10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER: 1-11535

Burlington Northern Santa Fe Corporation

Exact name of registrant as specified in its charter

Delaware	41-1804964
State of Incorporation	I.R.S. Employer Identification No.
2650 Lou Menk Drive Fort Worth, Texas 76131-2830	(800) 795-2673
Address of principal executive offices, including zip code	Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer  x          Accelerated filer  ¨          Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $17.373 billion on June 30, 2005. For purposes of this calculation only, the registrant has excluded stock beneficially owned by directors and officers. By doing so, the registrant does not admit that such persons are affiliates within the meaning of Rule 405 under the Securities Act of 1933 or for any other purpose.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 372,960,559 shares outstanding as of February 2, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

LIST HEREUNDER THE DOCUMENTS FROM WHICH PARTS THEREOF HAVE BEEN INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH SUCH INFORMATION IS INCORPORATED:

Burlington Northern Santa Fe Corporation’s definitive Proxy Statement, to be filed not later than 120 days after the end of the fiscal year covered by this report                                         Part III

Table of Contents

Part I	Item 1. Business	3
	Item 1A. Risk Factors	4
	Item 1B. Unresolved Staff Comments	7
	Item 2. Properties	8
	Item 3. Legal Proceedings	15
	Item 4. Submission of Matters to a Vote of Security Holders	16
	Executive Officers of the Registrant	16
Part II	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
	Item 6. Selected Financial Data	18
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk	52
	Item 8. Financial Statements and Supplementary Data	54
	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	103
	Item 9A. Controls and Procedures	103
	Item 9B. Other Information	103
Part III	Item 10. Directors and Executive Officers of the Registrant	104
	Item 11. Executive Compensation	104
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
	Item 13. Certain Relationships and Related Transactions	105
	Item 14. Principal Accountant Fees and Services	105
Part IV	Item 15. Exhibits and Financial Statement Schedules	106
	Signatures	S-1
	Index to Exhibits	E-1

2

Part 1

Item 1. Business

Burlington Northern Santa Fe Corporation (BNSF or Company) was incorporated in the State of Delaware on December 16, 1994. On September 22, 1995, the stockholders of Burlington Northern Inc. (BNI) and Santa Fe Pacific Corporation (SFP) became the stockholders of BNSF pursuant to a business combination of the two companies.

On December 30, 1996, BNI merged with and into SFP. On December 31, 1996, The Atchison, Topeka and Santa Fe Railway Company (ATSF) merged with and into Burlington Northern Railroad Company (BNRR), and BNRR changed its name to The Burlington Northern and Santa Fe Railway Company. On January 2, 1998, SFP merged with and into The Burlington Northern and Santa Fe Railway Company. On January 20, 2005, The Burlington Northern and Santa Fe Railway Company changed its name to BNSF Railway Company (BNSF Railway).

Through its subsidiaries, BNSF is engaged primarily in the rail transportation business. At December 31, 2005, BNSF and its subsidiaries had approximately 40,000 employees. The rail operations of BNSF Railway, BNSF’s principal operating subsidiary, comprise one of the largest railroad systems in North America. BNSF Railway’s business and operations are described below.

BNSF’s Internet address is www.bnsf.com. Through this internet website (under the “Investors” link), BNSF makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as all amendments to those reports, as soon as reasonably practicable after these reports are electronically filed with or furnished to the Securities and Exchange Commission (SEC). Filing on Forms 3, 4 and 5 are also available on this website within one day after filing. BNSF’s annual CEO certification filed pursuant to the New York Stock Exchange’s Corporate Governance Listing Standards is filed as an exhibit to this Form 10-K. BNSF also makes available on its website other previously filed SEC reports, registration statements and exhibits via a link to the SEC’s website at www.sec.gov. The following documents are also made available on the Company’s website, and a copy will be mailed, without charge, upon request to Investor Relations:

• Code of Business Conduct and Ethics for Directors

• Code of Ethics for the Chief Executive Officer and Senior Financial Officers

• Code of Conduct for Salaried Employees

• Code of Business Conduct and Ethics for Scheduled Employees

• Corporate Governance Guidelines

• Charters of the Audit, Compensation and Development, and Directors and Corporate Governance Committees

Further discussion of the Company’s business, including equipment and business sectors, is incorporated by reference from Item 2, “Properties.”

3

Item 1A. Risk Factors

The Company faces intense competition from rail carriers and other transportation providers, and its failure to compete effectively could adversely affect its results of operations, financial condition or liquidity.

The Company operates in a highly competitive business environment. Depending on the specific market, the Company faces intermodal, intramodal, product and geographic competition. For example, the Company believes that high service truck lines, due to their ability to deliver non-bulk products on an expedited basis, have had and will continue to have an adverse effect on the Company’s ability to compete for deliveries of non-bulk, time-sensitive freight. While the Company must build or acquire and maintain its rail system, trucks and barges are able to use public rights-of-way maintained by public entities. Any material increase in the scope and quality of these alternative methods or the passage of legislation granting greater latitude to motor carriers with respect to size and weight restrictions could have an adverse effect on the Company’s results of operations, financial condition or liquidity.

A downturn in the economy or change in government policy could negatively impact demand for the Company’s services.

Significant, extended negative changes in economic conditions that impact the producers and consumers of the commodities transported by the Company may have an adverse effect on the Company’s operating results, financial condition or liquidity. In addition, changes in United States and foreign government policies could change the economic environment and affect demand for our services. For example, changes in clean air laws may impact demand for coal and United States and foreign government agriculture subsidies may impact the demand for grain.

As part of its railroad operations, the Company frequently transports chemicals and other hazardous materials.

The Company is required to transport these commodities to the extent of its common carrier obligation. An accidental release of these commodities could result in a significant loss of life and extensive property damage. The associated costs could have an adverse effect on the Company’s operating results, financial condition or liquidity.

Future acts of terrorism or war, as well as the threat of war, may cause significant disruptions in the Company’s business operations.

Terrorist attacks, such as those that occurred on September 11, 2001, as well as the more recent attacks on the transportation systems in Madrid and London, any government response to those types of attacks and war or risk of war may adversely affect the Company’s results of operations, financial condition or liquidity. The Company’s rail lines and facilities could be direct targets or indirect casualties of an act or acts of terror, which could cause significant business interruption and result in increased costs and liabilities and decreased revenues, which could have an adverse effect on its operating results and financial condition. Such effects could be magnified where releases of hazardous materials are involved. Any act of terror, retaliatory strike, sustained military campaign or war or risk of war may have an adverse impact on the Company’s operating results and financial condition by causing or resulting in unpredictable operating or financial conditions, including disruptions of rail lines, volatility or sustained increase of fuel prices, fuel shortages, general economic decline and instability or weakness of financial markets which could restrict its ability to raise capital. In addition, insurance premiums charged for some or all of the coverage currently maintained by the Company could increase dramatically or certain coverage may not be available to the Company in the future.

4

The Company is subject to stringent environmental laws and regulations which may impose significant costs on its business operations.

The Company’s operations are subject to extensive federal, state and local environmental laws and regulations concerning, among other things, emissions to the air; discharges to waters; the generation, handling, storage, transportation and disposal of waste and hazardous materials; and the cleanup of hazardous material or petroleum releases. In addition, many of the Company’s land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. Environmental liability can extend to previously owned or operated properties, leased properties and properties owned by third parties, as well as to properties currently owned and used by the Company. Environmental liabilities have arisen and may continue to arise from claims asserted by adjacent landowners or other third parties in toxic tort litigation. The Company has been and may continue to be subject to allegations or findings to the effect that it has violated, or is strictly liable under, these laws or regulations. The Company’s operating results, financial condition or liquidity could be adversely affected as a result of any of the foregoing, and it may be required to incur significant expenses to investigate and remediate environmental contamination. The Company records liabilities for environmental cleanup when the amount of its liability is both probable and reasonably estimable.

The Company’s future success depends on its ability to continue to comply with the significant federal, state and local governmental regulations to which it is subject.

The Company is subject to a significant amount of governmental regulation with respect to its rates and practices, railroad operations and a variety of health, safety, labor, environmental and other matters. Failure to comply with applicable laws and regulations could have a material adverse effect on the Company. Governments may change the legislative framework within which the Company operates without providing the Company with any recourse for any adverse effects that the change may have on its business. Also, some of the regulations require the Company to obtain and maintain various licenses, permits and other authorizations, and it cannot assure that it will continue to be able to do so. Increased economic regulation of the rail industry could negatively impact the Company’s ability to determine prices for rail services and to make capital improvements to its rail network, resulting in an adverse effect on the Company’s results of operations, financial condition or liquidity.

The availability of qualified personnel and an aging workforce may adversely affect the Company’s operations.

Changes in demographics, training requirements and the availability of qualified personnel, particularly train crew members, could negatively impact service levels. In addition, approximately 45 percent of the workforce will be eligible for retirement within the next 10 years. The Company’s efforts to attract and retain qualified personnel may be hindered due to increased demand in the job market. Unpredictable increases in demand for rail services may exacerbate these risks and may have an adverse effect on the Company’s operating results, financial condition or liquidity.

5

Most of the Company’s employees are represented by unions, and failure to successfully negotiate collective bargaining agreements may result in strikes, work stoppages, or substantially higher ongoing labor costs.

A significant majority of BNSF Railway’s employees are union-represented. BNSF Railway’s union employees work under collective bargaining agreements with various labor organizations. A negotiating process for new, major collective bargaining agreements covering all of BNSF Railway’s union employees has been underway since the bargaining round was initiated on November 1, 2004. Wages, health and welfare benefits, work rules and other issues have traditionally been addressed through industry-wide negotiations. These negotiations have generally taken place over an extended period of time and have previously not resulted in any extended work stoppages. The existing agreements have remained in effect and will continue to remain in effect until new agreements are reached or the Railway Labor Act’s procedures (which include mediation, cooling-off periods and the possibility of Presidential intervention) are exhausted. While the negotiations have not yet resulted in any extended work stoppages, if the Company is unable to negotiate acceptable new agreements, it could result in strikes by the affected workers, loss of business and increased operating costs as a result of higher wages or benefits paid to union members, any of which could have an adverse effect on the Company’s operating results, financial condition or liquidity.

Severe weather and natural disasters could disrupt normal business operations, which would result in increased costs and liabilities and decreases in revenues.

The Company’s success is dependent on its ability to operate its railroad system efficiently. Severe weather and natural disasters, such as tornados, flooding and earthquakes, could cause significant business interruptions and result in increased costs and liabilities and decreased revenues. In addition, damages to or loss of use of significant aspects of the Company’s infrastructure due to natural or man-made disruptions could have an adverse affect on the Company’s operating results, financial condition or liquidity for an extended period of time until repairs or replacements could be made. Extreme swings in weather could also negatively affect the performance of locomotives and rolling stock.

Fuel supply availability and fuel prices may adversely affect the Company’s results of operations, financial condition or liquidity.

Fuel supply availability could be impacted as a result of limitations in refining capacity, disruptions to the supply chain, or rising global demand. A significant reduction in fuel availability could impact the Company’s ability to provide transportation services at current levels, increase fuel costs and impact the economy. Each of these factors could have an adverse effect on the Company’s operating results, financial condition or liquidity. Additionally, the Company is expected to be able to offset a significant portion of the anticipated higher fuel costs through its fuel surcharge program and fuel hedging activities in 2006. However, to the extent that the Company is unable to maintain and expand its existing fuel surcharge program, increases in fuel prices could have an adverse effect on the Company’s operating results, financial condition or liquidity.

The Company depends on the stability and availability of its information technology systems.

The Company relies on information technology in all aspects of its business. A significant disruption or failure of its information technology systems could result in service interruptions, safety failures, security violations, regulatory compliance failures, and the inability to protect corporate information assets against intruders or other operational difficulties. Although the Company has taken steps to mitigate these risks, including Business Continuity Planning, Disaster Recovery Planning and Business Impact Analysis, a significant disruption could adversely affect the Company’s results of operations, financial condition or liquidity. Additionally, if the Company is unable to acquire or implement new technology, it may suffer a competitive disadvantage, which could also have an adverse effect on the Company’s results of operations, financial condition or liquidity.

6

Personal injury claims constitute a significant expense, and increases in the amount or severity of these claims could adversely affect the Company’s operating results.

The Company is subject to various personal injury claims by third parties and employees, including claims by employees who worked around asbestos until it was substantially eliminated by 1985. Personal injury claims by BNSF Railway employees are subject to the Federal Employees’ Liability Act (FELA), rather than state workers’ compensation laws. The Company believes that the FELA system, which includes unscheduled awards and a reliance on the jury system, has contributed to increased expenses in the past. Future events, such as increases in the number of claims that will be filed, developments in legislative and judicial standards and the costs of settling claims, could result in an adverse effect on the Company’s operating results.

Item 1B. Unresolved Staff Comments

None

7

Item 2. Properties

TRACK CONFIGURATION

BNSF Railway operates over a railroad system consisting of approximately 32,000 route miles of track (excluding second, third and fourth main tracks, yard tracks, and sidings), approximately 24,000 miles of which are owned route miles, including easements, in 28 states and two Canadian provinces as of December 31, 2005. Approximately 8,000 route miles of BNSF Railway’s system consist of trackage rights that permit BNSF Railway to operate its trains with its crews over other railroads’ tracks.

As of December 31, 2005, the total BNSF Railway system, including first, second, third and fourth main tracks, yard tracks, and sidings, consists of approximately 50,000 operated miles of track, all of which are owned by or held under easement by BNSF Railway except for approximately 9,000 route miles operated under trackage rights. At December 31, 2005, approximately 26,000 miles of BNSF Railway’s track consists of 112-pound per yard or heavier rail, including approximately 19,000 track miles of 131-pound per yard or heavier rail.

EQUIPMENT CONFIGURATION

BNSF Railway owned or had under non-cancelable leases exceeding one year the following units of railroad rolling stock and other equipment as of the dates shown below:

At December 31,	2005	2004	2003
Locomotives	5,790	5,715	5,377
Freight Cars:
Covered hopper	34,631	35,066	36,255
Gondola	12,579	16,070	15,327
Open hopper	10,973	11,257	10,866
Box-specially equipped	8,658	9,625	10,021
Flat	8,537	8,132	7,854
Refrigerator	4,983	5,420	5,427
Autorack	748	894	827
Tank	422	612	639
Box-general purpose	27	27	31
Other	323	273	302
Total freight cars	81,881	87,376	87,549
Domestic chassis	12,649	9,846	9,864
Domestic containers	10,412	10,501	10,627
Company service cars	4,091	3,999	4,028
Trailers	1,916	2,152	2,152
Commuter passenger cars	179	166	163
Average age from date of manufacture- locomotive fleet (years)a	15	15	15
Average age from date of manufacture- freight car fleet (years) a	15	16	16

a These averages are not weighted to reflect the greater capacities of the newer equipment.

8

CAPITAL EXPENDITURES AND MAINTENANCE

CAPITAL EXPENDITURES

The extent of the BNSF Railway’s maintenance and capacity program is outlined in the following table:

Year Ended December 31,	2006 Estimate	2005	2004	2003
Track miles of rail laid a	854	711	695	749
Cross ties inserted (thousands) a	3,314	3,171	2,695	2,353
Track resurfaced (miles)	14,528	12,790	11,450	12,399

a Includes both maintenance of existing route system and expansion projects. Expenditures for these maintenance programs are primarily capitalized.

A breakdown of the Company’s cash capital expenditures for the three years ended December 31, 2005, is incorporated by reference from a table in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the headings “Liquidity and Capital Resources; Investing Activities.”

BNSF’s planned 2006 cash capital expenditures are incorporated by reference from Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the headings “Executive Summary; Business Outlook for 2006.”

MAINTENANCE

As of December 31, 2005, General Electric Company, Alstom Transportation Inc., OmniTRAX Locomotive Services, LLC and Electro-Motive Diesel, Inc. performed locomotive maintenance and overhauls for BNSF Railway at its facilities under various maintenance agreements that covered approximately 4,080 locomotives.

PROPERTY AND FACILITIES

BNSF Railway operates various facilities and equipment to support its transportation system, including its infrastructure and locomotives and freight cars as previously described. It also owns or leases other equipment to support rail operations, including highway trailers, containers and vehicles. Support facilities for rail operations include yards and terminals throughout its rail network, system locomotive shops to perform locomotive servicing and maintenance, a centralized network operations center for train dispatching and network operations monitoring and management in Fort Worth, Texas, regional dispatching centers, computers, telecommunications equipment, signal systems, and other support systems. Transfer facilities are maintained for rail-to-rail as well as intermodal transfer of containers, trailers and other freight traffic. These facilities include 33 major intermodal hubs located across the system. BNSF Railway’s largest intermodal facilities in terms of 2005 volume were as follows:

Intermodal Facilities	Lifts
Hobart Yard (Los Angeles, California)	1,338,000
Willow Springs (Illinois)	770,000
Corwith Yard (Chicago, Illinois)	730,000
Alliance (Fort Worth, Texas)	573,000
San Bernardino (California)	555,000
Cicero (Illinois)	522,000
Logistics Park Chicago (Illinois)	454,000
Argentine (Kansas City, Kansas)	317,000

BNSF Railway owns 23 automotive distribution facilities and serves eight port facilities where automobiles are loaded or unloaded from multi-level rail cars in the United States and Canada.

