SPRB Updates - 2007
May 2, 2007
Dear Valued Customer:
SPRB coal loadings on Union Pacific Railroad continue to be reduced by mine production issues. A late-winter storm, water in the pits and unplanned equipment breakdowns resulted in lower coal production for the month. Because of this, Union Pacific loaded 980 trains for the month of April 2007, compared with 1,020 trains loaded in 2006. The Joint Line supported a combined average of 62.7 trainloads for the month, compared to the 65.4 train per day average during 2006.
Production issues at the mines accounted for 108 missed trainloading opportunities. During this same time period, Union Pacific Railroad missed 21 trainloads, mostly associated with the recovery from two derailments that occurred on the South Morrill Subdivision during the weekend of April 7. A handful of mine properties account for most of the missed loadings, while other mines have offset some of those shortfalls by producing at or above the NCTA target. For the total month, Union Pacific Railroad was able to generate 36 extra trainloads of coal through its FLIP Program (Flexible Loading Improvement Program), in cooperation with those mines that were able to exceed their production targets.
Union Pacific Railroad set a new monthly record for train size out of the SPRB, loading an average of 15,482 tons per train in April, compared with 15,060 tons per train in April 2006. This represents a 2.8% increase in train productivity, or the equivalent of 27 coal trains for the month. We plan to continue working with our customers to increase train length where possible. We also ran 361 coal trains out of Colorado and Utah in April, an average of 12 trains per day, which satisfied more than 100% of NCTA demand.
Union Pacific remains focused on moving as much coal as possible based upon availability from the mines. We know that several of the SPRB mines are working on restoring production as quickly as possible, and expect that dryer and warmer weather this week will assist their recovery.
April 9, 2007
Dear Valued Customer:
In my December 23, 2006 coal update, I failed to anticipate the rapidly changing weather events that would close-out 2006 and define the first quarter of the New Year. Mother Nature compensated for an abnormally mild start to the winter during the October-December 2006 time period with an Artic cold snap and a series of powerful storms that impacted a large segment of the country.
Weather was not the only issue we had to contend with. In early January, one of our Colorado mines encountered a roof failure, forcing the relocation of its longwall mining system and bringing most of its coal production to a halt. Despite these events, Union Pacific was able to satisfy over 96% of NCTA demand by mid-March. We also increased average coal train size by three cars per train compared to the same time period last year. This led to an increase in total system coal tonnage of .4% and a .5% reduction in total system coal trainloads versus last year.
Southern Powder River Basin
The first quarter of 2007 closed with 3,082 SPRB trainloadings, a 3.6% decrease from the first quarter of 2006. Union Pacific averaged 34.24 SPRB trains per day for the first 90 days of the year, or 1.25 trains per day less than the first quarter of 2006.
During the first quarter, several winter storms impacted the mines, Union Pacific’s coal train operations and the utilities. The greatest impact on coal trainloadings occurred during the last week of March, when a fast moving winter storm forced the closure of Highway 59 that parallels the Joint Line and runs from Gillette to Lusk, Wyoming. This road closure forced all of the coal producers to cease mining operations on the Joint Line for almost two days. The lack of coal production compelled Union Pacific to store empty coal trains throughout its network. On Saturday, March 31, Union Pacific had 160 empty train sets in storage awaiting the mines to return to normal production.
While partial mining operations resumed on Saturday, March 31, the coal producers in the South Powder River Basin were dealing with water in the coal pits, muddy haul roads and equipment breakdowns caused by blowing snow. Loadings have slowly increased since March 30, when the Joint Line only loaded four trains. As of Sunday, April 4, we had 87 empty coal trains in storage, which dropped to 35 in storage as of Monday morning, April 9. We loaded 36 trains on Saturday and 35 trains on Sunday, April 7-8, respectively.
Colorado/Utah
Colorado and Utah mines loaded 928 trains during the first quarter of 2007, an average of 10.31 trains per day. This compares with 10.02 trains per day handled during the first quarter of 2006, a 2.9% increase. This improvement occurred in spite of one mine outage that lasted for the better part of the quarter. Normal coal production has resumed and in the past seven days, we have averaged 11.9 trains per day – the best 7-day loading performance from the Colorado/Utah coal producers since early January.
Increased Train Productivity and First Quarter System Performance
If there was a bright spot in the first quarter, it was the progress we made increasing train size. This was due to the cooperation of our customers and more effectively replacing bad-ordered cars and wheels at North Platte.
With these initiatives firmly in place, we were able to limit the decline in tons of SPRB coal delivered year-over-year to 2.1% and increase Colorado/Utah coal tonnage 5%. Combining all coal producing regions, Union Pacific delivered .4% more coal than last year.
Missed Train Loadings
There were a total of 546 missed SPRB trainloadings during the first quarter on Union Pacific when compared with the NCTA demand established at the beginning of each month, including mine replans. This figure represented 181 more trains than last year, which had fewer major weather events. The SPRB mines accounted for 50% of the missed loadings, a portion of which were associated with weather. Weather events on the Joint Line and on Union Pacific accounted for 34% of the misses. The remaining missed trains were associated with unplanned utility outages and derailments. Offsetting a share of those misses, we loaded 164 extra trains during the first quarter through our Flexible Loading Improvement Program (FLIP), which over half of our customers now participate in.
New Developments
Despite the challenges everyone in the coal supply chain has faced this quarter, there are also many notable accomplishments.
Based upon progress made renewing track and roadbed on the Joint Line, we were able to lift our embargo on new business effective March 27.
The CANAC recommendations for adding new capacity on the Joint Line are being implemented, with grading work underway to add a third main line on the north end of the Joint Line and a fourth main line near Logan Hill, toward the south end. Based upon the Joint Line work schedule, the third main line on the north end will be completed by June, with crossovers installed by the fall. Logan Hill’s fourth main line will be completed by year-end, with crossovers in the first half of 2008. Both projects will significantly increase coal hauling capacity on the Joint Line.
Based upon future tonnage projections from the mines, CANAC also recommended adding 20 additional train landing spots at the mines along the Joint Line. At this time, 11 additional landing spots are either completed or planned for completion by the mines, by year-end 2008. Seven additional landing spots are in the planning stage.
Union Pacific has significantly improved its coal train processing capacity at North Platte and reduced average dwell train time. We also set an all-time system record of 15,334 tons per train in March. Later this month, we resume work on adding Centralized Traffic Control on the Columbus, Nebraska subdivision, an important coal corridor.
Summary
The U.S. Department of Energy Information Administration reports that coal stockpiles are at the highest level in four years, up 38% over last year’s levels. We are pleased with the progress Union Pacific and the rest of the industry has made restoring coal stockpiles to normal. However, in spite of this information, our utility customers continue to report strong demand for the remainder of 2007 and into 2008.
As we move into spring, we are encouraged by Union Pacific's resilience and the commitment of our employees to meet the everyday challenges we face in this business. Our industry must continue to work together to mitigate the many variables that impact coal production, transportation and utility unloading performance in a manner that produces greater supply chain reliability. I am confident that we will continue to make progress towards achievement of this objective.
Thanks.