SPRB Updates - 2005

Notice Of Disruption On The Southern Powder River Basin Joint Line

Update November 27, 2005

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.

Update November 17, 2005

Doug Glass, Vice President & General Manager - Energy, issued a letter announcing Union Pacific's intention to lift its SPRB Force Majeure notice on November 24, assuming that BNSF finishes this year’s work on Logan Hill as currently planned.  The exact date and time that the Force Majeure is to be lifted has yet to be announced.

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

Read Doug Glass's letter.

Update November 1, 2005

October Performance

In October, coal shipments declined from September levels due to a combination of flooding in Kansas, three derailments including one that blocked all three tracks on the Joint Line and the lingering effects of Hurricane Rita. In addition, on October 21 there were 37 slow orders extending over 42.4 miles, the highest total since June 22, 2005. By the end of the month, slow orders had declined to approximately 13 miles as a result of BNSF sending out 14 welding trucks during the last week of the month.

Through October 31, total loadings on the Joint Line were 58.4 trains per day against a NCTA target of 68.5. Of this total, Union Pacific averaged 30.1 trains per day.

In recognition of declining inventories and in hopes of boosting loadings, BNSF proposed to reduce its repair activities to only those essential for safe operations through the winter. Union Pacific agreed with this proposal. Average train counts increased somewhat since implementation of this plan.

Kansas Washouts Update

While the damage from Hurricane Rita has been widely documented, heavy rains on October 1 washed out track or damaged bridges on all four UP lines north or west of Kansas City. This is the center of our Coal Network particularly for trains headed South and East.

We were able to repair the damage on some lines relatively quickly, but severe damage on both mainlines on a segment used by all SPRB trains moving through Kansas City required more time to repair. On October 12, permanent bridge and track structure were restored on mainline #1 between Topeka, KS, and Kansas City. Mainline #2 bridges and track structure were restored on Friday, October 28. With these repairs completed, the Kansas flooding force majeure was lifted effective October 28.

We will continue to provide updates as the situation changes.

Update October 5, 2005

Mine production problems and slow orders triggered by extensive track repairs continue to affect operations on the Joint Line serving the Southern Powder River Basin.

Following a major storm in northeast Kansas last Saturday, October 1, an important corridor in Union Pacific’s coal network has been dramatically impacted by washouts of track and damage to bridges both north and west of the Kansas City area.

Kansas Washouts Damage Coal Routes

On Saturday, October 1, a severe thunderstorm in the Topeka, KS, region dumped between 10-12 inches of rain over several hours. The runoff from this storm caused bridge damage and extensive washouts, several of which are hundreds of feet in length. As a result, all UP train movements in the area immediately west of Kansas City were blocked for three days. The route between Kansas City and Topeka will be limited to one main line until the bridge is fully restored.

Three of our subdivisions bore the brunt of this storm:

• The Salina Subdivision between Salina, KS, and Topeka, KS, which is used for Colorado loads moving east and empties moving west;
• The Kansas Subdivision between Marysville, KS, and Kansas City, which is used for SPRB loads moving east and south, as well as for some empties moving west; and
• The Falls City Subdivision between Kansas City and Atchison, KS, which is used for SPRB empties moving west and loads for some local customers.

UP began mobilizing repair crews and materials last Saturday night. Since then, crews have been working around the clock in the area. The Salina Subdivision reopened Monday morning. The Falls City and Kansas Subdivisions reopened Wednesday morning with limited service. UP is detouring some loaded coal trains via Council Bluffs-Des Moines-Kansas City.

As of Wednesday morning, October 5, UPRR had 116 coal trains staged across its system due to the bridge damage and washouts. As of Thursday morning, October 6, the number of trains staged had declined to 71. The storm has also severely curtailed the flow of empty trains to the Joint Line and disrupted operations for all traffic moving over the central corridor. While the bridges and washouts are being restored, it is likely that it will take several days before operations return to normal. Four lines in Kansas sustained damage from the Oct. 1 storm that dumped 10 to 12 inches of rain in the area. Two bridges were damaged, and the lines also sustained erosion damage and washouts. Additional photos can be found in our October Customers Letter.