9

BNSF Railway’s largest freight car classification yards based on the average daily number of cars processed (excluding cars that do not change trains at the terminal and intermodal and coal cars) are shown below:

Classification Yard	Daily Average Cars Processed
Argentine (Kansas City, Kansas)	1,795
Galesburg (Illinois)	1,653
Pasco (Washington)	1,393
Barstow (California)	1,384
Memphis (Tennessee)	962

As of December 31, 2005, certain BNSF Railway properties and other assets are subject to liens securing $384 million of mortgage debt. Certain locomotives and rolling stock of BNSF Railway are subject to equipment obligations and leases, as referred to in Notes 9 and 10 of the Consolidated Financial Statements.

PRODUCTIVITY

Productivity in 2005, as measured by thousand gross ton miles per employee, was relatively consistent with 2004 as shown in the table below. Gross ton miles is defined as the product of the number of loaded and empty miles traveled and the combined weight of the car and contents.

Year Ended December 31,	2005	2004	2003
Thousand gross ton miles divided by average number of employees	26,847	26,898	24,875

Volumes as measured by gross ton miles increased 5 percent in 2005 over 2004 and 11 percent in 2004 over 2003. In turn, the increase in volumes has led the Company to increase employee headcounts. A discussion of Employees and Labor Relations is incorporated by reference from Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Other Matters; Employee and Labor Relations.”

BUSINESS MIX

In serving the Midwest, Pacific Northwest and the Western, Southwestern, and Southeastern regions and ports of the country, BNSF Railway transports, through one operating transportation services segment, a range of products and commodities derived from manufacturing, agricultural and natural resource industries. Approximately 65 percent of the freight revenues originated by the Company is covered by contractual agreements of varying duration, while the balance is subject to common carrier, published prices or quotations offered by the Company. BNSF’s financial performance is influenced by, among other things, general and industry economic conditions at the international, national and regional levels. The following map illustrates the Company’s primary routes, including trackage rights, which allow BNSF Railway to access major cities and ports in the western United States as well as Canadian and Mexican traffic. In addition to major cities and ports, BNSF Railway efficiently serves many smaller markets by working closely with approximately 200 shortline partners. BNSF has also entered into marketing agreements with Canadian National Railway Company and Kansas City Southern Railway Company, expanding the marketing reach for each railroad and their customers.

10

CONSUMER PRODUCTS:

The Consumer Products’ freight business provided approximately 41 percent of freight revenues in 2005 and consisted of the following business sectors:

• INTERNATIONAL INTERMODAL – International business consists primarily of container traffic from steamship companies such as Maersk, Evergreen and Hyundai. International Intermodal accounted for approximately 41 percent of total Consumer Products revenues.

• DOMESTIC INTERMODAL – Domestic Intermodal generated approximately 44 percent of total Consumer Products revenue. The Domestic Intermodal sector is comprised of the following business areas:

• TRUCKLOAD – This business area is comprised of full truckload carriers such as J.B. Hunt Transportation, Schneider National, U.S. Xpress Enterprises and Swift.

• DIRECT – This business area is comprised of less-than-truckload carriers and parcel carriers such as United Parcel Service and YRC Worldwide, Inc.

• INTERMODAL MARKETING COMPANIES – This business area is comprised of shipper agents and consolidators such as the Hub Group.

• AUTOMOTIVE – The transportation of both assembled motor vehicles and shipments of vehicle parts to numerous destinations throughout the Midwest, Southwest, West and Pacific Northwest provided about 8 percent of total Consumer Products revenues.

• PERISHABLES AND DRY BOXCAR – Perishables and Dry Boxcar represented approximately 7 percent of total Consumer Products revenues. This group consists of beverages, canned goods and perishable food items. Other consumer goods handled include cotton, salt, rubber and tires, and miscellaneous boxcar shipments.

11

INDUSTRIAL PRODUCTS:

Industrial Products’ freight business provided approximately 23 percent of BNSF’s freight revenues in 2005 and consisted of the following four business areas:

• BUILDING PRODUCTS – This sector generated approximately 39 percent of total 2005 Industrial Products revenues and includes primary forest product commodities such as lumber, plywood, oriented strand board, particleboard, paper products, pulpmill feedstocks, wood pulp and sawlogs. Also included in this sector are government, machinery and waste traffic. Commodities from this diverse group primarily originate from the Pacific Northwest, Western Canada, upper Midwest, and the Southeast for shipment mainly into domestic markets. Industries served include construction, furniture, photography, publishing, newspaper and industrial packaging. Shipments of waste, ranging from municipal waste to contaminated soil, are transported to landfills and reclamation centers across the country. The government and machinery business includes aircraft parts, agricultural and construction machinery, military equipment and large industrial machinery.

• CONSTRUCTION PRODUCTS – The construction products sector represented approximately 34 percent of total Industrial Products revenues in 2005. This sector serves virtually all of the commodities included in or resulting from the production of steel along with mineral commodities such as clays, sands, cements, aggregates, sodium compounds and other industrial minerals. Industrial taconite, an iron ore derivative produced in northern Minnesota, scrap steel and coal coke are BNSF Railway’s primary input products transported. Finished steel products range from structural beams and steel coils to wire and nails. BNSF Railway links the integrated steel mills in the East with fabricators in the West and Southwest. Service is also provided to various mini-mills in the Southwest that produce rebar, beams and coiled rod for the construction industry. Industrial minerals include various mined and processed commodities such as cement and aggregates (construction sand, gravel and crushed stone) that generally move to domestic markets for use in general construction and public work projects, including highways. Borates and clays move to domestic points as well as to export markets primarily through West Coast ports. Sodium compounds, primarily soda ash, are moved to domestic markets for use in the manufacturing of glass and other industrial products. Sand is utilized in the manufacturing of glass and in foundry and oil drilling applications.

• CHEMICALS AND PLASTICS – The chemicals and plastics sector represented approximately 14 percent of total 2005 Industrial Products revenues. This group is composed of industrial chemicals and plastics commodities. These commodities include caustic soda, chlorine, industrial gases, acids, polyethylene, polypropylene and polyvinyl chloride. Industrial chemicals and plastics resins are used by the automotive, housing, and packaging industries, as well as for feedstocks, to produce other chemical and plastic products. These commodities originate primarily in the Gulf Coast region for shipment mainly into domestic markets.

• PETROLEUM – Commodities included in the petroleum sector are liquefied petroleum gas (LPG), diesel fuels, asphalt, alcohol, solvents, petroleum coke, lubes, oils, waxes and carbon black, which made up 13 percent of total Industrial Products revenues for 2005. Product use varies based on commodity, and includes the use of LPG for heating purposes, diesel fuel and lubes to run heavy machinery and asphalt for road projects and roofing. Products within this group originate and terminate throughout the BNSF network, with the largest areas of activities being the Texas Gulf, Pacific Northwest, California, Montana and Illinois.

12

COAL:

In 2005, the transportation of coal contributed about 19 percent of freight revenues. BNSF Railway is the largest transporter of low-sulfur coal originating from the Powder River Basin of Wyoming and Montana, which accounted for approximately 93 percent of all BNSF Railway’s coal tons during the year ended December 31, 2005. These coal shipments were destined for coal-fired electric generating stations located primarily in the North Central, South Central, Southeast and Mountain regions of the United States. BNSF Railway also transports coal from the Powder River Basin to markets in Canada and the eastern United States. Demand for Powder River Basin coal has increased substantially over the past 20 years due to environmental compliance issues, abundant reserves, relatively inexpensive mine production and competitive delivered cost to power plants.

Other BNSF coal shipments originate principally in Colorado, Illinois, New Mexico and North Dakota. These shipments move to electrical generating stations and industrial plants in the Mountain and North Central regions of the United States and to Mexico.

AGRICULTURAL PRODUCTS:

The transportation of Agricultural Products provided approximately 17 percent of 2005 total freight revenues and includes wheat, corn, bulk foods, soybeans, oil seeds and meals, feeds, barley, oats and rye, flour and mill products, milo, oils, specialty grains, malt, ethanol and fertilizer. The BNSF Railway system is strategically located to serve the grain-producing regions of the Midwest and Great Plains. The Company is developing and operating a shuttle network for grain and grain products, which allows more efficient use of equipment and improved cycle times. In addition to serving most grain-producing areas, BNSF Railway serves most major terminal, storage, feeding and food-processing locations. Furthermore, BNSF Railway has access to major export markets in the Pacific Northwest, western Great Lakes, Texas Gulf and Mexico.

FREIGHT STATISTICS:

The following table sets forth certain freight statistics relating to rail operations for the periods indicated:

Year Ended December 31,	2005		2004		2003
Revenue ton miles (millions)*		596,575		570,688		508,200
Freight revenue per thousand revenue ton miles	$	21.13	$	18.82	$	18.27
Average length of haul (miles)		1,068		1,045		1,014

* Revenue ton miles is defined as the product of the number of loaded miles traveled and the weight of the contents.

Revenue, cars/units and average revenue per car/unit information for the three years ended December 31, 2005, is incorporated by reference from a table in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the headings “Results of Operations; Revenue Table.”

GOVERNMENT REGULATION AND LEGISLATION

The Company is subject to federal, state and local laws and regulations generally applicable to all businesses. Rail operations are subject to the regulatory jurisdiction of the Surface Transportation Board (STB) of the United States Department of Transportation (DOT), the Federal Railroad Administration of the DOT, the Occupational Safety and Health Administration (OSHA), as well as other federal and state regulatory agencies. The STB has jurisdiction over disputes and complaints involving certain rates, routes and services, the sale or abandonment of rail lines, applications for line extensions and construction, and consolidation or merger with, or acquisition of control of, rail common carriers. The outcome of STB proceedings can affect the profitability of BNSF’s business.

13

DOT and OSHA have jurisdiction under several federal statutes over a number of safety and health aspects of rail operations, including the transportation of hazardous materials. State agencies regulate some aspects of rail operations with respect to health and safety in areas not otherwise preempted by federal law.

BNSF Railway’s rail operations, as well as those of its competitors, are also subject to extensive federal, state and local environmental regulation. These laws cover discharges to water, air emissions, toxic substances, and the generation, handling, storage, transportation and disposal of waste and hazardous materials. This regulation has the effect of increasing the cost and liabilities associated with rail operations. Environmental risks are also inherent in rail operations, which frequently involve transporting chemicals and other hazardous materials.

Many of BNSF Railway’s land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. As a result, BNSF Railway is now subject to, and will from time to time continue to be subject to, environmental cleanup and enforcement actions. In particular, the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), also known as the Superfund law, generally imposes joint and several liability for cleanup and enforcement costs on current and former owners and operators of a site, without regard to fault or the legality of the original conduct. Accordingly, BNSF Railway may be responsible under CERCLA and other federal and state statutes for all or part of the costs to clean up sites at which certain substances may have been released by BNSF Railway, its current lessees, former owners or lessees of properties, or other third parties. Further discussion is incorporated by reference from Note 10 of the Consolidated Financial Statements.

RAILROAD RETIREMENT

Railroad industry personnel are covered by the Railroad Retirement System instead of Social Security. BNSF Railway’s contributions under the Railroad Retirement System have been approximately triple those in industries covered by Social Security. The Railroad Retirement System, funded primarily by payroll taxes on covered employers and employees, includes a benefit roughly equivalent to Social Security (Tier I), an additional benefit similar to that allowed in some private defined-benefit plans (Tier II), and other benefits. For 2005, the Railroad Retirement System required up to a 20.25 percent contribution by railroad employers on eligible wages, while the Social Security and Medicare Acts only required a 7.65 percent contribution on similar wage bases.

COMPETITION

The business environment in which BNSF Railway operates is highly competitive. Depending on the specific market, deregulated motor carriers, other railroads and river barges may exert pressure on price and service levels. The presence of advanced, high service truck lines with expedited delivery, subsidized infrastructure and minimal empty mileage continues to affect the market for non-bulk, time-sensitive freight. The potential expansion of longer combination vehicles could further encroach upon markets traditionally served by railroads. In order to remain competitive, BNSF Railway and other railroads continue to develop and implement operating efficiencies to improve productivity.

As railroads streamline, rationalize and otherwise enhance their franchises, competition among rail carriers intensifies. BNSF Railway’s primary rail competitor in the western region of the United States is the Union Pacific Railroad Company (UP). Other Class I railroads and numerous regional railroads and motor carriers also operate in parts of the same territories served by BNSF Railway.

Based on weekly reporting to the Association of American Railroads, BNSF’s share of the western United States rail traffic in 2005 was approximately 48 percent.

14

Item 3. Legal Proceedings

Ray Ridgeway, et al. v. Burlington Northern Santa Fe Corporation and The Burlington Northern and Santa Fe Railway Company, No. 48-185170-00 (District Court of Tarrant County, Texas, 48th Judicial District) is a state court action filed on October 27, 2000. The plaintiffs’ causes of action include alleged breach of contract, negligence, and breach of fiduciary duties with respect to a special dividend that was paid in 1988 by a BNSF predecessor, Santa Fe Southern Pacific Corporation (SFSP). The complaint alleges that SFSP erroneously informed shareholders as to the tax treatment of the dividend–specifically, the apportionment of the dividend as either a distribution of earnings and profits or a return of capital–which allegedly caused some shareholders to overpay their income taxes. The plaintiffs assert, through their expert’s report, that SFSP had essentially no accumulated earnings and profits and that the entire dividend distribution should have been treated as a return of capital, rather than the approximately 34 percent that SFSP determined was a return of capital. On July 8, 2005, the court entered an order denying the plaintiffs’ requests to certify a class action, and the plaintiffs subsequently filed an appeal of this ruling to the Texas Court of Appeals. BNSF believes these claims lack merit and that it has substantial defenses on both the merits of these claims and the attempted class action, and it is defending these claims vigorously.

BNSF Railway was notified by the Minnesota Pollution Control Agency (MPCA) of a proposed Stipulation Agreement to resolve alleged environmental violations with respect to BNSF Railway’s Dilworth, Minnesota fueling facility. The MPCA alleges violations involving BNSF Railway’s wastewater permit, tank regulations, and hazardous waste regulations. In October 2005, the MPCA presented BNSF Railway with proposed monetary sanctions. Although the parties are negotiating a settlement, it is possible that resolution of this matter could result in monetary sanctions exceeding $100,000.

Information concerning certain pending tax-related administrative or adjudicative state proceedings or appeals is incorporated by reference from Note 5 of the Consolidated Financial Statements, and information concerning other claims and litigation is incorporated by reference from Note 10 of the Consolidated Financial Statements.

15

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted by BNSF to a vote of its securities holders during the fourth quarter of 2005.

EXECUTIVE OFFICERS OF THE REGISTRANT

Listed below are the names, ages, and positions of all executive officers of BNSF and their business experience during the past five years. Executive officers hold office until their successors are elected or appointed, or until their earlier death, retirement, resignation, or removal.

MATTHEW K. ROSE, 46

Chairman, President and Chief Executive Officer of BNSF since March 2002. Previously President and Chief Executive Officer of BNSF from December 2000. Also, Chairman, President and Chief Executive Officer of BNSF Railway from December 2000.

THOMAS N. HUND, 52

Executive Vice President and Chief Financial Officer since January 2001. Prior to that, Senior Vice President and Chief Financial Officer and Treasurer from August 1999.

CARL R. ICE, 49

Executive Vice President and Chief Operations Officer since January 2001. Prior to that, Senior Vice President-Operations from June 1999.

JOHN P. LANIGAN, JR., 50

Executive Vice President and Chief Marketing Officer since January 2003. Prior to that, President and Chief Executive Officer of Logistics.com, Inc. (provider of ASP-based transportation procurement services to shippers and carriers) from May 2000.

JEFFREY R. MORELAND, 61

Executive Vice President Law & Government Affairs and Secretary since December 2001. Prior to that, Executive Vice President-Law and Chief of Staff since January 2001, and Senior Vice President-Law and Chief of Staff since February 1998.

PETER J. RICKERSHAUSER, 57

Vice President-Network Development since May 1999.

16

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

BNSF’s common stock is listed on the New York Stock Exchange under the symbol “BNI.” In 2005, the Company decided to de-list its common stock from the Chicago Stock Exchange and the Pacific Exchange, effective December 31, 2005, due to low trading volume and regulatory compliance costs. Information as to the high and low sales prices of such stock for the two years ending December 31, 2005, and the frequency and amount of dividends declared on such stock during such periods, is set forth in Note 17 of the Consolidated Financial Statements. The approximate number of holders of record of the common stock at February 2, 2006, was 35,000.

