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To: BNSF Industrial Products Customers
05/13/2015

Shale Crude Transportation Update

As part of our ongoing efforts to communicate with our customers and keep you apprised of industry developments, I wanted to share an update on a number of issues regarding the transportation of crude by rail.

BNSF continually works to reduce risk in the transportation of all of our commodities; as we have said many times nothing is more important than our safety commitment. Our philosophy and practice for crude transportation is that we must prevent incidents from happening, mitigate their severity and mobilize effective, efficient response. We believe our progress in all three areas; prevention, mitigation and response, coupled with the recently released U.S Department of Transportation (DOT) rule on crude transportation, will further our ability to move your product safely and instill confidence we can do so in the communities we serve.

Prevention

We continue to refine our operational counter-measures that we notified you of on March 30. Specifically, these are reduced speed in municipal areas with populations of over 100,000 people, increased inspection frequencies near critical waterways and higher thresholds for removing a car from service when it is flagged by our detector network. As such, we already exceed the Federal Railroad Administration's April 17 Emergency Order on speed reductions and actions were already underway on a substantial portion of the Safety Advisories released as well.

We make extensive use of our inspection and detection detector network and are vigilant in making use of the data readings on Key Train routes and taking action if necessary. Our performance indicates that our efforts are working. BNSF had its best-ever year in reducing the frequency of derailments in 2014. Yet, as we saw last week in the incident in Heimdal, North Dakota, one accident is too many and we must continue to learn what we can to further reduce risk.

Mitigation

Last year, we thought we had a role to play in helping the industry move to a more appropriate tank car and providing certainty to the marketplace in the future of rail crude transportation. We stepped forward with a request for proposal on 5,000 next generation tank cars. While this step was initially received positively, subsequent conversations with you, our customers, indicated many of you had concerns and BNSF owning or leasing tank cars was not viewed as useful. We have listened closely to your concerns and as a result have decided to not proceed with the investment in equipment. Despite a change in our plans, we believe our planned build advanced the dialogue and design for a next generation tank car.

We are still committed to ensuring that all crude moves in appropriate equipment. With the release of the federal regulatory tank car standard in the DOT rule, as we have said before, BNSF intends to work with our customers to transition the next generation or appropriately retrofit tank cars into shale crude service as soon as is practicable. We continue to believe that DOT-111 tank cars should be removed from BNSF shale crude service in one year. Also, we believe that unmodified CPC-1232 tank cars should be removed from BNSF shale crude service in three years. We expect commercial differentiation in timeline by commodity and tank car design will be beneficial in deploying the next generation tank car into service more quickly.

We do have concerns that additional provisions of the DOT rule will remove capacity from our network, particularly the electronically controlled pneumatic brakes mandate. While the industry continues to work through these issues, we advise customers who plan to acquire tank cars to have the cars fit with the structural elements for a dual-braking system to be added at a later date. We, of course, will keep you updated as events proceed in this area.

Response

In the unfortunate case of an incident, we remain committed to not only having our own robust capacity to respond quickly and effectively, but also ensuring that emergency responders in the communities we serve have effective training and response capability as well. This year, we will continue the Transcaer training program across our Key Train network and will financially sponsor 500 first responders for specialized crude response training at the Transportation Technology Center in Pueblo, Colorado.

We have also listened to the concerns of local officials and emergency personnel across our network in being able to access the location and contents of any given train in their area. To provide that information to those who may need it to respond, BNSF is rolling out a near real-time GIS-based tracking application (SECURETRAK) to allow our public partners to access the information they need, when they need it.

Reducing risk requires prevention, mitigation and response. BNSF believes we have taken action in all three and will continue our leadership in continually improving safety on our network. We will continue to update you on these and related developments, but please know that we are committed to meeting your expectations and moving your business in the safest way possible.

Thank you for your business.


Steve Bobb
Executive Vice President and
Chief Marketing Officer

Greg Fox
Executive Vice President and
Chief Operations Officer


If you have any questions, please send an email to Customer.Notifications@bnsf.com