Joint Line Outlook

Month-to-date through Wednesday, October 5, UPRR averaged 29.4 loaded trains per day on the Joint Line. Due to the Kansas washouts and the large number of empty and loaded coal trains staged across our system, only 22 trains were loaded on Tuesday and 21 trains were loaded on Wednesday. There are 21 loadings projected for today. The Kansas washouts are expected to impact the Joint Line loadings for UPRR through the rest of this week and into next week. During the temporary reduction of inbound empty coal trains destined for the Joint Line, BNSF has stepped-up track repair activity where feasible.

September 2005 Performance

Union Pacific finished the month with 986 loaded coal trains off the Joint Line, an average of 32.9 trainloads per day. This compares with a demand target of 38.7 trains per day or 17.4 million tons for Union Pacific’s share of SPRB volume.

UPRR and BNSF generated a combined average of 60.5 trainloads per day. The original Joint Line demand target for both UPRR's and BNSF’s share of SPRB volume had been 70.7 trains per day or 31.4 million tons.

Joint Line repairs, slow orders and the resulting congestion had a greater impact on the number of trains loaded than did coal production problems and other delays combined (reference chart below). One producer adjusted its loading plans during September, reducing the total Joint Line target by 77 trainloads. Unplanned equipment breakdowns and insufficient coal inventory at some of the mines accounted for 61 missed UPRR trainloads for the month. Joint Line rail repairs accounted for 86 missed trainloads, while other UPRR delays contributed to an additional 15 missed trainloads for the month. Allowing for the replan from one producer, Union Pacific fulfilled 87.7% of NCTA demand in the month of September.

Union Pacific South Powder River Basin
Missed Loadings By Primary Cause
September 2005

 

Update September 27, 2005

Mine production problems and slow orders triggered by extensive track repairs continue to affect operations on the Joint Line serving the Southern Powder River Basin.

August 2005 Performance

Union Pacific finished the month lower than expected with 992 loaded coal trains off the Joint Line, an average of 32.0 trainloads per day. This compares with a demand target of 37.4 trains per day or 17.4 million tons for Union Pacific’s share of SPRB volume.

UP and BNSF generated a combined average of 58.5 trainloads per day. The original Joint Line demand target for both UP and BNSF’s share of SPRB volume had been 67.1 trains per day or 30.8 million tons.

Coal production problems during August had a greater impact on the number of trains loaded than did Joint Line repairs, slow orders and other delays combined. Two mine properties adjusted their loading plans during August, reducing the total Joint Line target by 59 trainloads. Equipment failures, spoil slides, insufficient coal inventory, and plant upgrades at some of the mines accounted for 121 missed Union Pacific trainloads for the month. Joint Line rail repairs accounted for 19 missed trainloads, while other Union Pacific delays contributed to an additional 18 missed trainloads for the month. Allowing for the mine replans, Union Pacific fulfilled 87.2% of NCTA demand in the month of August.

Union Pacific South Powder River Basin
Missed Loadings as a Percent of Total NCTA Demand By Primary Cause
August 2005

 

September 2005 Operations

Through the first 25 days of September, Union Pacific averaged 33.4 trainloads per day while the combined UP and BNSF loadings were 61.2 trains per day on the Joint Line. Of the missed trainload opportunities on Union Pacific so far this month, 45 were mine-related, 63 were associated with Joint Line repair work, and 15 were associated with UP operations. Mine operating problems again reduced coal loadings last weekend.

BNSF, which maintains the Joint Line, continues restoring the track structure. On August 25, the repair program transitioned from tie/rail replacement to undercutting. The undercutting work improves the roadbed by removing the coal dust from the ballast. This work will continue into November or as long as weather permits. As of Sept. 22, 30 separate slow orders covering 22.2 miles of track also disrupted coal train operations on the Joint Line.

While we are still cautious about September, we remain hopeful that average daily trainloads will be modestly higher than in August. Producers recently completed capacity improvement projects which should help the mines meet their loading targets. In addition, BNSF has changed its undercutting plan by scheduling shorter outages at Logan Hill, a critical point on the Joint Line, to reduce the severe congestion that work causes. We will reassess our Force Majeure and Embargo conditions when this critical work is complete. Meanwhile, we continue to operate under Force Majeure and Embargo conditions on the Joint Line.