COMMON STOCK REPURCHASES

The following table presents repurchases by the Company of its common stock for each of the three months for the quarter ended December 31, 2005 (shares in thousands):

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchaseda	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programsb	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programsb
October 1 – 31	37	$	60.12	—	5,160
November 1 – 30	1,625		63.89	1,597	3,563
December 1 – 31	1,840		66.38	1,800	31,763
Total	3,502	$	65.15	3,397

a Total number of shares purchased includes approximately 105,000 shares where employees delivered already owned shares or used an attestation procedure to satisfy the exercise price of stock options or the withholding of tax payments. Total number of shares purchased does not include approximately 35,000 shares acquired from employees to satisfy tax withholding obligations that arose on the vesting of restricted stock or the exercise of stock options.

b On July 17, 1997, the Board initially authorized and the Company announced the repurchase of up to 30 million shares of the Company’s common stock from time to time through open market transactions or otherwise. On December 9, 1999, April 20, 2000, September 21, 2000, January 16, 2003 and December 8, 2005, the Board authorized extensions of the BNSF share repurchase program, adding 30 million shares at each date for a total of 180 million shares authorized. The share repurchase program does not have an expiration date.

17

Item 6. Selected Financial Data

The following table presents, as of and for the dates indicated, selected historical financial information for the Company (dollars in millions, except per share data):

December 31,	2005			2004			2003			2002			2001
For the year ended:
Revenues	$	12,987		$	10,946		$	9,413		$	8,979		$	9,208
Operating income	$	2,922	a	$	1,686	b	$	1,665		$	1,656		$	1,750
Income before cumulative effect of accounting change	$	1,531	a	$	791	b	$	777	c	$	760		$	731
Basic earnings per share (before cumulative effect of accounting change)	$	4.12	a	$	2.14	b	$	2.10	c	$	2.01		$	1.89
Average basic shares (in millions)		371.8			370.0			369.1			378.0			387.3
Diluted earnings per share (before cumulative effect of accounting change)	$	4.01	a	$	2.10	b	$	2.09	c	$	2.00		$	1.87
Average diluted shares (in millions)		381.8			376.6			372.3			380.8			390.7
Dividends declared per common share	$	0.74		$	0.64		$	0.54		$	0.48		$	0.48
At year end:
Total assets	$	30,304		$	28,925		$	26,947		$	25,767		$	24,721
Long-term debt and commercial paper, including current portion	$	7,154		$	6,516		$	6,684		$	6,814		$	6,651
Stockholders’ equity	$	9,508		$	9,311		$	8,495		$	7,932		$	7,849
Net debt to total capitalization d		42.7	%		39.9	%		44.0	%		46.1	%		45.8	%
For the year ended:
Total capital expenditures	$	1,750		$	1,527		$	1,726		$	1,358		$	1,459
Depreciation and amortization	$	1,075		$	1,012		$	910		$	931		$	909

a 2005 operating income, income before cumulative effect of accounting change and earnings per share include a loss related to an agreement to sell certain line segments to the state of New Mexico in the future of $71 million pre-tax, $44 million net of tax, or $0.12 per basic and diluted share.

b 2004 operating income, income before cumulative effect of accounting change and earnings per share include a charge for a change in estimate of unasserted asbestos and environmental liabilities of $465 million pre-tax, $288 million net of tax, or $0.78 per basic share and $0.77 per diluted share, as described in Note 10 of the Consolidated Financial Statements.

c 2003 income before cumulative effect of accounting change excludes the favorable cumulative effect of an accounting change of $39 million, net of tax, or $0.11 per basic share and $0.10 per diluted share, as described in Note 2 of the Consolidated Financial Statements.

d Net debt is calculated as total debt less cash and cash equivalents, and total capitalization is calculated as the sum of net debt and total stockholders’ equity.

18

CALCULATION OF RETURN ON INVESTED CAPITAL

BNSF’s return on invested capital (ROIC), as discussed in the “Letter from the Chairman, President, and Chief Executive Officer” in the Company’s 2005 Annual Report, is a non-GAAP measure and should be considered in addition to, but not as a substitute or preferable to, other information prepared in accordance with GAAP. However, the information is included herein as management believes that ROIC provides meaningful information that can be useful in assessing the long-term performance of the Company’s business and in evaluating potential strategic transactions. Below is the calculation of ROIC for the years ended December 31, 2005, 2004 and 2003.

Year ended December 31,	2005			2004			2003
Average capitalizationa	$	19,831		$	19,069		$	18,409
Operating income	$	2,922		$	1,686		$	1,665
Other expense		(37	)		(4	)		(14	)
Financing chargesb		305			274			262
Exclude 2004 charge for change in estimate of unasserted asbestos and environmental liabilities		—			465			—
Taxesc		(1,196	)		(917	)		(707	)
After-tax income excluding financing charges and 2004 charge	$	1,994		$	1,504		$	1,206
Return on invested capitald		10.1	%		7.9	%		6.6	%

a Average capitalization is calculated as the average of the sum of stockholders’ equity, net debt (total debt less cash and cash equivalents), the net present value of future operating lease commitments, and the receivables sold under the accounts receivable sales program for the most recent preceding 13 month ends.

b Financing charges represent the estimated interest expense included in operating lease payments and A/R sales fees.

c Taxes are calculated as the sum of monthly operating income, other expense, A/R sales, and an operating lease interest factor (estimated interest expense included in operating lease payments) multiplied by a federal tax rate respective to each month.

d Return on invested capital is calculated as the total after-tax income excluding financing charges and 2004 charge divided by average capitalization.

19

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis relates to the financial condition and results of operations of Burlington Northern Santa Fe Corporation and its majority-owned subsidiaries (collectively BNSF, Registrant or Company). The principal operating subsidiary of BNSF is the BNSF Railway Company (BNSF Railway) through which BNSF derives substantially all of its revenues. All earnings per share information is stated on a diluted basis.

COMPANY OVERVIEW

Through its subsidiaries, BNSF is engaged primarily in the rail transportation business. The rail operations of BNSF’s primary operating subsidiary, BNSF Railway, comprise one of the largest railroad networks in North America, with 32,000 route miles in 28 states and two Canadian provinces. Through one operating transportation services segment, BNSF Railway transports a wide range of products and commodities including Consumer Products, Industrial Products, Coal and Agricultural Products.

Additional operational information, including weekly intermodal and carload unit reports as submitted to the American Association of Railroads and annual reports submitted to the Surface Transportation Board, are available on the Company’s website at www.bnsf.com/investors.

EXECUTIVE SUMMARY

FISCAL YEAR 2005 – FINANCIAL OVERVIEW

• The Company achieved record earnings of $4.01 per share, which included a $0.12 per share after tax loss related to an agreement to sell certain line segments to the state of New Mexico, compared with 2004 earnings of $2.10 per share, which included a third-quarter charge for a change in estimate of unasserted asbestos and environmental liabilities totaling $0.77 per share after tax.

• Freight revenues increased 17 percent compared with 2004, to $12.6 billion, a record for annual revenues.

• The 17 percent increase in revenue is attributable to growth in unit volumes, rates and surcharges, partially offset by a slight decrease of 1 percent due to business mix.

• Operating expenses for 2005 increased 9 percent compared with 2004, primarily due to an increase in volumes, higher fuel costs and a $71 million pre-tax loss related to an agreement to sell certain line segments to the state of New Mexico, partially offset by lower asbestos and environmental costs due to the $465 million pre-tax charge in 2004 related to a change in BNSF’s estimates of unasserted asbestos and environmental liabilities.

• Operating income increased to nearly $3.0 billion, an all-time record for the Company.

• Each year capital expenditures are a significant use of cash for BNSF. In 2005, BNSF increased its cash capital expenditures to $1.75 billion from $1.53 billion in the prior year primarily due to additional expansion projects in 2005.

• Moody’s Investors Service affirmed the ratings of BNSF’s senior unsecured debt at Baa2 and changed the outlook to positive from stable in August of 2005.

BUSINESS OUTLOOK FOR 2006

• BNSF expects to see strong revenue growth in the 10 to 13 percent range in freight revenues. Half of the revenue growth is anticipated to be driven by volume, and the remainder is expected from pricing and fuel surcharges.

20

• Coal and intermodal are expected to lead the trend of strong unit growth.

• Combining projected revenue growth with an ongoing focus on productivity, earnings per share is anticipated to grow in the mid-teens despite operating income being negatively impacted by the combination of fuel prices, hedges and fuel surcharge recoveries.

• The Company anticipates that the operating ratio (calculated as operating expenses less other revenues divided by freight revenues) will be below 77 percent.

• The Company plans to increase its capital commitment program to approximately $2.4 billion in 2006, which includes both cash spent for capital and locomotive leases. Compared with 2005, this represents an increase of approximately 10 percent.

• Capital commitments are increasing to meet projected future demand, while the Company anticipates improving its return on invested capital.

• BNSF anticipates spending $1.4 billion to keep its infrastructure strong by replacing track, signal systems and structures; rebuilding rolling stock; and implementing new technology.

• BNSF also plans to acquire 310 locomotives at a cost of approximately $550 million.

• The Company anticipates investing approximately $400 million in track and facilities to expand capacity.

21

RESULTS OF OPERATIONS

REVENUE TABLE

The following table presents BNSF’s revenue information by commodity group for the years ended December 31, 2005, 2004 and 2003:

	Revenues (in millions)						Cars / units (in thousands)			Average revenue per car / unit
Year ended December 31,	2005		2004		2003		2005	2004	2003	2005		2004		2003
Consumer Products	$	5,156	$	4,245	$	3,657	5,306	4,859	4,336	$	972	$	874	$	843
Industrial Products		2,871		2,448		2,138	1,564	1,561	1,428		1,836		1,568		1,497
Coal		2,448		2,277		2,025	2,238	2,216	2,048		1,094		1,028		989
Agricultural Products		2,131		1,772		1,465	916	900	834		2,326		1,969		1,757
Total freight revenues		12,606		10,742		9,285	10,024	9,536	8,646	$	1,258	$	1,126	$	1,074
Other revenues		381		204		128
Total operating revenues	$	12,987	$	10,946	$	9,413

EXPENSE TABLE

The following table presents BNSF’s expense information for the years ended December 31, 2005, 2004, and 2003 (in millions):

Year Ended December 31,	2005		2004			2003
Compensation and benefits	$	3,515	$	3,322		$	2,963
Fuel		1,959		1,335			1,093
Purchased services		1,714		1,424			1,252
Depreciation and amortization		1,075		1,012			910
Equipment rents		886		790			705
Materials and other		916		1,377	a		825
Total operating expenses	$	10,065	$	9,260		$	7,748
Interest expense	$	437	$	409		$	420
Other expense, net	$	37	$	4		$	14
Income tax expense	$	917	$	482		$	454

a 2004 materials and other expense includes a $465 million pre-tax charge related to changes in estimates of the Company’s unasserted asbestos and environmental liabilities (see Note 10 of the Consolidated Financial Statements).

YEAR ENDED DECEMBER 31, 2005 COMPARED WITH YEAR ENDED DECEMBER 31, 2004

BNSF recorded net income for 2005 of $1,531 million, or $4.01 per share, which included a $0.12 per share loss related to an agreement to sell certain line segments to the state of New Mexico (see Item 7, Management’s Discussion and Analysis of Financial Position and Results of Operations under the heading “New Mexico Department of Transportation”). In comparison, net income for 2004 was $791 million, or $2.10 per share, which included a $288 million, net of tax, or $0.77 per share charge for a change in the Company’s estimate of unasserted asbestos liabilities and environmental liabilities (see Note 10 of the Consolidated Financial Statements).

22

REVENUES

FREIGHT

Freight revenues of $12,606 million for 2005 were $1,864 million, or 17 percent, higher than 2004. Freight revenues were up due to a 5 percent increase in volumes, despite a decrease in car velocity from 199 miles per day in 2004 to approximately 190 miles per day in 2005. Freight revenues in 2005 included fuel surcharges of approximately $1.1 billion compared with approximately $350 million in the prior year. Growth in rates and fuel surcharges drove average revenue per car/unit up 12 percent in 2005 to $1,258 from $1,126 in 2004.

CONSUMER PRODUCTS The Consumer Products’ freight business consists of the following business areas: international intermodal, domestic intermodal, automotive, and perishables and dry boxcar. Consumer Products revenues of $5,156 million for 2005 were $911 million, or 22 percent, greater than 2004. The increase in Consumer Products revenues was strong in all sectors. The increase in average revenue per unit of 11 percent was primarily related to rate increases and increased fuel surcharges.
INDUSTRIAL PRODUCTS Industrial Products’ freight business consists of four business areas: building products, construction products, chemicals and plastic products, and petroleum products.
Industrial Products revenues increased $423 million, or 17 percent, to $2,871 million for 2005. The revenue increase was primarily due to increased lumber, panel and paper traffic in the building products sector, as well as increased traffic in petroleum products, partially offset by decreased volumes in waste products in the building products sector as well as steel and taconite in the construction products sector. Rate increases along with increased fuel surcharges contributed to a 17 percent increase in average revenue per car.

COAL

BNSF is one of the largest transporters of low-sulfur coal in the United States. Approximately 93 percent of all BNSF Railway’s coal tons originate from the Powder River Basin of Wyoming and Montana.

Coal revenues of $2,448 million for 2005 increased $171 million, or 8 percent, versus a year ago. Coal volumes increased slightly as a result of new customer business and higher demand from existing customers, partially offset by weather-related operational and maintenance disruptions in the Powder River Basin. Average revenue per car increased 6 percent primarily driven by contractual rate escalations and increased average length of haul.

AGRICULTURAL PRODUCTS The Agricultural Products’ freight business transports agricultural products including corn, wheat, soybeans, bulk foods, fertilizer and other products.
Agricultural Products revenues of $2,131 million for 2005 were $359 million, or 20 percent, higher than revenues for 2004. Average revenue per car increased 18 percent primarily driven by mix as a result of strong exports out of the Pacific Northwest, price increases and increased fuel surcharges.

23

OTHER REVENUES

Other Revenues increased $177 million, or 87 percent, to $381 million for 2005 compared to 2004. This increase was primarily attributable to increases in storage-related revenues and volume growth, in addition to the acquisitions and volume growth of BNSF Logistics, a wholly-owned non-rail subsidiary that specializes in providing third-party logistic services.

EXPENSES

Total operating expenses for 2005 were $10,065 million, an increase of $805 million, or 9 percent, over 2004. The increase in operating expenses was the result of significant fuel price increases, a 5-percent increase in gross-ton miles handled and a $71 million pre-tax loss related to an agreement to sell certain line segments to the state of New Mexico, offset by lower asbestos and environmental costs due to the $465 million pre-tax charge taken in 2004 to reflect changes in the Company’s estimate of unasserted asbestos liabilities and environmental liabilities.

COMPENSATION AND BENEFITS

Compensation and benefits includes expenses for BNSF employee compensation and benefit programs. The primary factors influencing the expenses recorded are volume, headcount, utilization, wage rates, incentives earned during the period, benefit plan participation as well as pension-related expenses.

Compensation and benefits expenses of $3,515 million were $193 million, or 6 percent, higher than 2004. The increase was primarily related to the significant increase in freight volumes experienced in 2005. The increases in freight volumes drove an increase in crew training costs and an approximate 5 percent increase in employee headcount.

FUEL

Fuel expense is driven by market price, the level of locomotive consumption of diesel fuel and the effects of hedging activities.

Fuel expenses of $1,959 million for 2005 were $624 million, or 47 percent, higher than 2004. The increase in fuel expense is due to an increase in the average all-in cost per gallon of diesel fuel, as well as an increase in consumption driven by higher volumes. The average all-in cost per gallon of diesel fuel increased by 40 cents, or $566 million, which is comprised of an increase in the average purchase price of 53 cents, or $759 million, partially offset by an increase in the hedge benefit of 13 cents, or $193 million (2005 benefit of $531 million less 2004 benefit of $338 million). Consumption in 2005 was 1,402 million gallons compared with 1,344 million gallons in 2004, resulting in a $58 million increase in fuel expense.

In the future, benefits from hedging activities are expected to decrease as the Company increases its fuel surcharge program. When compared to 2005, operating income is expected to be negatively impacted by the combination of fuel prices, hedges and fuel surcharge recoveries.

24

PURCHASED SERVICES

Purchased services expense includes ramping (lifting of containers onto and off of cars); drayage (highway movements to and from railway facilities); maintenance of locomotives, freight cars and equipment; transportation costs over other railroads; technology services outsourcing; professional services; and other contract services provided to BNSF. Purchased services expense also includes purchased transportation costs for BNSF Logistics. The expenses are driven by the rates established in the related contracts and the volume of services required.

Purchased services expenses of $1,714 million for 2005 were $290 million, or 20 percent, higher than 2004. This increase was primarily due to increases in the following volume-related costs: approximately $75 million higher intermodal ramp costs; approximately $70 million higher locomotive, freight car and equipment maintenance expense; approximately $45 million higher purchased transportation costs for BNSF Logistics and approximately $30 million higher payments for transportation over other railroads.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expenses for the period are determined by using the group method of depreciation, applying a single rate to the gross investment in a particular class of property. Due to the capital-intensive nature of BNSF’s operations, depreciation expense is a significant component of the Company’s operating expense. The full effect of inflation is not reflected in operating expenses since depreciation is based on historical cost.

