line. Work is already underway on the new third main line between Nacco Junction and Reno Junction. Plans for adding a fourth track on Logan Hill are under consideration.
Thanks to these efforts, we should deliver record volumes of SPRB coal in 2006. We also anticipate strong Colorado and Utah coal volumes once the North Fork Branch mines return to normal production later this quarter.
While these are important steps to increase throughput, we still expect the entire supply chain to be stretched throughout 2006. We will continue to do everything within our means to move as much coal as possible this year and determine how we can move more coal in the future.
Yours very truly,
Doug Glass
Vice President & General Manager-Energy
Union Pacific Railroad
UPDATE: February 7, 2006
SPRB Joint Line Performance for January
In January Union Pacific set an all-time monthly record of 1,123 loaded coal trains on the South Powder River Basin Joint Line, a 6.3% increase over January 2005. Trains per day averaged 36.2. The Joint Line launched a total of 2,030 trains, another monthly record for the Joint Line. This compares to 1,900 in January 2005.
Total loadings for the month would have been higher but for some congestion arising from BNSF’s cutover to a new dispatching system on the Joint Line on January 4, 2006, which significantly reduced loadings and delayed trains. Immediately following the cutover, UPRR loadings decreased to 32.6 trainloads per day, resulting in a loss of 46 trains for the month. BNSF has returned temporarily to its original dispatching system, which improved throughput on the line. UPRR is working with BNSF to avoid disruption when it re-installs the new dispatching system on March 1, 2006
Colorado/Utah Performance for January
UPRR loaded a total of 311 trains in Colorado and Utah in January. This compares with 342 trains loaded in January 2005. UPRR’s loadings of 4.4 trains per day on the Craig Branch and 4.5 trains per day in Utah exceeded the planned targets. However, the North Fork Branch’s 1.1 trains per day were well below expected performance levels due to coal production issues experienced at two mines that began in December 2005. Production on the North Fork Branch may not return to normal until March. Union Pacific is working with these producers to find alternative supplies of coal in the short-term.
February Outlook
Mild weather in the first week of February is supporting continued strong performance on the Joint Line. We expect a strong month and first quarter based upon record demand and normal operating performance.
2005 Year-End Review
Despite the problems with conditions on the Joint Line serving the Southern Powder River Basin, Union Pacific moved 11,985 trains of SPRB coal in 2005, a 1% increase over 2004. Total tonnage increased 1.2%, due to improved train length and an increase in average tons per train.
In December, following the seasonal suspension of repair work on the Joint Line and a major blizzard in the region, UPRR was able to steadily increase loadings off the SPRB, finishing the month with 1,000 trains – an increase of 17 trains over December 2004.
UPDATE: January 17, 2006
The strong finish to 2005 continued into 2006. After Christmas and through the New Year’s weekend, Union Pacific averaged 37 trains per day. We averaged 39 trains per day for the first three days of 2006. However, that pace slowed as a result of a BNSF change in dispatching systems.
On January 4, 2006, BNSF cut over to a new dispatch system ("TMDS") on the Joint Line and the Joint Line became congested almost immediately. UPRR train loadings dropped to an average of 32.6 per day from January 4 through January 11, 2006. This is 6.1 trains per day below NCTA demand and 6.4 trains per day below the 39 trains achieved before the dispatch system cutover.
This severe congestion slowed trains in both directions on the Joint Line. It also trapped loaded trains at the producers, causing lost slots and reduced loadings. Accordingly, UPRR declared a force majeure due to the congestion arising from the BNSF dispatching cutover effective January 4, 8:00 a.m. MDT.
In response to the congestion, on January 10, 2006, BNSF temporarily restored the prior dispatching system (Digicon) for the southern portion of the Joint Line. This is the area that serves Jacobs Ranch, Black Thunder, South Black Thunder, North Antelope/Rochelle and Antelope mines. The new TMDS dispatch system remains in place for the northern end, which includes the Caballo, Belle Ayr and Cordero Rojo mines.
UPRR deployed additional managers to both Fort Worth and Gillette to assist with restoration of operations and the redeployment of empty trainsets back into service. In addition, managers were dispatched to Gillette to shuttle crews to and from trains.
As of January 13, the train count and velocity of the Joint Line improved sufficiently to allow many of the trainsets that had been put in temporary storage to be restored to active service. In recent days, we have been loading 36-40 trains daily. Thanks to the reduction in congestion, the force majeure arising from the BNSF dispatching cutover ended on January 13 effective at 12:01 a.m. MDT.