Letter from Jack Koraleski

September 2, 2005

To Our Customers:

I wanted to briefly provide you with information beyond what has been contained in our embargo notices regarding the status of Union Pacific operations in the area impacted by the tragic devastation of Hurricane Katrina.

Our Employees and the Communities We Serve

There are a little over 1,000 Union Pacific employees in Louisiana, with about 250 of those living in the New Orleans area. Communication with our employees in those areas impacted by the storm has been limited or non-existent. The safety and well-being of these employees, their families, and the communities we serve is our top priority. We have established a hot line for employees to call for help and have made counseling services available. We are working directly with FEMA regarding the transportation of fuel and supplies into damaged areas.

Status of UP Operations

Union Pacific accesses New Orleans from the west via two routes – the Lafayette Subdivision to the south and the Livonia Subdivision to the north. These lines come together at our Avondale Yard just west of the Mississippi River. We have no rail facilities in New Orleans proper, but do cross the river via the Huey P. Long Bridge to interchange traffic with the NS and CSX. Our normal interchange volume with these carriers via New Orleans is about 14 trains per day – 10 with the CSX and 4 with the NS.

With the brunt of the storm hitting New Orleans and points east, our routes to the west appear to have been spared major structural damage. A detailed engineering inspection of the bridge over the river is continuing. We continue to work through issues presented by downed power lines and loss of communications. Union Pacific embargoes remain in effect at this time for business east of St. James and New Iberia, Louisiana. Limited local service on the Livonia Subdivision has been restored. As our customer's facilities become operational, we will lift these embargoes.

Despite the apparent absence of significant physical damage, our operations in this region will continue to be impaired by restricted interchange with eastern carriers and the availability of our train crews, maintenance of way and signal employees as they deal with the personal losses suffered from the storm.

Waybilling of Traffic

New Orleans is not presently a viable interchange gateway. We are working with eastern carriers to keep commerce flowing as effectively as possible given the scope of the devastation. To minimize the impact on customers, UP has developed, with NS and with CSX, alternative routing plans for the traffic that would normally interchange through the New Orleans gateway. These plans will allow customers to continue to waybill traffic through the New Orleans interchange. Embargoes remain in place in the New Orleans area and other Gulf Coast locations. Traffic destined to embargoed stations will not be processed and customers need to advise us of alternative destinations. A current listing of embargoed stations is available on the AAR's embargo Web site (http://embargo.railinc.com/).

Going Forward

We thank you for your cooperation as we work to restore operations in this devastated area and minimize delays as we move increased volumes over other connecting gateways. We will work cooperatively with other carriers in an effort to minimize the impact on customers. For now, our thoughts and prayers are with the victims of Katrina and our focus is on restoring safe operations as soon as possible.

We will continue to provide Web updates as further information becomes available.