Depreciation and amortization expenses of $1,075 million for 2005 were $63 million, or 6 percent, higher than 2004. This increase was primarily due to ongoing capital expenditures.

EQUIPMENT RENTS

Equipment rents expense includes long-term and short-term payments primarily for locomotives, freight cars, containers and trailers. Variances in expense are driven primarily by volume, lease and rental rates, utilization of equipment and changes in business mix resulting in equipment usage variances.

Equipment rents expenses for 2005 of $886 million were $96 million, or 12 percent, higher than 2004. Expense increases of $70 million for freight car equipment and $26 million for locomotive leases were driven by increases in units resulting from significant volume increases as well as higher lease rates.

MATERIALS AND OTHER

Material expenses consist mainly of the costs involved to purchase mechanical and engineering materials and other items for construction and maintenance of property and equipment. Other expenses include personal injury claims, environmental remediation and derailments as well as employee separation costs, utilities, impairments of long-lived assets and property and miscellaneous taxes. The total is offset by gains on land sales and other recoveries.

Materials and other expenses of $916 million for 2005, which consists of approximately $360 million of materials expense with the remainder consisting of numerous other items, were $461 million, or 33 percent, lower than 2004. In 2005, materials and other expense was impacted by an impairment charge of $71 million related to the future sale of certain line segments as well as $70 million of increased material costs for locomotives, freight cars and track structure, partially offset by lower environmental and personal injury expense in 2005. However, the $465 million pre-tax charge recorded in 2004 to reflect a change in BNSF’s estimates of unasserted asbestos and environmental liabilities more than offset these changes by a significant amount.

25

INTEREST EXPENSE

Interest expense of $437 million for 2005 was $28 million, or 7 percent, higher than 2004. This increase was primarily the result of higher average interest rates in 2005.

OTHER EXPENSE, NET

Other expense of $37 million for 2005 was $33 million higher than in 2004. The increase in other expense, net was predominantly due to the receipt of interest income on a settlement that occurred in 2004, losses on BNSF’s participation in a synthetic fuel partnership for which tax credits are generated and higher accounts receivable sales fees driven primarily by higher interest rates.

YEAR ENDED DECEMBER 31, 2004 COMPARED WITH YEAR ENDED DECEMBER 31, 2003

BNSF recorded net income for 2004 of $791 million, or $2.10 per share. 2004 net income includes a $288 million, net of tax, or $0.77 per share charge for a change in the Company’s estimate of unasserted asbestos liabilities and environmental liabilities (see Note 10 of the Consolidated Financial Statements). In comparison, net income for 2003 was $816 million, or $2.19 per share, which includes the favorable cumulative effect of an accounting change of $39 million, net of tax, or $0.10 per share (see Note 2 of the Consolidated Financial Statements).

REVENUES

FREIGHT

Freight revenues of $10,742 million for 2004 were $1,457 million, or 16 percent, higher than 2003. Freight revenues in 2004 included fuel surcharges of approximately $350 million compared with approximately $100 million in the prior year. Average revenue per car/unit increased 5 percent in 2004 to $1,126 from $1,074 in 2003.

CONSUMER PRODUCTS Consumer Products revenues of $4,245 million for 2004 were $588 million, or 16 percent, greater than 2003. The increase in Consumer Products revenues was primarily due to double-digit volume growth in the international and domestic intermodal sectors. The increase in average revenue per unit of 4 percent was primarily related to rate increases and increased fuel surcharges.
INDUSTRIAL PRODUCTS
Industrial Products revenues increased $310 million, or 15 percent, to $2,448 million for 2004. The revenue increase was primarily due to increased lumber, plywood, particleboard and paper traffic in the building products sector and increased business in steel, taconite and clay in the construction products sector, as well as increased traffic in petroleum products and plastics. Rate increases along with increased fuel surcharges contributed to a 5 percent increase in average revenue per car.

COAL

Coal revenues of $2,277 million for 2004 increased $252 million, or 12 percent, versus a year ago. The increase was primarily a result of new customer business volumes and higher demand from existing customers. Average revenue per car increased 4 percent primarily driven by contractual rate escalations and increased average length of haul.

AGRICULTURAL PRODUCTS Agricultural Products revenues of $1,772 million for 2004 were $307 million, or 21 percent, higher than revenues for 2003. This increase was primarily driven by strong corn and wheat exports out of the Pacific Northwest. The average revenue per car increased 12 percent primarily driven by the mix of commodity and destination price increases, increased fuel surcharges and increased average length of haul.

26

OTHER REVENUES

Other Revenues increased $76 million, or 59 percent, to $204 million for 2004 compared to 2003. This increase was primarily attributable to increased volumes related to BNSF Logistics, a wholly-owned non-rail subsidiary that specializes in providing third-party logistic services, and demurrage.

EXPENSES

Total operating expenses for 2004 were $9,260 million, an increase of $1,512 million, or 20 percent, over 2003. The increase was primarily due to a $465 million pre-tax charge to reflect changes in the Company’s estimate of unasserted asbestos liabilities and environmental liabilities. The increase in operating expenses was also the result of an 11 percent increase in gross-ton miles handled and significant fuel price increases.

COMPENSATION AND BENEFITS

Compensation and benefits expenses of $3,322 million were $359 million, or 12 percent, higher than 2003. The increase was primarily related to the significant increase in volumes. These increases in traffic volume drove an approximate 3 percent increase in employee headcount as well as greater overtime and crew training costs. Improved financial performance has led to higher incentive expenses for the Company’s salaried and scheduled workforce. Additionally, BNSF recognized increased pension costs of $17 million.

FUEL

Fuel expenses of $1,335 million for 2004 were $242 million, or 22 percent, higher than 2003. The increase in fuel expense is due to an increase in the average all-in cost per gallon of diesel fuel, as well as an increase in consumption driven by higher volumes. The average all-in cost per gallon of diesel fuel increased by 9 cents, or $124 million, which is comprised of an increase in the average purchase price of 29 cents, or $394 million, partially offset by an increase in the hedge benefit of 20 cents, or $270 million (2004 benefit of $338 million less 2003 benefit of $68 million). Consumption in 2004 was 1,344 million gallons compared with 1,213 million gallons in 2003.

PURCHASED SERVICES

Purchased services expenses of $1,424 million for 2004 were $172 million, or 14 percent, higher than 2003 primarily due to higher costs for locomotive contract maintenance expense of $50 million, haulage expense of $27 million and intermodal ramp costs of $20 million for contracted transportation over other railroads, all of which were primarily driven by higher volume. Additionally, purchased transportation costs for BNSF Logistics increased $45 million as a result of increases in its business.

27

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expenses of $1,012 million for 2004 were $102 million, or 11 percent, higher than 2003. The majority of the increase was due to ongoing capital expenditures. Additionally, about $40 million of this increase was due to the expiration of credits to depreciation expense resulting from the application of purchase accounting at the time of the merger in 1996. As a result of a depreciation rate study completed with the assistance of third-party consultants in 2004, BNSF adopted new depreciation rates applied to track structure. This change in rate caused a net decrease in annual depreciation expense of approximately $5 million for 2004 and approximately $16 million on an ongoing annual basis, as calculated using the asset base at the time of the rate change.

EQUIPMENT RENTS

Equipment rents expenses for 2004 of $790 million were $85 million, or 12 percent, higher than 2003. Expense increases of $68 million for freight car equipment and $17 million for locomotive leases are predominantly related to significant volume increases.

MATERIALS AND OTHER

Materials and other expenses of $1,377 million for 2004, which consists of approximately $300 million of materials expense with the remainder consisting of other items, including a charge of $465 million pre-tax related to a change in BNSF’s estimates of unasserted asbestos liabilities and environmental liabilities, were $552 million higher than 2003. In addition to the charge, materials and other expenses increased due to higher material costs of $44 million primarily to maintain freight cars and locomotives due to higher volumes, increased environmental expenses of $28 million primarily related to developments at two former fueling facility sites, increased casualty costs of $32 million driven by two large derailments, and a $24 million decrease in the carrying value of certain assets (see Note 7 of the Consolidated Financial Statements) partially offset by decreases in property and other miscellaneous taxes of $9 million, and increased gains from land sales of $23 million.

INTEREST EXPENSE

Interest expense of $409 million for 2004 was $11 million, or 3 percent, lower than 2003. This decrease was primarily the result of lower average interest rates and lower average debt outstanding.

OTHER EXPENSE, NET

Other expense of $4 million for 2004 was $10 million lower than in 2003. The decrease in expense was due to the receipt of interest income on a settlement that occurred during the third quarter of 2004, partially offset by losses on company owned life insurance.

INCOME TAXES

The effective tax rate in 2004 was 37.9 percent compared with 36.9 percent for the prior year. The increase in the effective tax rate primarily reflects a tax settlement attributable to prior years that was settled favorably in 2003.

28

LIQUIDITY AND CAPITAL RESOURCES

Cash generated from operations is BNSF’s principal source of liquidity. BNSF generally funds any additional liquidity requirements through debt issuance including commercial paper, the leasing of assets and the sale of a portion of its accounts receivable.

OPERATING ACTIVITIES

2005

Net cash provided by operating activities was $2,609 million during 2005 compared with $2,377 million during 2004. The increase was primarily the result of an increase in earnings before the effect of the 2004 third quarter charge related to a change in BNSF’s estimates of unasserted asbestos liabilities and environmental liabilities, which had no impact on the Company’s cash flows (see note 10 of the Consolidated Financial Statements) and a use of cash related to the $350 million decrease in the Company’s accounts receivable sales program (see Note 6 of the Consolidated Financial Statements). The decrease in the Company’s accounts receivable sales program resulted in higher commercial paper (see Note 9 of the Consolidated Financial Statements).

2004

Net cash provided by operating activities was $2,377 million during 2004 compared with $2,285 million during 2003. The increase was primarily the result of an increase in earnings before the effect of the aforementioned third quarter 2004 charge.

INVESTING ACTIVITIES

2005

Net cash used for investing activities was $2,023 million during 2005 compared with $1,595 million during 2004. Investing activities for the year include $1,750 million of capital expenditures, which were $223 million higher than 2004 primarily due to an increase in capital expenditures for maintenance of BNSF’s track structure and for terminal and line expansions. The increase in cash used for other investing activities primarily reflects the timing of equipment financing activities, consideration paid to another carrier for trackage rights and alternative access rights (see Note 7 of the Consolidated Financial Statements), line acquisitions and investment in Pace Synfuels as well as a $26 million cash source in the first quarter of 2004 related to the consolidation of San Jacinto Rail Limited (see Note 2 of the Consolidated Financial Statements).

2004

Net cash used for investing activities was $1,595 million during 2004 compared with $1,806 million during 2003. Investing activities for the year include $1,527 million of capital expenditures, which were $199 million lower than 2003 primarily due to the fact that most of the locomotives acquired in 2004 were leased, whereas the majority of locomotives acquired in 2003 were purchased.

A breakdown of cash capital expenditures during 2005, 2004 and 2003 is set forth in the following table (in millions):

Year Ended December 31,	2005		2004		2003
Maintenance of way:
Rail	$	232	$	219	$	202
Ties		284		257		227
Surfacing		183		159		160
Other		354		359		337
Total maintenance of way		1,053		994		926
Mechanical		136		114		133
Information services		64		73		63
Other		108		107		116
Total maintenance of business		1,361		1,288		1,238
New locomotive acquisitions		—		16		270
Terminal and line expansion		389		223		218
Total	$	1,750	$	1,527	$	1,726

29

The above table does not include expenditures for equipment financed through operating leases (principally related to locomotives).

FINANCING ACTIVITIES

2005

Net cash used for financing activities during 2005 was $833 million primarily related to the following: (i) common stock repurchases of $799 million, (ii) prepaid forward share repurchases of $600 million (see Note 15 of the Consolidated Financial Statements), and (iii) dividend payments of $267 million, which where partially offset by net debt borrowings of $599 million and proceeds from stock options exercised of $244 million.

In December 2005, BNSF issued $500 million of 6.613 percent junior subordinated notes due December 31, 2055. The junior subordinated notes are callable on or after January 15, 2026, at par plus accrued and unpaid interest. On January 15, 2026, if the junior subordinated notes are not called, the interest rate will change to an annual rate equal to the 3-month LIBOR rate plus 2.35%, reset quarterly. Interest payments may be deferred, at the option of the Company, on a cumulative basis for a period of up to five consecutive years; however, during this time the Company will not be permitted to declare or pay dividends on its common stock. In the event that certain financial covenants are not maintained, the Company will be required to sell common stock, the proceeds of which will be used to pay any accrued and unpaid interest. At December 31, 2005, the Company was in compliance with these covenants. Because of this structure, certain rating agencies provide a considerable degree of equity treatment for purposes of calculating various ratios and metrics. The majority of the net proceeds of the debt issuance are being used to repurchase common stock, with the remainder used for general corporate purposes.

Aggregate debt to mature in 2006 is $456 million. BNSF’s ratio of net debt to total capitalization was 42.7 percent at December 31, 2005, compared with 39.9 percent at December 31, 2004. The Company’s adjusted net debt to total capitalization was 51.5 percent at December 31, 2005, compared to 51.0 percent at December 31, 2004. BNSF’s adjusted net debt to total capitalization is a non-GAAP measure and should be considered in addition to, but not as a substitute or preferable to, the information prepared in accordance with GAAP. However, the information is included herein as management believes that adjusted net debt to total capitalization provides meaningful additional information about the ability of BNSF to service long-term debt and other fixed obligations and to fund future growth.

The following table presents a reconciliation of the calculation of adjusted net debt to total capitalization percentage:

Year Ended December 31,	2005		2004
Net debt to total capitalization a	42.7	%	39.9	%
Adjustment for long-term operating leases	9.4	%	9.3	%
Adjustment for other debt equivalents b	0.6	%	1.8	%
Adjustment for junior subordinated notes c	(1.2	)%	—	%
Adjusted net debt to total capitalization	51.5	%	51.0	%

a Net debt to total capitalization is calculated as total debt less cash and cash equivalents divided by the sum of net debt and total stockholders’ equity.

30

b Adjustment for other debt equivalents principally includes accounts receivable financing. See Note 6 of the Consolidated Financial Statements.

c Junior subordinated notes are included in total debt on the respective Consolidated Balance Sheet; however, as they include certain equity characteristics as described above, they have been assigned 50% equity credit for purposes of this calculation.

Pursuant to existing Board authority, BNSF can issue up to an additional $1 billion of debt securities. The Company expects that it will file shelf registration statements for this additional $1 billion when it is ready to issue the debt.

2004

Net cash used for financing activities during 2004 was $478 million primarily related to the following: (i) dividend payments of $231 million; (ii) net debt repayments of $292 million; and (iii) common stock repurchases of $376 million, which were offset by proceeds from stock options exercised of $420 million.

The Company issued $250 million of 4.88 percent notes due January 15, 2015. The net proceeds of the debt issuance were used for general corporate purposes including the repayment of outstanding commercial paper.

2003

Net cash used for financing activities during 2003 was $489 million primarily related to common stock repurchases of $217 million, dividend payments of $191 million and net debt repayments of $151 million partially offset by proceeds from stock options exercised of $68 million.

The Company exercised an option to call $150 million of 7.50 percent bonds due July 2023. The bonds were called at a price of 103.02 percent of par, and commercial paper was used to fund the call.

BNSF issued $250 million of 4.30 percent notes due July 1, 2013. The net proceeds of the debt issuance were used for general corporate purposes including the repayment of outstanding commercial paper.

The Company exercised an option to call $29 million of 2.63 percent mortgage bonds issued by a predecessor company and due January 1, 2010. Cash generated from operations was used to fund the call.

DIVIDENDS

Common stock dividends declared were $0.74 per share, $0.64 per share, and $0.54 per share annually for 2005, 2004 and 2003, respectively. Dividends paid on common stock were $267 million, $231 million and $191 million during 2005, 2004 and 2003, respectively.

COMMON STOCK REPURCHASE PROGRAM

In July 1997, the Board authorized the repurchase of up to 30 million shares of the Company’s common stock from time to time through open market transactions or otherwise. In December 1999, April 2000, September 2000, January 2003 and December 2005, the Board authorized extensions of the BNSF share repurchase program, adding 30 million shares at each date to the total shares previously authorized bringing BNSF’s share repurchase program to 180 million shares. During 2005, 2004 and 2003, the Company repurchased approximately 14 million, 10 million, and 8 million shares, respectively, of its common stock at average prices of $54.95 per share, $35.98 per share, and $27.25 per share, respectively. Total repurchases through December 31, 2005, were 148 million shares at a total average cost of $29.49 per share, leaving 32 million shares available for repurchase out of the 180 million shares presently authorized.

31

LONG-TERM DEBT AND OTHER OBLIGATIONS

The Company’s business is capital intensive. BNSF has historically generated a significant amount of cash from operating activities, which it uses to fund capital additions, service debt, repurchase shares and pay dividends. Additionally, the Company relies on access to the debt and leasing markets to finance a portion of capital additions on a long-term basis.

