ROCKDALE PROJECT

NOTES ON THE MINE DEVELOPMENT SCHEDULE

A. 1

The Project was initiated in June 1974 with the start of leasing activities in Milam County.

A significant point in time was reached with the acquisition of the Coffield lease which brought Shell's holdings in the area to some 21,000 acres and the estimated recoverable reserves to 150 million tons of lignite.

A.2, A.3, A.4

Drilling testing and geological mapping activities could perhaps have been performed in a shorter period of time, this would not however have resulted in the project coming on stream at an earlier date, since the environmental program which was initiated very shortly after acquisition of the Coffield lease becomes the governing factor in terms of time.

B.1, B.2

An

Minimum time required to complete the Environmental Programs is
governed by the time necessary to carry out environmental baseline studies.
This is required to satisfy the National Environmental Policy Act.
additional two to three months is normally required to assess anomolies.
In gathering baseline data we chose to obtain all data necessary to support
a Federal E. I.S. This now looks like a good decision since it will probably
provide us with the information we will need for a Federal Strip Mine
Permit.

B.4, B.5

The Environmental assessment and a proposed plan covering mitigating
measures are being prepared by the Project's environmental specialist in
conjunction with Radian Corporation, the contractor for the environmental
program. On completion of the above mentioned documents, towards the end
of this year, applications for mining permits from State and Federal agencies
will be submitted.

C.1, C.2

D - I

It was assumed in the mine development schedule that the permits

will be processed and issued without delays. The Shell schedule coincides with the minimum time required to obtain these permits.

For the remaining categories indicated on the schedule it was assumed that the project will be brought on stream without unforeseen delays.

I recently received the enclosed letter from
Union Pacific on the hearings on horizontal divestiture
which were conducted before the Subcommittee on Antitrust
and Monopoly on August 2 and 4. Please include it in
the final record of those hearings.

HMM/kp

Warm regards,

Forard Mauthent an

Howard M. Metzenberm
United States Senator

There is, as you know, a belief by some sectors of the electorate that companies with major interests in the oil and gas business, who also have a significant position in coal reserves, are failing to fully commit their corporate capital and energies to expanded development of those reserves. Indeed it has recently been asserted that some of these companies including Union Pacific are "not producing any coal."

My purpose in addressing this letter to you is to set the record straight with respect to our Company. I want to acquaint you with Union Pacific's proven commitment to past and current development of our western coal reserves and - more significantly - our aggressive posture reflecting our corporate determination for the future. We intend to make an all out contribution to the fulfillment of the President's National Energy Plan, which, as you realize, sets as a major goal an almost 90% increase in domestic coal production from the 1976 estimate of 671 million tons to the 1985 target of 1.265 billion tons.

Before turning to the merits, let me offer a

brief background on Union Pacific.

Union Pacific Corporation is the parent of four wholly owned operating companies, each of which is a distinct profit center with a separate and fully staffed operating management. One of these companies, Champlin Petroleum, headquartered in Fort Worth, Texas, is exclusively involved in oil and gas and petrochemical activities, while another, Rocky Mountain Energy Company, headquartered in Denver, Colorado, is charged with the development of our coal and uranium reserves. Each energy resource is separately and independently developed through the activities of these two companies. There is utterly

96-515 - 78 - 22

no basis in fact for an allegation that Union Pacific's interests in oil and gas have in any way impacted adversely on its commitment to continue to expand the development of its coal resources to meet the new challenges which face the Nation today.

From 1868 to 1962, Union Pacific was one of the largest producers of western coal for use in coalfired steam locomotives. This coal came from the lands granted by the Federal government to Union Pacific in a checkerboard pattern for 20 miles on either side of the railroad right-of-way. In 1962, the last Union Pacific coal mine was sealed when the railroad completed conversion to diesel engines and industry turned away from the use of coal as a primary energy source.

Perceiving changing market conditions, Union Pacific began in 1967 to move as expediently as possible to develop its coal reserves. Our plan has, and is, to be responsive to the needs of consumers through the use of production methods seeking to maximize coal recovery and yet at the same time assuring that development is both environmentally acceptable and safe. It is only recently that western coal has become particularly attractive due to its low sulfur and ash characteristics, relative price, and the rising prices of alternative energy supplies. It is important to note that considerable tonnage is now being produced when compared to the near non-existent production of ten years ago. This is true for the West in general as well as for Union Pacific's holdings.

The first stage in achieving these objectives was the initiation by Union Pacific of a drilling program in 1967 to inventory the coal resources of the checkerboarded land grant. As a result of this program, Union Pacific's coal reserves have been estimated at 10 billion tons, 2 billion tons of which (1.4 billion tons of strippable coal, and .6 billion tons of deep mined coal) is either now in production or is scheduled for production within the next decade. The remaining 8 billion tons will be brought into production as market conditions change and technology improves. The fact that these reserves lie at great depths and in relatively thin seams renders them uneconomic under present circumstances. Continuous attention is being given, however, to these remaining 8 billion tons to identify possible new projects to be developed. It is critical to bear in mind that the development of Union Pacific's coal reserves frequently