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To: BNSF Agricultural Customers
07/10/2014

Update on BNSF Preparations for the Fall Harvest

Dear Customer,

I am writing to update you on the state of our investments in the railroad, as part of the continuous communication you have received directly from me since Feb. 1. We are dedicated to restoring the level of service that you have come to expect from us. I have met with numerous groups and associations in the past five months and listened to your feedback. As we now move forward into the fall harvest this year, I would like to outline the steps we have taken in preparation to move significant amounts of grains.

As we move through summer, the additional capacity we have promised is beginning to come online as we implement our $5 billion 2014 capital plan. As many of you know, capacity comes in three ways; people, locomotives/railcars and track. I am glad to report that we are making considerable progress in all three of those areas.

This week, I was on our Lakeside subdivision in eastern Washington and saw several of the 10-20 mile capacity expansion segments that either are in place or will be in the next several months. In addition, we now have 22 miles of double track in service on the Glasgow subdivision. By October, we will have about 60 miles of double track on this important subdivision in Montana and western North Dakota. These improvements are all a part of the $1 billion expansion and maintenance capital program we are executing this year on our northern region.

Our locomotive fleet continues to increase as well, having received about half of our 2014 program of 500 locomotives. In fact, the number of trains holding for power on our Northern Corridor is lower than it has been for several months. We have also hired well over 4,000 people, which is far along the path of achieving this year’s plan of over 5,000 new hires. As capacity is added a siding and a segment at a time, we will expect pronounced velocity improvements.

We have also been making significant progress on reducing past due orders and will continue to greatly reduce the total number that now stands around 7,000 cars. Our plan is to spot 450 cars per day, and combined with new orders coming in, should result in a reduction to less than 2,000 past due cars by mid-September. If the new harvest is as strong as it appears to be, we will never reach zero past dues. That said, we expect substantial volume improvements as we will offer more shuttles and COTs this fall than we did in 2013 and our performance will be better than it was last year.

I recognize that some customers’ plans to utilize their ordered freight may have changed during our delay to provide empty railcars. I want to let you know we plan to temporarily change our car order cancellation policies. Effective Friday, July 11 we will suspend our order cancellation charges and refund pre-payments on cancelled car orders until Aug. 15.

As you all know, the Surface Transportation Board (STB) has been paying close attention to rail service issues and several of you have contacted them directly. In response, they have taken several actions. In April, responding to regional concerns about fertilizer availability, they asked that we pay special attention to getting the product to market. We had already begun this effort, and this being a relative small number of trains, we completed this initiative ahead of time and we believe achieved success.

Following some additional listening sessions, the STB has now asked for that same focus on past due grain orders. While we will comply with the directive, we are concerned with some of the implications. First, we at BNSF are acutely aware that these service issues arise from strained network capacity, and we believe our mission is to move as much volume as possible given the limits of our network capacity. We believe we best accomplish this by balancing the capacity allocated to single cars versus shuttles. Intervening in that balance will have the unintended consequence of reducing the amount of grain moved; less than the market needs us to move or that the railroad is capable of handling.

Second, we are concerned that these specific orders will encourage all system users to seek regulatory intervention. Altering our service priorities through regulation will potentially pit one region versus another, or even one commodity versus another, compromising the network and hurting the system overall. And this is not an idle concern—already ethanol producers have publicly asked for a focus on their product.

In summary, we have and will continue to make every effort to frequently communicate and be transparent with our customers, and also our regulators and other interested parties. For our customers, you will see improvement in our railroad, and on behalf of our leadership a continued commitment to the resources necessary to handle all of our customers’ business.


Sincerely,

John Miller
 
John Miller
Group Vice President,
Agricultural Products


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