BNSF has agreed to acquire 845 locomotives by 2009. As of December 31, 2005, BNSF has taken delivery of 403 of the 845 locomotives. During 2005, BNSF took delivery of 288 locomotives, which were primarily financed through operating leases.

In the first quarter of 2004, BNSF entered into a contractual obligation to acquire 6,000 grain cars over the course of the following four years. Through December 31, 2005, BNSF has taken delivery of 4,500 of the hoppers, which were primarily financed through operating leases.

The locomotives and grain cars under these agreements have been or are expected to be financed through one or a combination of sources including, but not limited to, cash from operations, capital or operating leases and debt issuances. The decision on the method used for a particular acquisition financing will depend on market conditions and other factors at that time.

The Company also utilizes a commercial paper program backed by a bank revolving credit agreement to manage liquidity needs. For 2006 and the foreseeable future, the Company expects that cash from operating activities, access to capital markets, the accounts receivable sales program and the bank revolving credit agreement will be sufficient to enable the Company to meet its obligations when due. The Company believes these sources of funds will also be sufficient to fund capital additions that are necessary to maintain its competitiveness and position the Company for future revenue growth.

The Company’s ratio of earnings to fixed charges was 4.62 and 3.06 times for the years ended December 31, 2005 and 2004, respectively. Additionally, the Company’s ratio of net cash provided by operating activities divided by total average debt was 39 percent and 35 percent for the years ended December 31, 2005 and 2004, respectively. The increase in the ratio of net cash provided by operating activities divided by total average debt is primarily due to increased revenue and lower average debt outstanding.

The following table summarizes the Company’s obligations under long-term debt and other contractual commitments at December 31, 2005 (in millions):

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1–3 years		3–5 years		More than 5 years
Long-term debt a	$	6,550	$	348	$	415	$	1,155	$	4,632
Capital lease obligations		604		108		211		140		145
Operating lease obligations b		6,143		461		1,031		897		3,754
Purchase obligations c		9,353		1,370		1,433		1,256		5,294
Other long-term liabilities reflected on the balance sheet under GAAP d		268		44		76		67		81
Total contractual obligations	$	22,918	$	2,331	$	3,166	$	3,515	$	13,906

a Excludes capital lease obligations.

32

b Gross payments due which include an interest component.

c Includes short-line minimum usage commitments, asset maintenance and other purchase commitments.

d Consists of employee separation payments as discussed in Note 11 of the Consolidated Financial Statements, the 2006 required pension plan contribution and actuarially estimated payments expected to be made over the next five years for other post-retirement benefit plans as discussed in Note 13 of the Consolidated Financial Statements.

In the normal course of business, the Company enters into long-term contractual requirements for future goods and services needed for the operations of the business. Such commitments are not in excess of expected requirements and are not reasonably likely to result in performance penalties or payments that would have a material adverse effect on the Company’s liquidity.

CREDIT AGREEMENT

Commercial paper and the revolving credit agreement are discussed in Note 9 of the Consolidated Financial Statements. The revolving credit agreement includes covenants and events of default typical for this type of facility, including a minimum consolidated tangible net worth test, a maximum debt-to-capital test, and a $75 million cross-default provision. At December 31, 2005, the Company was in compliance with its debt covenants. BNSF’s tangible net worth is $4 billion greater than the minimum consolidated tangible net worth required under the agreement, and the maximum debt-to-capital test provides approximately $6 billion of debt capacity above BNSF’s outstanding debt as of December 31, 2005, before an event of default would occur under these covenants. With the exception of a voluntary bankruptcy or insolvency, any event of default has either or both a cure period or notice requirement before termination of the agreement. A voluntary bankruptcy or insolvency would be considered an immediate termination event.

OFF-BALANCE SHEET ARRANGEMENTS

SALE OF ACCOUNTS RECEIVABLE

The accounts receivable sales program of Santa Fe Receivables Corporation (SFRC), as described in Note 6 of the Consolidated Financial Statements, includes various provisions that, if triggered, would allow the investors participating in this program, at their option, to cancel the program. These provisions include a minimum consolidated tangible net worth test and a maximum debt-to-capital test, which are the same as in the BNSF revolving credit agreements described above. BNSF’s tangible net worth is approximately $4 billion greater than the minimum consolidated tangible net worth required under the agreement, and the maximum debt-to-capital test provides approximately $6 billion of debt capacity above BNSF’s outstanding debt as of December 31, 2005. The Company’s capacity to sell undivided interests to investors under the accounts receivable sales program was $700 million at December 31, 2005, which was comprised of two $350 million, 364-day accounts receivable facilities. The Company amended these facilities on October 14, 2005, modifying their expiration dates to October 2006. Management expects to be able to either extend the commitment of the current investors under the accounts receivable sales program past October 2006 or to find additional investors in the accounts receivable sales program who will be committed to purchase undivided interests after October 2006.

The accounts receivable sales program provides efficient financing at a competitive interest rate as compared with traditional borrowing arrangements and provides diversification of funding sources. Since the funding is collateralized by BNSF receivables, the risk of exposure is only as great as the risk of default on these receivables (see Note 6 of the Consolidated Financial Statements).

33

GUARANTEES

The Company acts as guarantor for certain debt and lease obligations of others. During the past few years the Company has primarily utilized guarantees to allow third-party entities to obtain favorable terms to finance the construction of assets that will benefit the Company. Additionally, in the ordinary course of business, BNSF enters into agreements with third parties that include indemnification clauses. The Company does not expect performance under these guarantees or indemnities to have a material adverse effect on the Company’s liquidity in the foreseeable future (see Note 9 of the Consolidated Financial Statements).

INFLATION

Due to the capital-intensive nature of BNSF’s business, the full effect of inflation is not reflected in operating expenses because depreciation is based on historical cost. An assumption that all operating assets were depreciated at current price levels would result in substantially greater expense than historically reported amounts.

OTHER MATTERS

COMMERCIAL

In July 2004, BNSF Railway initiated an arbitration proceeding under a Joint Service Agreement (JSA) with a major truckload carrier (the “carrier”) with which BNSF Railway handles substantial joint intermodal movements. In the proceeding, BNSF Railway sought an increase in its divisions of joint revenue for intermodal movements. Additionally, the carrier challenged the basis of the divisions and raised other issues under the JSA. An Interim Award decision was issued by the arbitration panel on September 16, 2005, increasing BNSF’s revenue divisions, and favorably resolving other issues raised in the proceeding. Both parties accepted the Interim Award as the final and binding award in the arbitration on October 17, 2005. By agreement of the parties, on October 19 the panel entered an order terminating the proceeding. In the fourth quarter of 2005, BNSF recorded a gain of approximately $26 million pre-tax, $16 million, net of tax, or $0.04 per share, as a result of this retroactive award of compensation for the period of July 7, 2004 through September 30, 2005. Of this gain, $21 million was recorded as an increase in Consumer Products revenue, and the remaining $5 million was recorded in purchased services expense as a reimbursement of legal fees.

In February 2005, the Company received a Civil Investigative Demand from the Antitrust Division of the Department of Justice requesting information concerning the Company’s pricing activities relating to the shipment of coal from the southern Powder River Basin. The Company continues to respond to requests for information.

HEDGING ACTIVITIES

The Company uses derivatives to hedge against increases in diesel fuel prices and interest rates as well as to convert a portion of its fixed-rate long-term debt to floating-rate debt. The Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives that are designated as fair value or cash flow hedges to specific assets or liabilities on the balance sheet, commitments or forecasted transactions. The Company assesses at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the changes in fair value or cash flows. Any change in fair value resulting from ineffectiveness, as defined by Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, is recognized in current period earnings. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is recorded in accumulated other comprehensive income (AOCI) as a separate component of stockholders’ equity and reclassified into earnings in the period during which the hedge transaction affects earnings.

34

FUEL

BNSF measures the fair value of fuel hedges from data provided by various external counterparties. To value a swap, the Company uses the forward commodity price for the period hedged. The fair values of costless collars are calculated and provided by the corresponding counterparties. BNSF monitors its hedging positions and credit ratings of its counterparties and does not anticipate losses due to counterparty nonperformance (see Note 3 of the Consolidated Financial Statements).

Between January 1, 2006 and February 13, 2006, the Company converted approximately 66 million gallons of WTI collars into HO swaps at an average price of approximately $0.95 per gallon. Additionally, the Company entered into HO-WTI swap agreements for 1.5 million barrels at an average price of $10.18 per barrel. These hedges will expire during 2006.

INTEREST RATE

From time to time, the Company enters into various interest rate hedging transactions for the purpose of managing exposure to fluctuations in interest rates and establishing rates in anticipation of future debt issuances as well as to convert a portion of its fixed-rate long-term debt to floating-rate debt. The Company uses interest rate swaps and treasury locks as part of its interest rate risk management strategy. BNSF’s measurement of the fair value of interest rate swaps and treasury locks is based on estimates of the mid-market values for the transactions provided by the counterparties to these agreements (see Note 3 of the Consolidated Financial Statements).

EMPLOYEE AND LABOR RELATIONS

A significant majority of BNSF Railway’s employees are union-represented. BNSF Railway’s union employees work under collective bargaining agreements with various labor organizations. A negotiating process for new, major collective bargaining agreements covering all of BNSF Railway’s union employees has been underway since the bargaining round was initiated November 1, 2004. Wages, health and welfare benefits, work rules and other issues have traditionally been addressed through industry-wide negotiations. These negotiations have generally taken place over an extended period of time and have previously not resulted in any extended work stoppages. The existing agreements have remained in effect and will continue to remain in effect until new agreements are reached or the Railway Labor Act’s procedures (which include mediation, cooling-off periods and the possibility of presidential intervention) are exhausted. Agreements undergoing renegotiation in the current bargaining round provide for periodic wage increases until new agreements are reached.

UNIONS WITH AN AGREEMENT UNDER THE PREVIOUS BARGAINING ROUND

In the previous bargaining round, which began on November 1, 1999, BNSF’s entire unionized workforce, reached final agreements that cover periods through December 2004.

2005 BARGAINING ROUND

The current bargaining round for all unions with contracts that came into effect after January 1, 2005, began on and after November 1, 2004, with the serving of Section 6 notices, which are each side’s initial proposals. BNSF is participating in coordinated national handling of these proposals. The current agreements remain in effect until new agreements are reached or until changes to the existing agreements are made.

SEATTLE SOUND TRANSIT

In December 2003, the Company entered into several agreements with Central Puget Sound Regional Transit Authority (Sound Transit), a government authority established by King, Pierce and Snohomish counties within the state of Washington. BNSF has agreed to sell to Sound Transit under the threat of condemnation a combination of (a) four easements enabling Sound Transit to offer commuter rail service over existing BNSF track from Seattle to Everett and (b) 18 miles of railroad line from south of Tacoma to Nisqually, Washington.

35

Sound Transit will pay BNSF approximately $260 million for four commuter easements to operate trains on the segment between Seattle and Everett and entered into agreements both for service on the commuter easements and joint use of track for commuter and freight purposes. The Company received approximately $80 million of cash in 2003 upon the closing of the first easement and $80 million of cash in 2004 upon closing of the second easement. The sale proceeds will be recognized in income over the use of the associated track structure (approximately 37 years). Over the next two years, upon the subsequent closings subject to conditions in the sale agreement, BNSF will receive an additional $100 million for the remaining two easements.

Sound Transit will also pay BNSF to convey the 18 miles of railroad line and associated real estate from south of Tacoma to Nisqually in three separate transactions. First, the Company received approximately $8 million of cash in 2003 and reported a gain in income of $2 million, net of tax, as a result of the real estate sale for station-related parcels to Sound Transit. Second, the Company received $6 million of cash and a $6 million note receivable in the third quarter of 2004 associated with the sale of approximately half of the 18 miles. The gain on this sale was deferred due to certain continuing involvement in the property. This continuing involvement expired in November 2004, and the Company recognized a gain in income of $7 million, net of tax. The Company collected $3 million of the $6 million note receivable related to this sale in 2005, and the remaining $3 million is expected to be collected in 2006. Third, the Company received $3 million of cash and a $9 million note receivable in the fourth quarter of 2005 associated with the sale of the remaining railroad line and real estate. The Company recognized a gain of approximately $9 million, net of tax, associated with the sale. The Company is expected to collect the $9 million note receivable over the next two years.

NEW MEXICO DEPARTMENT OF TRANSPORTATION

In the fourth quarter of 2005, BNSF Railway Company entered into an agreement with the New Mexico Department of Transportation (NMDOT) to sell the Company’s rail line and certain adjacent property between Belen, New Mexico and Trinidad, Colorado while maintaining freight easement rights on the line. Upon satisfaction of closing conditions, the sale is anticipated to close in segments over the next 3 years for a total purchase price of $76 million and will allow NMDOT to create a commuter rail line. The Company recognized an impairment charge of $71 million in the fourth quarter of 2005 related to this agreement and anticipates recording a gain of $21 million in the first quarter of 2006 upon the sale of one of the line segments. The Company received $9 million in 2005 related to this sale, and expects to receive cash payments of $45 million in 2006, $18 million in 2007, and $4 million in 2008. While this rail line has been a critical alternative route for the Company, it will become less significant over the next several years as the double-tracking of the main line transcontinental route is completed.

AMERICAN JOBS CREATION ACT OF 2004

In October 2004, the American Jobs Creation Act of 2004 was signed into law. Part of the legislation includes the repeal of a 4.3–cent tax per gallon of diesel fuel. The tax is being gradually phased out in 2005 and 2006 and will be completely phased out by 2007. Based on actual and projected fuel consumption, the repeal of the tax resulted in $21 million in incremental savings in 2005 and is expected to result in incremental savings of approximately $10 million and $30 million for BNSF in 2006 and 2007, respectively.

CRITICAL ACCOUNTING ESTIMATES

In the ordinary course of business, the Company makes a number of estimates and assumptions related to the reporting of results of operations and financial position in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. The following discussion addresses the Company’s most critical accounting estimates.

36

Management has discussed the development and selection of the critical accounting estimates described below with the Audit Committee of the Board of Directors, and the Audit Committee has reviewed the Company’s disclosure relating to them in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

LEGAL

BNSF’s most significant legal claims relate to personal injury claims and environmental matters. These claims are discussed in more detail below.

During 2004, BNSF recorded a $465 million pre-tax charge to reflect changes in its estimate of unasserted asbestos liabilities and environmental liabilities. Of this amount, $293 million and $172 million were related to unasserted asbestos and environmental liabilities, respectively. The $465 million pre-tax charge was recorded in materials and other expense and reduced net income by $288 million, or $0.77 per share during 2004.

PERSONAL INJURY

Personal injury claims, including asbestos claims and employee work-related injuries and third party injuries (collectively, other personal injury), are a significant expense for the railroad industry. Personal injury claims by BNSF Railway employees are subject to the provisions of the Federal Employers’ Liability Act (FELA) rather than state workers’ compensation laws. FELA’s system of requiring the finding of fault, coupled with unscheduled awards and reliance on the jury system, contributed to increased expenses in past years. Other proceedings include claims by non-employees for punitive as well as compensatory damages. A few proceedings purport to be class actions. The variability present in settling these claims, including non-employee personal injury and matters in which punitive damages are alleged, could result in increased expenses in future years. BNSF has implemented a number of safety programs designed to reduce the number of personal injuries as well as the associated claims and personal injury expense.

BNSF records a liability for personal injury claims when the expected loss is both probable and reasonably estimable. The liability and ultimate expense projections are estimated using standard actuarial methodologies. Liabilities recorded for unasserted personal injury claims are based on information currently available. Due to the inherent uncertainty involved in projecting future events such as the number of claims filed each year, developments in judicial and legislative standards and the average costs to settle projected claims, actual costs may differ from amounts recorded.

ASBESTOS

The Company is party to a number of personal injury claims by employees and non-employees who may have been exposed to asbestos. The heaviest exposure for BNSF employees was due to work conducted in and around the use of steam locomotive engines that were phased out between the years of 1950 and 1967. However, other types of exposures, including exposure from locomotive component parts and building materials, continued after 1967, until it was substantially eliminated by 1985.

37

Prior to 2000, claim filings against the Company for asbestos were not numerous and were sporadic. Accordingly, while the Company had concluded that a probable loss had occurred, it did not believe it could estimate the range of reasonably possible loss because of the lack of experience with such claims and the lack of detailed employment records for the population of exposed employees. The Company believed, however, that the low end of the range of reasonably possible loss, as that term is used in Financial Accounting Standards Board (FASB) Interpretation No. 14 (FIN 14), Reasonable Estimation of the Amount of a Loss, was immaterial. Subsequent to this period, claim filings increased and, when they continued into 2004, the Company concluded that the low end of the range of reasonably possible loss would be material and that an estimate for unasserted asbestos exposure liability needed to be recorded. BNSF then engaged a third party with extensive experience in performing asbestos studies to assist in assessing the unasserted liability exposure. The objective of the assessment was to determine the number of estimated unasserted asbestos claims and the estimated average cost per claim. The Company, with the assistance of the third party, first determined its exposed population from which it was able to derive the estimated number of unasserted claims. The estimated average cost per claim was then determined utilizing recent actual average cost per claim data.

