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First publish date: 05-08-2006
BNSF, UP Announce Agreement for PRB Capacity Expansion
Union Pacific and BNSF Railway Company announced plans to begin another significant capacity expansion on the jointly owned rail line serving the Southern Powder River Basin (SPRB) coal fields, the largest open-pit, low-sulfur coal reserves in North America.

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 (PRB) 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 19 miles of the third main line currently under construction and scheduled to go into service later in May and 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.

"The investment in the Joint Line is a strategic part of Union Pacific's coal network operations," said Jim Young, president and chief executive officer, Union Pacific. "On-going infrastructure development improvements in the Southern Powder River Basin will enhance our ability to serve our customers and meet this nation's energy demands."

"This Joint Line project and the magnitude of our investment underscores BNSF's commitment to this country's coal and power industries," said Matthew K. Rose, BNSF's chairman, president and chief executive officer. "The rail, mining, and generating industries all need to work together to keep coal a strong part of the nation's future energy program."

For many years, CANAC, a Montreal-based rail engineering firm, has been evaluating PRB coal production forecasts and both railroad and mine infrastructure capacity needed to support forecasted production. Recommendations for railroad capacity proposed by CANAC in 1999 are in the final stages of completion and will be fully implemented by September 2006.

CANAC began a new study of the Joint Line in early Fall 2005, and presented its preliminary findings to the two railroads in early 2006. In response, Union Pacific and BNSF have advanced construction plans to add the more than 40 miles of third and fourth main line capacity to meet the annual projected growth in demand for SPRB coal in 2007 through 2009. These activities include construction of a fourth main line over Logan Hill and construction of a third main line at the north end of the Southern Powder River Basin.

"I'm very pleased at this investment in Wyoming infrastructure," said Gov. Dave Freudenthal. "I'm also encouraged by the action, which reflects a new level of responsiveness to our need for more rail capacity to move Wyoming coal to market. This project could have a significant impact on our
ability to sell Wyoming coal."

Over the last 20 years, there have been significant increases in the SPRB Joint Line production volume. In 1985, the Joint Line handled 19 million tons of coal. To meet the growing demand for Western coal, volume grew steadily and in 2005, the Joint Line capacity had grown to handle an all-time record 325 million tons. These improvements will enable the Joint Line to handle in excess of 400 million tons of coal.

Coal-fired power generating technology has improved considerably over the last 20 years. With coal processing technology advances, future coal power systems will be dramatically cleaner and more efficient than plants based on older technologies. Coal is also relatively inexpensive compared to natural gas, which has had highly erratic prices the last few years, and oil, which is used as a fuel source on a rather limited basis. Coal is viewed as one of the best sources of clean, economical fuel to power the needs of North America and reduce its dependency on foreign oil.
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