Update August 16, 2005

Slow orders, extensive track repairs and mine production problems continue to affect operations on the Joint Line serving the Southern Powder River Basin.

July 2005 Performance

Union Pacific finished the month better than expected with 1,028 loaded coal trains off the Joint Line, averaging 33.16 trains per day. The entire Joint Line (UP and BNSF combined) generated an average 61.2 trains per day—the highest level achieved since April 2005, but still short of demand.

Coal production problems during July had a greater impact on Union Pacific’s outbound loaded trains than Joint Line repairs, slow orders and other delays combined. Excessive summer heat, equipment failures, water in the pits and moisture-saturated highwalls at some of the mines accounted for 65 out of 121 missed Union Pacific outbound trains for the month, or 5.7% of total NCTA demand. Joint Line rail repairs accounted for 43 loaded train misses while Union Pacific delays contributed 13 missed loaded trains for the month.

 

Union Pacific Southern Powder River Basin
July 2005 Missed Supply Chain Loadings

August 2005 Operations

Through the first 15 days of August, Union Pacific is averaging 32.3 loaded trains per day out of 59.5 (UP and BNSF combined) loaded trains per day on the Joint Line. Of the 55 missed train opportunities on Union Pacific this month, 28 were mine-related, 10 were associated with Joint Line repair work and 10 were due to a UP derailment caused by high winds. Seven missed loaded trains were related to other UP-caused delays.

BNSF, who maintains the Joint Line, continues to make progress repairing the track structure. As of August 8, the Joint Line had 25 separate slow orders covering 16.2 miles of track. This compares with 25 slow orders spanning 25.1 miles of Joint Line track on July 7.

Union Pacific fulfilled 89.3% of NCTA demand in the month of July. We are currently tracking at 85.62% of NCTA demand through August 15.

While we are still cautious about September, we plan to do everything possible to continue to increase our loaded coal train performance.

July 22, 2005

Slow orders and extensive track repair continue to impact operations on the Joint Line serving the Southern Powder River Basin following two separate derailments that occurred on May 14 and May 15.

Current Status of Operations

We are encouraged by progress made on train loadings in the face of significant repair work on the Joint Line this month. The Joint Line has averaged 61.1 trains per day through July 20th, with Union Pacific’s share of loadings averaging 33.2 trains per day, compared to 30.8 trains per day in June.  Union Pacific's performance against July’s NCTA train demand level at 89.4% through July 21 is also significantly higher than anticipated.

While Union Pacific will be unable to satisfy all of our customers' July NCTA demand from the Southern Powder River Basin, we still expect to load, on a percentage basis, our estimated market share of demand, or 54%.

Mine production problems related to high temperatures being experienced in Northeast Wyoming and elsewhere across the country also resulted in the loss of approximately 2 trainloads per day through July 21.  These problems are indicative of how closely the mines, railroads and utilities are integrated as partners in the energy supply chain.  Union Pacific will continue to work closely with the mines and the utilities to optimize the delivery of coal. 

Future Plans for Qualifying NCTA Demand

If we are able to sustain the progress we have made through the first 20 days of July, we may adjust the allocation of train slots upward.  Train performance on the Joint Line remains dynamic and we will continue to see daily fluctuations in loadings as different phases of repair work are performed.  We intend to maintain flexibility with respect to adjusting NCTA train allocation based upon loading performance.

Request For Missed Train Loadings

Union Pacific has formally requested that BNSF restore to UPRR and its customers a number of train loading opportunities that were missed in May and June.  This occurred over a course of several weeks when BNSF obtained more than its NCTA share of total loadings.

Utility Inventory Levels

Since the Force Majeure event in mid-May, Union Pacific has communicated frequently with its customers regarding the severity and the anticipated duration of the disruption on the Joint Line.  These communications are designed to enable our customers to adjust their operations, to adopt fuel conservation practices, or to make alternative arrangements for fuel, as they consider best.   Our customers have the information and expertise to make the complex decisions associated with managing coal inventory.