Based on the assessment, the Company recorded an undiscounted $293 million pre-tax charge for unasserted asbestos claims in the third quarter of 2004. The $293 million pre-tax charge was recorded in materials and other expense and reduced net income by $182 million, or $0.49 per share, for the year ended December 31, 2004.

38

Key elements of the assessment included:

• Because BNSF did not have detailed employment records in order to compute the population of potentially exposed employees, it computed an estimate using Company employee data from 1970 forward and estimated the BNSF employee base from 1938-1969 using railroad industry historical census data and estimating BNSF’s representation in the total railroad population.

• The projected incidence of disease was estimated based on epidemiological studies using employees’ age, duration and intensity of exposure while employed.

• An estimate of the future anticipated claims filing rate by type of disease (non-malignant, cancer and mesothelioma) was computed using the Company’s average historical claim filing rates for the period 2000-2003 (the years in which the number of claims were more significant).

• An estimate of the future anticipated dismissal rate by type of claim was computed using the Company’s historical average dismissal rates observed in 2002-2004.

• An estimate of the future anticipated settlement by type of disease was computed using the Company’s historical average of dollars paid per claim for pending and future claims using the average settlement by type of incidence observed during 2002-2004.

From these assumptions BNSF projected the incidence of each type of disease to the estimated population to arrive at an estimate of the total number of employees that could potentially assert a claim. Historical claim filing rates were applied for each type of disease to the total number of employees that could potentially assert a claim to determine the total number of anticipated claim filings by disease type. Historical dismissal rates, which represent claims that are closed without payment, were then applied to calculate the number of future claims by disease type that would likely require payment by the Company. Finally, the number of such claims was multiplied by the average settlement value to estimate BNSF’s future liability for unasserted asbestos claims.

The most sensitive assumptions for this accrual are the estimated future filing rates and estimated average claim values. Asbestos claim filings are typically sporadic and may include large batches of claims solicited by law firms. To reflect these factors, BNSF used a multi-year calibration period (i.e., the average historical filing rate for the period 2000-2003) because it believed it would be most representative of its future claim experience. In addition, for non-malignant claims, the number of future claims to be filed against BNSF declines at a rate consistent with both mortality and age as there is a decreasing propensity to file a claim as the population ages. BNSF believes the average claim values by type of disease from the historical period 2002-2004 are most representative of future claim values. Non-malignant claims, which represent approximately 95 percent of the total number and 80 percent of the cost of estimated future asbestos claims, were priced by age of the projected claimants. Historically, the ultimate settlement value of these types of claims is most sensitive to the age of the claimant. A 10 percent increase or decrease in either the forecasted number of unasserted claims or the average claim values would result in an approximate $30 million increase or decrease in the liability recorded for unasserted asbestos claims.

During the third quarter of 2005, the Company obtained an update of this study, which concluded that the original September 2004 study continues to represent a reasonable estimate of BNSF’s future asbestos exposure. Therefore, management recorded no additional expense as a result of this update. The Company plans to update the study in the third quarter of 2006. On a quarterly basis, BNSF monitors actual experience against the number of forecasted claims and expected claim payments. Adjustments to the Company’s estimates will be recorded when necessary (see Note 10 of the Consolidated Financial Statements for additional information).

39

The following table summarizes the activity in the Company’s accrued obligations for both asserted and unasserted asbestos matters (in millions):

	2005			2004			2003
Beginning balance	$	345		$	60		$	55
Accruals		—			308			25
Payments		(19	)		(23	)		(20	)
Ending balance at December 31,	$	326		$	345		$	60

Of the obligations at December 31, 2005, $266 million is related to unasserted claims and $60 million is related to asserted claims. At December 31, 2005 and 2004, $21 and $18 million are included in current liabilities, respectively. The recorded liability is not discounted. In addition, defense and processing costs, which are recorded on an as-reported basis, are not included in the recorded liability. The Company is presently self-insured for asbestos-related claims.

The following table summarizes information regarding the number of asserted asbestos claims filed against BNSF:

	2005		2004
Claims unresolved at January 1,	1,926		1,985
Claims filed	835		712
Claims settled, dismissed or otherwise resolved	(640	)	(771	)
Claims unresolved at December 31,	2,121		1,926

Based on BNSF’s estimate of the potentially exposed employees and related mortality assumptions, it is anticipated that unasserted claims will continue to be filed through the year 2050. The Company recorded an amount for the full estimated filing period through 2050 because it had a relatively finite exposed population (former and current employees hired prior to 1985) which it was able to identify and reasonably estimate and about which it had obtained reliable demographic data (including age, hire date and occupation) derived from industry or BNSF specific data that was the basis for the study. BNSF projects that approximately 50, 70, and 90 percent of the future unasserted asbestos claims will be incurred within the next 10, 15, and 25 years, respectively.

Because of the uncertainty surrounding the factors used in the study, it is reasonably possible that future costs to settle asbestos claims may range from approximately $225 million to $425 million. However, BNSF believes that the $326 million recorded at December 31, 2005, is the best estimate of the Company’s future obligation for the settlement of asbestos claims.

The amounts recorded by BNSF for the asbestos-related liability were based upon currently known facts. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

While the final outcome of asbestos-related matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, should a number of these items occur in the same period, it could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

40

OTHER PERSONAL INJURY

BNSF uses a third party actuary to assist the Company in estimating its other personal injury liability claims and expense. These estimates are based on the covered population, activity levels and trends in frequency, and the costs of covered injuries. These actuarial estimates include unasserted claims except for certain repetitive stress and other occupational trauma claims that result from prolonged repeated events or exposure. Such claims are estimated on an as-reported basis because, while the Company has concluded that a probable loss has occurred, it cannot estimate the range of reasonably possible loss due to other contributing causes of such injuries and the fact that continued exposure is required for the potential injury to manifest itself as a claim. The Company believes that the low end of the range of reasonably possible loss, as that term is used in FIN 14, is immaterial for these other occupational trauma claims.

Key elements of the actuarial assessment include:

• Size and demographics (employee age and craft) of the workforce.

• Activity levels (manhours by employee craft and carloadings).

• Expected claim frequency rates by type of claim (employee FELA or third party liability) based on historical claim frequency trends.

• Expected dismissal rates by type of claim based on historical dismissal rates.

• Expected average paid amounts by type of claim for open and incurred but not reported claims that eventually close with payment.

From these assumptions, BNSF estimates the number of open claims by accident year that will likely require payment by the Company. The projected number of open claims by accident year that will require payment is multiplied by the expected average cost per claim by accident year and type to determine BNSF’s estimated liability for all asserted claims. Additionally, BNSF estimates the number of its incurred but not reported claims that will likely result in payment based upon historical emergence patterns by type of claim. The estimated number of projected claims by accident year requiring payment is multiplied by the expected average cost per claim by accident year and type to determine BNSF’s estimated liability for incurred but not reported claims.

The most sensitive assumptions for this accrual are the expected average cost per claim and the projected frequency rates for the number of claims that will ultimately result in payment. A 10 percent increase or decrease in either the expected average cost per claim or the frequency rate for claims with payment would result in an approximate $45 million increase or decrease in BNSF’s recorded other personal injury reserves (see Note 10 of the Consolidated Financial Statements for additional information).

BNSF obtains quarterly actuarial updates for other personal injury liabilities and monitors actual experience against the number of forecasted claims to be received, the forecasted number of claims closing with payment and expected claims payments. Adjustments to the Company’s estimates are recorded quarterly as necessary or more frequently as new events or revised estimates develop.

The following table summarizes the activity in the Company’s accrued obligations for other personal injury matters (in millions):

	2005			2004			2003
Beginning balance	$	459		$	453		$	441
Accruals		181			194			190
Payments		(218	)		(188	)		(178	)
Ending balance at December 31,	$	422		$	459		$	453

41

At December 31, 2005 and 2004, $164 million and $170 million are included in current liabilities, respectively. BNSF’s liabilities for other personal injury claims are undiscounted. In addition, defense and processing costs, which are recorded on an as-reported basis, are not included in the recorded liability. The Company is substantially self-insured for other personal injury claims.

The following table summarizes information regarding the number of personal injury claims, other than asbestos, filed against BNSF:

	2005		2004
Claims unresolved at January 1,	4,116		4,393
Claims filed	3,758		3,632
Claims settled, dismissed or otherwise resolved	(4,257	)	(3,909	)
Claims unresolved at December 31,	3,617		4,116

Because of the uncertainty surrounding the ultimate outcome of other personal injury claims, it is reasonably possible that future costs to settle other personal injury claims may range from approximately $375 million to $525 million. However, BNSF believes that the $422 million recorded at December 31, 2005, is the best estimate of the Company’s future obligation for the settlement of other personal injury claims.

The amounts recorded by BNSF for other personal injury claims were based upon currently known facts. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding personal injury litigation in the United States, could cause the actual costs to be higher or lower than projected.

While the final outcome of these other personal injury matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, should a number of these items occur in the same period, it could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

42

ENVIRONMENTAL

The Company’s operations, as well as those of its competitors, are subject to extensive federal, state and local environmental regulation. BNSF’s operating procedures include practices to protect the environment from the risks inherent in railroad operations, which frequently involve transporting chemicals and other hazardous materials. Additionally, many of BNSF’s land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. As a result, BNSF is subject to environmental cleanup and enforcement actions. In particular, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), also known as the Superfund law, as well as similar state laws generally impose joint and several liability for cleanup and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. BNSF has been notified that it is a potentially responsible party (PRP) for study and cleanup costs at Superfund sites for which investigation and remediation payments are or will be made or are yet to be determined (the Superfund sites) and, in many instances, is one of several PRPs. In addition, BNSF may be considered a PRP under certain other laws. Accordingly, under CERCLA and other federal and state statutes, BNSF may be held jointly and severally liable for all environmental costs associated with a particular site. If there are other PRPs, BNSF generally participates in the cleanup of these sites through cost-sharing agreements with terms that vary from site to site. Costs are typically allocated based on such factors as relative volumetric contribution of material, the amount of time the site was owned or operated, and/or the portion of the total site owned or operated by each PRP.

Liabilities for environmental cleanup costs are recorded when BNSF’s liability for environmental cleanup is both probable and reasonably estimable. Subsequent adjustments to initial estimates are recorded as necessary based upon additional information developed in subsequent periods. Environmental costs include initial site surveys and environmental studies as well as costs for remediation of sites determined to be contaminated.

During the first half of 2004, the Company experienced a significant increase in expense relating to environmental remediation developments at known sites for which the majority of the contamination occurred decades ago. Because of these and other developments, the Company performed an assessment in 2004 to determine if it was feasible to better estimate developments at its known sites. The Company determined that a third party actuary had proprietary data that included information from the Environmental Protection Agency (EPA) and other governmental agencies as well as information accumulated from public sources and work performed for other clients. Because of its determination that a better estimate of future development could be made with this data, BNSF engaged this third party actuary, which has an extensive background in performing various studies for large companies, including environmental matters, to assist BNSF in determining the Company’s potential future environmental exposure at known sites. As a result of this study, the Company revised its estimate of its probable environmental losses and its accrued liabilities.

Consequently, during the third quarter of 2004, BNSF recorded an undiscounted $172 million pre-tax charge related to its change in estimated environmental liabilities on a site by site basis. The $172 million pre-tax charge was recorded in materials and other expense and reduced net income by $106 million, or $0.28 per share, for 2004. The charge did not include (i) contaminated sites of which the Company is not aware, or (ii) additional amounts for third party claims, which arise out of contaminants allegedly migrating from BNSF property, due to a limited number of sites. BNSF continues to estimate third party claims on a site by site basis when the liability for such claims is probable and reasonably estimable. BNSF’s recorded liability for third party claims as of December 31, 2005 is approximately $24 million.

43

During the third quarter of 2005, the Company obtained an update of this study. Based on the results of the study, management recorded additional expense of approximately $12 million. The Company plans to update the study in the third quarter of 2006. On a quarterly basis, BNSF monitors actual experience against the forecasted remediation and related payments made on existing sites. Adjustments to the Company’s estimates will continue to be recorded when necessary based on developments in subsequent periods. Additionally, environmental accruals include amounts for newly identified sites or contaminants, third-party claims and legal fees incurred for defense of third-party claims and recovery efforts (see Note 10 of the Consolidated Financial Statements for additional information).

The Company’s estimate of ultimate cost for cleanup efforts at its known environmental sites utilizes BNSF’s historical payment patterns, its current estimated percentage to closure ratios, and the actuary’s proprietary benchmark patterns developed from data accumulated from public sources and work performed by it for other clients, including the EPA and other governmental agencies. These factors incorporate experience gained from cleanup efforts at other similar sites into the estimates for which remediation and restoration efforts are still in progress. The most significant assumptions are as follows: (i) historical payment patterns of site development, and (ii) variance from benchmark costs. A 10 percent change in any of these individual assumptions could result in an increase of up to $50 million or a decrease of up to $40 million in BNSF’s estimated environmental liability. BNSF also conducts an ongoing environmental contingency analysis, which considers a combination of factors including independent consulting reports, site visits, legal reviews and analysis of the likelihood of participation in, and the ability to pay for, cleanup of other PRPs.

BNSF is involved in a number of administrative and judicial proceedings and other mandatory cleanup efforts for 369 sites, including Superfund sites, at which it is participating in the study or cleanup, or both, of alleged environmental contamination.

The following table summarizes the activity in the Company’s accrued obligations for environmental matters (in millions):

	2005			2004			2003
Beginning balance	$	385		$	199		$	196
Accruals		33			258			59
Payments		(48	)		(72	)		(56	)
Ending balance at December 31,	$	370		$	385		$	199

At December 31, 2005 and 2004, $55 million and $60 million are included in current liabilities, respectively. BNSF’s environmental liabilities are not discounted. BNSF anticipates that the majority of the accrued costs at December 31, 2005 will be paid over the next ten years and no individual site is considered to be material.

The following table summarizes the environmental sites:

	BNSF sites				Superfund sites
	2005		2004		2005		2004
Number of sites at January 1,	384		402		24		22
Sites added during the period	24		34		—		5
Sites closed during the period	(39	)	(52	)	(4	)	(3	)
Number of sites at December 31,	369		384		20		24

44

Liabilities recorded for environmental costs represent BNSF’s best estimate of its probable future obligation for the remediation and settlement of these sites and include both asserted and unasserted claims. Unasserted claims are not a material component of the liability. Although recorded liabilities include BNSF’s best estimate of all probable costs, without reduction for anticipated recoveries from third parties, BNSF’s total cleanup costs at these sites cannot be predicted with certainty due to various factors such as the extent of corrective actions that may be required, evolving environmental laws and regulations, advances in environmental technology, the extent of other parties’ participation in cleanup efforts, developments in ongoing environmental analyses related to sites determined to be contaminated, and developments in environmental surveys and studies of contaminated sites.

Because of the uncertainty surrounding these factors, it is reasonably possible that future costs for environmental liabilities may range from approximately $300 million to $600 million. However, BNSF believes that the $370 million recorded at December 31, 2005, is the best estimate of the Company’s future obligation for environmental costs.

While the final outcome of these environmental matters cannot be predicted with certainty, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

45

OTHER CLAIMS AND LITIGATION

In addition to asbestos, other personal injury, and environmental matters discussed above, BNSF and its subsidiaries are also parties to a number of other legal actions and claims, various governmental proceedings and private civil suits arising in the ordinary course of business, including those related to disputes and complaints involving certain transportation rates and charges (including complaints seeking refunds of prior charges paid for coal transportation and the prescription of future rates for such movements). Some of the legal proceedings include claims for punitive as well as compensatory damages, and a few proceedings purport to be class actions. While the final outcome of these matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded along with applicable insurance, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

INCOME TAXES

BNSF is subject to various federal, state and local income taxes in the taxing jurisdictions where the Company operates. BNSF accounts for income taxes by providing for taxes payable or refundable in the current year and for deferred tax assets and liabilities for future tax consequences of events that have been recognized in financial statements or tax returns.

BNSF recorded total income tax expense, including federal, state and other income taxes, of $917 million, $482 million and $454 million for the years ended December 31, 2005, 2004 and 2003, respectively. BNSF’s Consolidated Balance Sheets reflect $218 million and $308 million of net current deferred tax assets at December 31, 2005 and 2004, respectively. Also included in BNSF’s Consolidated Balance Sheets are $7,916 million and $7,820 million of net non-current deferred tax liabilities at December 31, 2005 and 2004, respectively. Classification of deferred tax assets and liabilities as current or non-current is determined by the financial statement classification of the asset or liability to which the temporary difference is related. If a temporary difference is not related to an asset or liability for financial reporting, it is classified according to the expected reversal date of the temporary difference.