While Union Pacific cannot be responsible for managing coal inventories, we will try to work with our customers to avoid critical shortages when we can. Mutual communication will help us all manage through the disruption caused by the Joint Line condition and restoration process.

Update July 1, 2005

Slow orders and extensive track maintenance continue to impact operations on the Joint Line serving the Southern Powder River Basin following two separate derailments that occurred on May 14 and May 15.

Current Status of Operations

• For the month of June, Union Pacific loaded an average of 31 trains per day, out of 58.5 average trains per day operating on the Joint Line. This represents an average shortfall of four trains per day or 12.3% compared to pre-derailment levels (January-April 2005).
• Union Pacific satisfied 82.15 % of NCTA demand during the month of June.
• As of June 30, 2005, slow orders were applied to 26 locations, covering 30.4 miles of track. This was comparable to the level two weeks ago.
• The 14-mile capacity expansion project between Shawnee Junction and Walker underwent a signal cutover on Wednesday, June 29.

Plans to Repair the Joint Line

BNSF and Union Pacific agree that postponing major rehabilitation work is not an alternative and that the best solution for completely restoring the long-term stability of the Joint Line is the removal of coal dust from the roadbed and the replacement of several miles of ties and track. We received a complete maintenance plan from BNSF on Tuesday, June 28, which provides more detail on the work that will be accomplished and have again reviewed details of that plan this morning, July 1.

Extensive maintenance and track repair will begin next week and run through November 2005. We anticipate that some maintenance and repair work associated may be carried over into next year, and we will be in a better position to advise what that entails as we get closer to November.

BNSF will use two undercutters and a P811 tie and rail replacement machine to perform track repair and maintenance. The undercutters will remove coal dust on approximately 100 miles of roadbed and the P811 will replace ties and rail on approximately 14 miles of track. Beginning July 6 and continuing through the rest of the month, switches will be rehabilitated during 12-hour curfews. Beginning July 11 and running through August 23, the P811 tie and rail machine will replace ties and track on the line between Nacco Junction and Reno Junction, working 16-hour stretches at a time from Monday-Thursday of each week. This will reduce the Joint Line from double to single-track operation during those windows.

BNSF Railway and Union Pacific are making plans to schedule a meeting with the coal producers in Gillette next week to review the specifics of the planned maintenance timetable.

Anticipated Volume for July

Based upon these plans, Union Pacific expects total outbound train operation on the Joint Line to average 60 trains per day with Union Pacific’s share of loadings averaging 31-32 trains per day for the month of July. Some days could have somewhat higher or significantly lower loadings. As another indicator of past and future performance, for the month of July, Union Pacific expects to load its estimated market share of NCTA demand, or 54%. Union Pacific’s market share of NCTA demand for June was 54%.

Going Forward

Union Pacific continues to operate under Force Majeure conditions on the Joint Line. Operations are significantly impaired and UP is unable to meet all of its obligations for coal based upon extraordinary track repair and slow orders in place since May 14, 2005, over which we have no control. Until further notice, Union Pacific plans to allocate coal proportionately among our customers based upon trains loaded as a percent of total NCTA train demand. We expect this daily allocation to be in the range of 80-85% of NCTA demand. Variations in this allocation process should be expected due to a number variables including but not limited to planned and unplanned utility outages; day-to-day Joint Line, utility and railroad congestion and rail carsets out of service or stored. Our customers can be assured that we will do everything possible to ensure that the allocation process is fair.

We are greatly concerned about the impact that Joint Line track conditions and extensive repair and maintenance are having on train operations and the corresponding impact on the ability of the mines to load trains and our customers' ability to satisfy their need for PRB coal. While we continue to do everything we can on the delivery side, we strongly encourage each of you to take steps to conserve coal until normal operations resume on the Joint Line. At this stage, we do not expect to be in a position to operate the Joint Line unencumbered until late November 2005 when track repair is completed for the year or suspended due to weather.

Utilities and industrial customers using PRB coal should plan their consumption of coal in accordance with estimates provided above and consideration given to their own unique inventory and fuel management strategies. We encourage ongoing communication with our sales representatives to insure that nothing is overlooked and that there are no misunderstandings about our train operations nor our limited ability to satisfy demand. We pledge our best efforts to keep the coal supply lines fluid, but we need your cooperation and support to take any and all steps necessary to protect the sustained operation of your coal-burning utilities.

The Joint Line represents the busiest and highest density freight railroad in the world as measured by gross ton-miles. We are using the experiences gained over the last 47 days to press forward with further improvements in the design and maintenance of the Joint Line – changes that will support significant volume increases and yet address the cumulative and destabilizing impact of future coal dust deposits.

We will continue to provide you with updates as the work progresses and with any significant changes in the situation.

Update June 15, 2005

Track maintenance continues on the Southern Powder River Basin Joint Line (SPRB) following two separate derailments on May 14 and 15 of a BNSF Railway train and a Union Pacific train. Both accidents were track-related.

Prior to May 14, 2005, the Joint Line supported a total outbound train number for both railroads of 63 per day. Average train flow since the beginning of June, while improved over May, is still below the average prior to the mid-May derailments.

A comprehensive maintenance plan that will focus on reducing speed restrictions, followed by track work and ballast repair for the duration of the maintenance of way season, is in development. Other plans that are an outgrowth of this effort will include additional supervision of dispatch operations and additional operating and engineering management support at the local level. All of these changes are designed to improve the flow of inbound and outbound trains and volume. Completion of the first Phase of BNSF's and UPRR's capacity expansion plans between Shawnee Junction and Walker are also expected by the end of June, which will enable maintenance to continue on the south end of the line, while trains operate over the new third main line.

We realize the slow orders and maintenance work are impacting the normal delivery of coal to our customers and we are doing everything possible to restore operations. The damage done to the roadbed by the combination of accumulated coal dust and significant rainfall over a short time period cannot be totally corrected without physically removing the dust from the ballast. More detailed information will be shared with the mines and our customers concerning what can be expected in the weeks ahead.

We encourage all of our customers and partners to continue to operate with the view that operations are not back to normal and that less than 63 trains per day will be shipped, on average, during the foreseeable time period. As more information becomes available regarding the actual impact of the maintenance in combination with the other initiatives outlined above, we will be in a better position to provide a more precise outlook of the expected impact and the associated timing.

Update June 3, 2005

Thirty-two trains were loaded on Wednesday, June 1 and twenty-two trains were loaded Thursday, June 2. There remains a 30 percent chance of rain for the area tonight, with a continued 30% probability of rain over the next 7-days, according to the National Weather Service. Heavy rain has been a major factor in the maintenance issues and could result in additional slow orders. Miles of speed restrictions have increased from 40 miles at 25 different locations one week ago to 57 miles at 30 different locations today.

We received a preliminary maintenance plan for the Joint Line from BNSF yesterday afternoon and are in the process of reviewing and providing feedback on that plan. The review process between our two companies will take several days. In the meantime, extensive maintenance on the Joint Line is continuing.

Earlier today, UPRR Chairman Dick Davidson, President Jim Young and Executive Vice President - Operations Dennis Duffy met with BNSF Chairman Matt Rose and his senior staff in Fort Worth and discussed the situation on the Joint Line. Plans for maintenance, dispatching and operations were reviewed, underscoring the importance of this operation to both companies.

Until a complete and collective review of the Joint Line is completed by the Operating and Engineering Departments of both companies, UPRR will continue to work with its customer base to manage inventory levels and train sets. Today, UPRR has 31 train sets parked on sidings to avoid creating additional congestion between the Mississippi River and Bill, Wyoming. As capacity ebbs and flows, sets will be added or subtracted from storage to maintain fluid operations.

Union Pacific is continuing its Force Majeure event status until normal operations are restored.