Valuation allowances are established to reduce deferred tax assets if it is more likely than not that some or all of the deferred tax asset will not be realized. BNSF has not recorded a valuation allowance, as it believes that the deferred tax assets will be fully realized in the future.

All federal income tax returns of BNSF’s predecessor companies, Burlington Northern Inc. and Santa Fe Pacific Corporation are closed through 1994 and the business combination date of September 22, 1995, respectively. Internal Revenue Service examination of the years 1995 through 1999 for BNSF is completed, and the unagreed issues are pending before Internal Revenue Service (IRS) Appeals. BNSF is currently under examination for years 2000 through 2002. In addition, BNSF and its subsidiaries have various state income tax returns in the process of examination, administrative appeal or litigation. Due to the capital-intensive nature of BNSF’s business, a significant portion of the audit issues with the IRS and other taxing authorities relate to whether expenditures are classified as maintenance or capital and whether certain asset valuations are appropriate. A provision for taxes resulting from ongoing and future federal and state audits is based on an estimation of aggregate adjustments that may be required as a result of the audits. The Company believes that adequate provision has been made for any adjustment that might be assessed for open years through 2005.

BNSF makes estimates of the potential liability based on its assessment of all potential tax exposures. In addition, the Company uses factors such as applicable law, current information and past experience with similar issues to make these judgments.

46

Deferred tax assets and liabilities are measured using the tax rates that apply to taxable income in the period in which the deferred tax asset or liability is expected to be realized or paid. Changes in the Company’s estimates regarding the statutory tax rate to be applied to the reversal of deferred tax assets and liabilities could materially affect the effective tax rate.

The Company has not significantly changed its methodology for calculating income tax expense for the years presented, and there are currently no known trends, demands, commitments, events or uncertainties that are reasonably likely to occur and materially affect the methodology or assumptions described above.

PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS

BNSF sponsors a funded, noncontributory qualified BNSF Retirement Plan, which covers substantially all non-union employees, and an unfunded BNSF Supplemental Retirement Plan, which covers certain officers and other employees. The benefits under these pension plans are based on years of credited service and the highest consecutive sixty months of compensation for the last ten years of salaried employment with BNSF. BNSF’s funding policy is to contribute annually not less than the regulatory minimum and not more than the maximum amount deductible for income tax purposes with respect to the funded plan.

Certain salaried employees of BNSF that have met age and years of service requirements are eligible for life insurance coverage and medical benefits, including prescription drug coverage, during retirement. The retiree medical plan is contributory and provides benefits to retirees, their covered dependents and beneficiaries. Retiree contributions are adjusted annually. The plan also contains fixed deductibles, coinsurance and out-of-pocket limitations. The basic life insurance plan is noncontributory and covers retirees only. Optional life insurance coverage is available for some retirees; however, the retiree is responsible for the full cost. BNSF’s policy is to fund benefits payable under the medical and life insurance plans as they come due. Generally, employees beginning salaried employment with BNSF subsequent to September 22, 1995, are not eligible for medical benefits during retirement.

The amounts recorded in the Consolidated Statements of Income for pensions and other post-employment benefits (OPEB) were as follows (in millions):

Year Ended December 31,	2006 Estimate		2005		2004		2003
Net pension cost (benefit)	$	68	$	38	$	15	$	(3	)
Net other post-employment benefits cost	$	14	$	11	$	24	$	32

The increased pension cost in 2004, 2005, and 2006 is primarily the result of recognition of previously unrecognized losses as well as a decrease in both the expected long-term rate of return on plan assets and discount rate assumptions. Other post-employment benefits costs are expected to increase in 2006 due primarily to a decrease in the discount rate and an increase in the assumed cost of future health care benefits.

At December 31, 2005, BNSF had unrecognized net losses of $524 million and $61 million related to the pension and health and welfare benefits plans, respectively. These net losses are comprised of gains and losses from changes in discount rates, actuarial assumptions, and census data as well as market gains and losses. The Company will recognize the portion of these net losses that exceeds 10 percent of the benefit obligation as a component of compensation and benefits expense. The table below outlines the net losses expected to be recognized over the next 15 years.

47

	Deferred Losses to be Recognized (in millions)
Fiscal Year	Pension		Health and Welfare Benefits
2006	$	46	$	3
2007		40		3
2008		30		4
2009		23		4
2010		18		4
Thereafter		161		16

BNSF uses a third party actuary to assist the Company in estimating liabilities and expenses for pension and OPEB. Estimated amounts are based on historical information, current information and estimates about future events and circumstances. Significant assumptions used in the valuation of pension or OPEB obligations include expected return on plan assets, discount rate, rate of increase in compensation levels and the health care cost trend rate.

48

From time to time, the Company will change pension and OPEB assumptions to better approximate current conditions and expected future experience. Significant assumptions for the past three years are as follows:

	Pension Benefits						Health and Welfare Benefits
Assumptions used to determine net (benefit) cost for fiscal years ended December 31,	2005		2004		2003		2005		2004		2003
Discount rate	5.75	%	6.00	%	6.50	%	5.75	%	6.00	%	6.50	%
Expected long-term rate of return on plan assets	8.00	%	8.25	%	8.50	%	—		—		—
Assumed health care cost trend rate	—		—		—		10.00	%	11.00	%	11.00	%
Rate of compensation increase b	3.90	%	3.90	%	3.90	%	3.90	%	3.90	%	3.90	%

	Pension Benefits				Health and Welfare Benefits
Assumptions used to determine benefit obligations at September 30 a,	2005		2004		2005		2004
Discount rate	5.25	%	5.75	%	5.25	%	5.75	%
Assumed health care cost trend rate	—		—		10.50	%	10.00	%
Rate of compensation increase b	3.90	%	3.90	%	3.90	%	3.90	%

a The Company’s pension and OPEB plans use a measurement date of September 30.

b Determined based on historical experience

The discount rate is a key assumption used in the estimates of both the pension and OPEB expense and liability. BNSF determined the discount rate by adjusting the Moody’s Aa Corporate bond yield to reflect the difference between the duration of the future estimated cash flows of the Company’s pension and health and welfare plans and the duration of the Moody’s Aa index. The expected return on plan assets, which reflects the expected long-term rates of return on those assets, is also a key assumption. Finally, the health care cost trend rates are also considered a significant assumption and only impact the OPEB-related estimates.

The discount rate used for the 2006 calculation of net benefit cost was lowered to 5.25 percent to reflect current market conditions. The expected rate of return on plan assets remained consistent from 2005 to 2006, and the Company does not expect any significant changes to the current investment allocation of assets. However, unforeseen changes in the investment markets or other external factors could prompt changes in these estimates in future years.

The following table is an estimate of the impact on future net benefit cost that could result from hypothetical changes to the most sensitive assumptions, the discount rate and rate of return on plan assets:

Sensitivity Analysis

	Change in Net Benefit Cost
Hypothetical discount rate change	Pension	OPEB
50 basis point decrease	$6 million increase	$2 million increase
50 basis point increase	$6 million decrease	$2 million decrease
Hypothetical rate of return on plan assets change	Pension
50 basis point decrease	$6 million increase
50 basis point increase	$6 million decrease

49

The Company contributed $40 million to the BNSF Retirement Plan in December 2005. The Company is not required to make any contributions to this plan in 2006. The Company determines this required funding by amortizing asset gains and losses over a period of five years. Additionally, the Company expects to make benefit payments in 2006 of approximately $21 million and $7 million to its OPEB plan and the BNSF Supplemental Retirement Plan, respectively. If the Company was required to fully fund the unfunded portion of its projected benefit obligation, which was $511 million at December 31, 2005 for the pension plans and $295 million for the health and welfare plan, the Company’s management believes that it would have sufficient liquidity, and it could fund the balance without a significant impact to the Company’s financial position.

Further information on pensions and other post-employment benefits is incorporated by reference from Note 13 of the Consolidated Financial Statements.

DEPRECIATION

Due to the capital-intensive nature of the railroad industry, depreciation expense is a significant component of the Company’s operating expense. The Company recorded depreciation and amortization expenses of $1,075 million, $1,012 million and $910 million for the years ended December 31, 2005, 2004 and 2003, respectively. At December 31, 2005 and 2004, the Company had property and equipment, net balances of $26,551 million and $25,814 million, which include $7,210 million and $6,518 million, respectively, of accumulated depreciation.

The Company uses the group method of depreciation under which a single depreciation rate is applied to the gross investment in a particular class of property, despite differences in the service life or salvage value of individual property units within the same class. The Company conducts studies of depreciation rates and the required accumulated depreciation balance as required by the Federal Surface Transportation Board (STB), which is generally every three years for equipment property and every six years for track structure and other roadway property. The Company uses external consultants to assist management with these studies. The consultants rely on statistical analysis, historical retirement data, industry knowledge and discussions with management to assess the impact of new technologies and maintenance practices. Changes in the estimated service lives of the assets and their related depreciation rates are implemented prospectively, and the difference between the calculated accumulated depreciation and the amount recorded is amortized over the average remaining service lives of the assets.

A study conducted in 2004 resulted in the Company adopting new depreciation rates for track structure that resulted in a net decrease in 2004 depreciation expense of $5 million and approximately $16 million on an ongoing annual basis, as calculated using the asset base at the time of the rate change. A study conducted in 2003 resulted in the Company adopting new depreciation rates for locomotives, other assets, as well as hardware and software that resulted in a net decrease in annual depreciation expense of $9 million.

ACCOUNTING PRONOUNCEMENTS

See Note 16 of the Consolidated Financial Statements for information about recent accounting pronouncements.

50

FORWARD-LOOKING INFORMATION

To the extent that statements made by the Company relate to the Company’s future economic performance or business outlook, projections or expectations of financial or operational results, or refer to matters that are not historical facts, such statements are “forward-looking” statements within the meaning of the federal securities laws. Forward-looking statements involve a number of risks and uncertainties, and actual performance or results may differ materially. Important factors that could cause actual performance or results to differ materially include, but are not limited to the following:

• Economic and industry conditions: material adverse changes in economic or industry conditions, both in the United States and globally, changes in customer demand, effects of adverse economic conditions affecting shippers, adverse economic conditions in the industries and geographic areas that produce and consume freight, adverse economic conditions in BNSF’s supplier base, competition and consolidation within the transportation industry, the extent to which BNSF is successful in gaining new long-term relationships with customers or retaining existing ones, changes in fuel prices and other key materials and disruptions in supply chains for these materials, changes in the securities and capital markets, and changes in crew availability, labor costs and labor difficulties, including stoppages affecting either BNSF’s operations or customers’ abilities to deliver goods to BNSF for shipment;

• Legal and regulatory factors: developments and changes in laws and regulations, including those affecting train operations or the marketing of services, the ultimate outcome of shipper and rate claims subject to adjudication, increased economic regulation of the rail industry, developments in environmental investigations or proceedings with respect to rail operations or current or past ownership or control of real property, and developments in other types of claims and litigation, including those relating to personal injuries, asbestos and other occupational disease, the release of hazardous materials, environmental contamination and damage to property, and rates or service; and

• Operating factors: technical difficulties, changes in operating conditions and costs, commodity concentrations, the availability of equipment and human resources to meet changes in demand, the extent of the Company’s ability to achieve its operational and financial initiatives and to contain costs, the effectiveness of steps taken to maintain and improve operations and network fluidity, including the management of the amount of traffic on the system to meet demand and the ability to acquire sufficient resources to meet that demand, congestion on other railroads, disruptions to BNSF’s technology network including computer systems and software, as well as natural events such as severe weather, fires, floods and earthquakes or man-made or other disruptions of BNSF Railway’s operating systems, structures, or equipment including the effects of acts of terrorism on the Company’s system or other railroads’ systems.

The Company cautions against placing undue reliance on forward-looking statements, which reflect its current beliefs and are based on information currently available to it as of the date a forward-looking statement is made. The Company undertakes no obligation to revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event the Company does update any forward-looking statement, no inference should be made that the Company will make additional updates with respect to that statement, related matters, or any other forward-looking statements. Any corrections or revisions may appear in the Company’s public filings with the Securities and Exchange Commission, which are accessible at www.sec.gov, and on the Company’s website at www.bnsf.com, and which investors are advised to consult.

51

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, BNSF utilizes various financial instruments that inherently have some degree of market risk. The following table summarizes the impact of these hedging activities on the Company’s results of operations (in millions):

December 31,	2005			2004
Fuel hedge benefit (including ineffective portion of unexpired hedges)	$	531		$	338
Interest rate hedge benefit		17			36
Total hedge benefit		548			374
Tax effect		(209	)		(144	)
Hedge benefit, net of tax	$	339		$	230

The Company’s fuel hedge benefit is due to increases in fuel prices subsequent to the initiation of various hedges. The interest rate hedge benefit is the result of the conversion of fixed-rate long-term debt to floating-rate debt coupled with lower interest rates. The information presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section and Notes 3 and 9 of the Consolidated Financial Statements describes significant aspects of BNSF’s financial instrument activities, which have a material market risk. Additionally, the Company uses fuel surcharges to mitigate the risk of fuel price volatility.

COMMODITY PRICE SENSITIVITY

BNSF engages in hedging activities to partially mitigate the risk of fluctuations in the price of its diesel fuel purchases. Existing hedge transactions as of December 31, 2005, are based on the front month settlement prices of New York Mercantile Exchange (NYMEX) #2 heating oil (HO), West Texas Intermediate crude oil (WTI), or the HO refining spread (HO-WTI), which is defined as the difference between HO and WTI. A WTI hedge combined with a HO-WTI hedge will result in the equivalent of a HO hedge. For swaps, BNSF either pays or receives the difference between the hedge price and the actual average price of the hedge commodity during a specified determination period for a specified number of gallons. For costless collars, if the average hedge commodity price for a specified determination period is greater than the cap price, BNSF receives the difference for a specified number of gallons. If the average commodity price is less than the floor price, BNSF pays the difference for a specified number of gallons. If the commodity price is between the floor price and the cap price, BNSF neither makes nor receives a payment. Hedge transactions are generally settled with the counterparty in cash. Based on historical information, BNSF believes there is a significant correlation between the market prices for diesel fuel, WTI, and HO.

At December 31, 2005, BNSF had recorded in the Consolidated Balance Sheet a fuel hedging asset of $336 million for fuel hedges covering 2006 and 2007.

The following table is an estimate of the impact to earnings that could result from hypothetical price changes during the twelve- month period ending December 31, 2006 and the balance sheet impact from the hypothetical price changes, both based on hedge position at December 31, 2005:

Sensitivity Analysis
Hedged commodity price change	Fuel hedge annual pre-tax earnings impact		Balance Sheet impact of change in fuel hedge fair value
10 percent increase	$	61 million increase	$	70 million increase
10 percent decrease	$	61 million decrease	$	64 million decrease

52

Based on fuel consumption during the twelve-month period ending December 31, 2005 of 1,402 million gallons and fuel prices during that same period, excluding the impact of the Company’s hedging activities, a ten percent increase or decrease in the commodity price per gallon would result in an approximate $231 million increase or decrease, respectively, in fuel expense (pre-tax) on an annual basis.

At December 31, 2005, BNSF maintained fuel inventories for use in normal operations, which were not material to BNSF’s overall financial position and, therefore, represent no significant market exposure. Further information on fuel hedges is incorporated by reference from Note 3 of the Consolidated Financial Statements.

INTEREST RATE SENSITIVITY

From time to time, BNSF enters into various interest rate hedging transactions for purposes of managing exposure to fluctuations in interest rates and establishing rates in anticipation of future debt issuances as well as to convert a portion of its fixed-rate long-term debt to floating-rate debt. These interest rate hedges are accounted for either as cash flow or fair value hedges. BNSF’s measurement of the fair value of these hedges is based on estimates of the mid-market values for the transactions provided by the counterparties to these agreements.

At December 31, 2005, the fair value of BNSF’s debt, excluding capital leases, was $7,195 million, and the interest rate hedging asset was less than $1 million for fair value hedges and $8 million for cash flow hedges.

The following table is an estimate of the impact to earnings and the fair value of the total debt and interest rate hedges that could result from hypothetical interest rate changes during the twelve-month period ending December 31, 2006 based on debt levels and outstanding hedges as of December 31, 2005:

Sensitivity Analysis
Hypothetical change in interest rates	Floating rate debt - Annual pre-tax earnings impact	Change in fair value
		Total debt	Interest rate hedges
1 percent decrease	$13 million increase	$645 million increase	$18 million decrease
1 percent increase	$13 million decrease	$541 million decrease	$16 million increase

Further information on interest rate hedges is incorporated by reference from Note 3 of the Consolidated Financial Statements. Information on the Company’s debt, which may be sensitive to interest rate fluctuations, is incorporated by reference from Note 9 of the Consolidated Financial Statements.

53

Item 8. Financial Statements and Supplementary Data

The Consolidated Financial Statements of BNSF and subsidiary companies, together with the report of the Company’s independent registered public accounting firm, are included as part of this filing.