Update June 1, 2005

Over the holiday weekend, UPRR experienced increased loaded trains as maintenance on the Joint Line was temporarily suspended. Thirty-eight, 36 and 25 trains were loaded on Sunday, Monday and Tuesday, May 29-31, respectively. However, on Monday, the Gillette area received .4 inches of rain, which resulted in an additional 6 miles of slow orders—some as low as 10 mph. This added moisture is expected to reduce loaded UPRR trains on the Joint Line to 34 for today against a goal of 36. Additional rain is forecast for the area with 10-30% probability through Tuesday, June 7, by the National Weather Service, which could result in additional slow orders.

Until BNSF issues a final assessment of the Joint Line’s track conditions and provides its short and long-term maintenance plan, we cannot predict when UPRR train operations will return to normal levels. UPRR will continue to work with its customer base to manage inventory levels and train sets. We will also continue to explore other alternatives to maximize the number of outbound trains from the Joint Line.

Update May 27, 2005

Miles of speed restrictions have been reduced from 126 miles at 22 locations one week ago to 40 miles at 25 different locations today.

During May 13-19 Union Pacific averaged 19 loaded trains per day. For the week of May 20-26 performance improved to an average of 30 trains per day. We loaded 30 trains yesterday compared to a normal 36 target. There are 30 empty coal trains staged at various locations on Union Pacific as the flow of inbound empty trains is metered to prevent congestion.

Update May 25, 2005

We loaded 27 trains yesterday compared to what we would have expected to be a normal 36. We are planning to increase the number of trains operated as conditions improve. There are 16 empty coal trains remaining staged at various locations on Union Pacific.

Update May 24, 2005

We loaded 34 trains yesterday compared to what we would have expected to be a normal 36. We are planning to increase the number of trains operated as the week progresses. There are 28 empty coal trains remaining staged at various locations on Union Pacific.

Update May 23, 2005

We loaded 34 trains yesterday compared to what we would have expected to be a normal 36. We are planning to increase the number of trains daily as the week progresses. Currently there are 50 empty coal trains staged at various locations on Union Pacific.

Update May 20, 2005

Coal train volumes are improving on the South Powder River Basin Joint Line (SPRB) .

We loaded 21 trains yesterday compared to what we would have expected to be a normal 36.  We are hoping to load in the high twenties today.  Currently there are 95 empty coal trains staged at various locations on Union Pacific. 

Update May 17, 2005

At 11:15 p.m. MT, Saturday, May 14, 2005, a BNSF Railway train derailed 15 cars approximately 6 miles north of Bill, Wyoming, on the Southern Powder River Basin Joint Line (SPRB). At 5:27 a.m. MT, Sunday, May 15, a Union Pacific coal train derailed 28 cars approximately 19 miles north of Bill, Wyoming, on the Joint Line. The two derailments, which may have been caused by track conditions, have disrupted the flow of trains to and from the SPRB. Union Pacific is working with BNSF Railway, which maintains the Joint Line, to finalize the investigations.

The eastern half of Wyoming has experienced unprecedented rainfall and snow in the last 45 days, including a major spring snowstorm on April 21, which virtually shut down mining operations in the Basin. Two inches of rain fell on the area Wednesday, May 11, followed by 6 inches of snow. The accumulation of coal dust in the Joint Line roadbed, in combination with high concentrations of moisture, is suspected to have created instability in the track structure.

Portions of the Joint Line are still out of service, which will continue to disrupt coal trains to and from the SPRB. Since the first derailment, Union Pacific has been unable to meet all of the demand for coal trains from the Powder River Basin. We expect this situation to continue until the track is fully repaired. We do not have a firm timetable for completion of track repairs.

Union Pacific Railroad is providing maintenance of way support to BNSF in terms of equipment and people to restore normal operations as quickly as possible, even though another storm is forecasted for the area later this week. In the meantime, based upon this disruption of service, Union Pacific is notifying its customers of a Force Majeure event commencing with the BNSF derailment on Saturday, May 14, 2005, and continuing until normal operations are restored.

We appreciate the patience of our customers as we restore operations and determine that all of the Joint Line trackage can safely accommodate the unprecedented demand we are experiencing for Powder River Basin coal. Union Pacific Railroad will do everything possible to move as many coal trains as possible given operating limitations caused by track repairs and corresponding congestion. We will be reaching out to the mines and our customers over the next few days to seek assistance in restoring normal service.