The following documents are filed as a part of this report:

Consolidated Financial Statements
Management’s Report on Internal Control Over Financial Reporting	55
Report of Independent Registered Public Accounting Firm	56
Consolidated Statements of Income for the three years ended December 31, 2005	58
Consolidated Balance Sheets as of December 31, 2005 and 2004	59
Consolidated Statements of Cash Flows for the three years ended December 31, 2005	60
Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2005	61
Notes to Consolidated Financial Statements	62-102

54

Management’s Report on Internal Control Over Financial Reporting

To the Shareholders of Burlington Northern Santa Fe Corporation and Subsidiaries

The management of Burlington Northern Santa Fe Corporation (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on our assessment we concluded that, as of December 31, 2005, the Company’s internal control over financial reporting is effective based on those criteria.

Management’s assessment of the Company’s internal control over financial reporting as of December 31, 2005, has been audited by PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, as stated in their report, which appears on the following pages.

55

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Burlington Northern Santa Fe Corporation

We have completed integrated audits of Burlington Northern Santa Fe Corporation’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005 and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Burlington Northern Santa Fe Corporation and its subsidiaries (the Company) at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2003, the Company changed the manner in which it accounts for asset retirement costs.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 8, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

56

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Fort Worth, Texas

February 13, 2006

57

Burlington Northern Santa Fe Corporation and Subsidiaries

Consolidated Statements of Income

Dollars in millions, except per share data

Year Ended December 31,	2005		2004		2003
Revenues	$	12,987	$	10,946	$	9,413
Operating expenses:
Compensation and benefits		3,515		3,322		2,963
Fuel		1,959		1,335		1,093
Purchased services		1,714		1,424		1,252
Depreciation and amortization		1,075		1,012		910
Equipment rents		886		790		705
Materials and other		916		1,377		825
Total operating expenses		10,065		9,260		7,748
Operating income		2,922		1,686		1,665
Interest expense		437		409		420
Other expense, net		37		4		14
Income before income taxes and cumulative effect of accounting change		2,448		1,273		1,231
Income tax expense		917		482		454
Income before cumulative effect of accounting change		1,531		791		777
Cumulative effect of accounting change, net of tax		—		—		39
Net income	$	1,531	$	791	$	816
Earnings per share:
Basic earnings per share (before cumulative effect of accounting change)	$	4.12	$	2.14	$	2.10
Basic earnings per share (after cumulative effect of accounting change)	$	4.12	$	2.14	$	2.21
Diluted earnings per share (before cumulative effect of accounting change)	$	4.01	$	2.10	$	2.09
Diluted earnings per share (after cumulative effect of accounting change)	$	4.01	$	2.10	$	2.19
Average shares (in millions):
Basic		371.8		370.0		369.1
Dilutive effect of stock awards		10.0		6.6		3.2
Diluted		381.8		376.6		372.3

See accompanying Notes to Consolidated Financial Statements.

58

BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

Dollars in millions, shares in thousands

December 31,	2005			2004
Assets
Current assets:
Cash and cash equivalents	$	75		$	322
Accounts receivable, net		678			181
Materials and supplies		396			339
Current portion of deferred income taxes		218			308
Current portion of fuel-hedging asset		303			264
Other current assets		210			201
Total current assets		1,880			1,615
Property and equipment, net		26,551			25,814
Other assets		1,873			1,496
Total assets	$	30,304		$	28,925
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities	$	2,773		$	2,251
Long-term debt due within one year		456			465
Total current liabilities		3,229			2,716
Long-term debt and commercial paper		6,698			6,051
Deferred income taxes		7,916			7,820
Casualty and environmental liabilities		878			941
Minimum pension liability		417			353
Employee separation costs		107			124
Other liabilities		1,551			1,609
Total liabilities		20,796			19,614
Commitments and contingencies (see Notes 3, 9 and 10)
Stockholders’ equity:
Common stock, $0.01 par value 600,000 shares authorized; 527,289 shares and 517,275 shares issued, respectively		5			5
Additional paid-in-capital		6,702			6,299
Retained earnings		8,045			6,792
Treasury stock, at cost, 155,718 shares and 140,463 shares, respectively		(4,569	)		(3,741	)
Prepaid forward repurchase of treasury stock		(600	)		—
Unearned compensation		(22	)		(43	)
Accumulated other comprehensive income (loss)		(53	)		(1	)
Total stockholders’ equity		9,508			9,311
Total liabilities and stockholders’ equity	$	30,304		$	28,925

See accompanying Notes to Consolidated Financial Statements.

59

BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Dollars in millions

Year Ended December 31,	2005			2004			2003
Operating activities
Net income	$	1,531		$	791		$	816
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,075			1,012			910
Deferred income taxes		217			237			460
Employee separation costs paid		(30	)		(33	)		(43	)
Cumulative effect of accounting change, net of tax		—			—			(39	)
Long-term casualty and environmental liabilities, net		(71	)		477			20
Other, net		(54	)		(84	)		28
Changes in current assets and liabilities:
Accounts receivable, net		(138	)		(65	)		(27	)
Change in accounts receivable sales program		(350	)		25			31
Materials and supplies		(57	)		(73	)		(39	)
Other current assets		(5	)		(144	)		5
Accounts payable and other current liabilities		491			234			163
Net cash provided by operating activities		2,609			2,377			2,285
Investing activities
Capital expenditures		(1,750	)		(1,527	)		(1,726	)
Other, net		(273	)		(68	)		(80	)
Net cash used for investing activities		(2,023	)		(1,595	)		(1,806	)
Financing activities
Net increase (decrease) in commercial paper and bank borrowings		563			(242	)		(77	)
Proceeds from issuance of long-term debt		500			250			265
Payments on long-term debt		(464	)		(300	)		(339	)
Dividends paid		(267	)		(231	)		(191	)
Proceeds from stock options exercised		244			420			68
Purchase of BNSF common stock		(799	)		(376	)		(217	)
Prepaid forward repurchase of treasury stock		(600	)		—			—
Other, net		(10	)		1			2
Net cash used for financing activities		(833	)		(478	)		(489	)
Increase (decrease) in cash and cash equivalents		(247	)		304			(10	)
Cash and cash equivalents:
Beginning of year		322			18			28
End of year	$	75		$	322		$	18
Supplemental cash flow information
Interest paid, net of amounts capitalized	$	427		$	476		$	458
Income taxes paid, net of refunds	$	545		$	159		$	26
Non-cash asset financing	$	68		$	104		$	24

See accompanying Notes to Consolidated Financial Statements.

60

BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

Shares in thousands, dollars in millions, except per share data

	Common Shares	Treasury Shares		Common Stock and Paid–in Capital		Retained Earnings			Treasury Stock			Prepaid Forward Repurchase of Treasury Stock			Unearned Compensation			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at December 31, 2002	496,683	(120,905	)	$	5,669	$	5,625		$	(3,114	)	$	—		$	(39	)	$	(209	)	$	7,932
Comprehensive income:
Net income					—		816			—			—			—			—			816
Minimum pension liability adjustment, net of tax expense of $3					—		—			—			—			—			6			6
Fuel/interest hedge mark-to-market, net of tax expense of $38					—		—			—			—			—			63			63
Total comprehensive income					—		816			—			—			—			69			885
Common stock dividends, $0.54 per share					—		(201	)		—			—			—			—			(201	)
Adjustments associated with unearned compensation, restricted stock	781	(54	)		22		—			—			—			3			—			25
Exercise of stock options and related tax benefit of $7	3,221	(316	)		80		—			(9	)		—			—			—			71
Purchase of BNSF common stock	—	(7,950	)		—		—			(217	)		—			—			—			(217	)
Balance at December 31, 2003	500,685	(129,225	)		5,771		6,240			(3,340	)		—			(36	)		(140	)		8,495
Comprehensive income:
Net income					—		791			—			—			—			—			791
Minimum pension liability adjustment, net of tax expense of $3					—		—			—			—			—			3			3
Fuel/interest hedge mark-to-market, net of tax expense of $83					—		—			—			—			—			136			136
Total comprehensive income					—		791			—			—			—			139			930
Common stock dividends, $0.64 per share					—		(239	)		—			—			—			—			(239	)
Adjustments associated with unearned compensation, restricted stock	1,135	(49	)		44		—			—			—			(7	)		—			37
Exercise of stock options and related tax benefit of $53	15,455	(746	)		489		—			(25	)		—			—			—			464
Purchase of BNSF common stock	—	(10,443	)		—		—			(376	)		—			—			—			(376	)
Balance at December 31, 2004	517,275	(140,463	)		6,304		6,792			(3,741	)		—			(43	)		(1	)		9,311
Comprehensive income:
Net income					—		1,531			—			—			—			—			1,531
Minimum pension liability adjustment, net of tax benefit of $25					—		—			—			—			—			(39	)		(39	)
Fuel/interest hedge mark-to-market, net of tax benefit of $8					—		—			—			—			—			(13	)		(13	)
Other					—		—			—			—			—			—			—
Total comprehensive income					—		1,531			—			—			—			(52	)		1,479
Common stock dividends, $0.74 per share					—		(278	)		—			—			—			—			(278	)
Adjustments associated with unearned compensation, restricted stock	665	(140	)		36		—			—			—			21			—			57
Exercise of stock options and related tax benefit of $94	9,349	(540	)		367		—			(29	)		—			—			—			338
Purchase of BNSF common stock	—	(14,575	)		—		—			(799	)		—			—			—			(799	)
Prepaid forward repurchase of treasury stock	—	—			—		—			—			(600	)		—			—			(600	)
Balance at December 31, 2005	527,289	(155,718	)	$	6,707	$	8,045		$	(4,569	)	$	(600	)	$	(22	)	$	(53	)	$	9,508

See accompanying Notes to Consolidated Financial Statements.

61

BURLINGTON NORTHERN SANTA FE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. The Company

Burlington Northern Santa Fe Corporation (BNSF) is a holding company that conducts no operating activities and owns no significant assets other than through its interests in its subsidiaries. BNSF’s principal, wholly-owned subsidiary is BNSF Railway Company (BNSF Railway), which operates one of the largest railroad networks in North America with approximately 32,000 route miles covering 28 states and two Canadian provinces. Through one operating transportation services segment, BNSF Railway transports a wide range of products and commodities including Consumer Products, Industrial Products, Coal and Agricultural Products. These consolidated financial statements include BNSF, BNSF Railway, other majority-owned subsidiaries, and a variable interest entity for which BNSF is the primary beneficiary (see Note 2 of the Consolidated Financial Statements below), all of which are separate legal entities (collectively, the Company).

2. Significant Accounting Policies

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of BNSF, including its principal subsidiary BNSF Railway. All significant intercompany accounts and transactions have been eliminated.

IMPLEMENTATION OF FIN 46R

In 2001, BNSF Railway entered into the San Jacinto Rail Limited Partnership (the Partnership) with subsidiaries of three chemical manufacturing companies. The original purpose of this Partnership was to construct and BNSF to operate a 13-mile rail line to service these and other chemical and plastics manufacturing facilities in the Houston, Texas area. BNSF Railway owns a 48-percent limited partnership interest and a one-percent general partnership interest in the Partnership and acts as the general partner and operator of this facility.

The Company determined that the Partnership, a previously unconsolidated subsidiary, was required to be consolidated pursuant to Financial Accounting Standards Board (FASB) Interpretation No. 46R (FIN 46R), Consolidation of Variable Interest Entities, on March 31, 2004, as the Partnership qualifies as a variable interest entity and the Company is the primary beneficiary. This consolidation had a minimal impact to the Consolidated Statements of Income due to the fact that the Company accounted for this investment prior to the adoption of FIN 46R under the equity method of accounting and the Partnership’s losses to date have been minimal. The consolidation of the Partnership in 2004 resulted in an increase in assets of $54 million, which includes $26 million in cash and $23 million in land and related development costs, an increase in liabilities of $55 million, including $50 million of short-term debt, and a decrease in equity of $1 million (see Note 7 of the Consolidated Financial Statements for additional information regarding the Partnership).

62

CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, on January 1, 2003. This statement requires BNSF to recognize a liability for legally obligated asset retirement costs associated with tangible long-lived assets. SFAS No. 143 also disallows the accrual of retirement costs that are not legal obligations. As a result, BNSF and other railroads were required to change their accounting policies for certain track structure assets to exclude removal costs as a component of depreciation expense where the inclusion of such costs would result in accumulated depreciation balances exceeding the historical basis of the assets. This change results in lower depreciation and amortization expense primarily offset by higher compensation and benefits, purchased services and materials and other expenses in the period in which removal costs are incurred.

63

The following table illustrates the effect on net income and earnings per share if the Company had applied SFAS No. 143, Accounting for Asset Retirement Obligations prior to its adoption by the Company in 2004 (in millions, except per share data):

Year ended December 31,	2005		2004		2003
Net income as reported	$	1,531	$	791	$	816
Pro forma net income	$	1,531	$	791	$	777
Earnings per share
Basic – as reported	$	4.12	$	2.14	$	2.21
Basic – pro forma	$	4.12	$	2.14	$	2.10
Diluted – as reported	$	4.01	$	2.10	$	2.19
Diluted – pro forma	$	4.01	$	2.10	$	2.09

USE OF ESTIMATES

The preparation of financial statements in accordance with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These estimates and assumptions are periodically reviewed by management. Actual results could differ from those estimates.

REVENUE RECOGNITION

Transportation revenues are recognized based upon the proportion of service provided as of the balance sheet date. Revenues from ancillary services are recognized when performed. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as a reduction to revenue on a pro-rata basis based on actual or projected future customer shipments. When using projected shipments, the Company relies on historic trends as well as economic and other indicators to estimate the liability for customer incentives.

ACCOUNTS RECEIVABLE, NET

Accounts receivable, net includes accounts receivable reduced by an allowance for bill adjustments and uncollectible accounts. The allowance for bill adjustments and uncollectible accounts is based on historical experience as well as any known trends or uncertainties related to customer billing and account collectibility.

CASH AND CASH EQUIVALENTS

All short-term investments with original maturities of less than 90 days are considered cash equivalents. Cash equivalents are stated at cost, which approximates market value because of the short maturity of these instruments.

MATERIALS AND SUPPLIES

Materials and supplies, which consist mainly of rail, ties and other items for construction and maintenance of property and equipment, as well as diesel fuel, are valued at the lower of average cost or market.

64

PROPERTY AND EQUIPMENT, NET

Property and equipment are depreciated and amortized on a straight-line basis over their estimated useful lives. The Company uses the group method of depreciation in which a single depreciation rate is applied to the gross investment in a particular class of property, despite differences in the service life or salvage value of individual property units within the same class. Upon normal sale or retirement of certain depreciable railroad property, cost less net salvage value is charged to accumulated depreciation, and no gain or loss is recognized. The disposals of land and non-rail property as well as significant premature retirements are recorded as gains or losses at the time of their occurrence.

The Company self-constructs portions of its track structure and rebuilds certain classes of rolling stock. In addition to direct labor and material, certain indirect costs are capitalized. Expenditures that significantly increase asset values or extend useful lives are capitalized. Repair and maintenance expenditures are charged to operating expense when the work is performed. Property and equipment are stated at cost.

The Company incurs certain direct labor, contract service and other costs associated with the development and installation of internal-use computer software. Costs for newly developed software or significant enhancements to existing software are typically capitalized. Research, preliminary project, operations, maintenance and training costs are charged to operating expense when the work is performed.

Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying value of the long-lived assets, the carrying value is reduced to the estimated fair value as measured by the discounted cash flows.

ENVIRONMENTAL LIABILITIES

Liabilities for environmental cleanup costs are initially recorded when BNSF’s liability for environmental cleanup is both probable and reasonably estimable. BNSF utilizes a third party actuary to assist the Company in estimating substantially all of its environmental liabilities. Subsequent adjustments to initial estimates are recorded as necessary based upon additional information developed in subsequent periods. Estimates for these liabilities are undiscounted.

PERSONAL INJURY CLAIMS

Liabilities for personal injury claims are initially recorded when the expected loss is both probable and reasonably estimable. Subsequent adjustments to initial estimates are recorded as necessary based upon additional information developed in subsequent periods. The liability and ultimate expense projections are developed with the assistance of third parties. Liabilities recorded for unasserted personal injury claims, including those related to asbestos, are based on information currently available. Estimates of liabilities for personal injury claims are undiscounted.

INCOME TAXES

Deferred tax assets and liabilities are measured using the tax rates that apply to taxable income in the period in which the deferred tax asset or liability is expected to be realized or paid. Valuation allowances are established to reduce deferred tax assets if it is more likely than not that some or all of the deferred tax asset will not be realized.

65

STOCK-BASED COMPENSATION

At December 31, 2005, the Company had stock-based employee compensation plans. The Company applies Accounting Principles Board (APB) Opinion 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock plans. In accordance with APB Opinion 25, the Company records the intrinsic value of stock-based compensation as expense. Accordingly, no compensation expense has been recognized for its fixed stock options as the exercise price equals the stock price on the date of grant. Stock-based compensation expense related to restricted stock and restricted stock units has been recognized as compensation expense.

66

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (in millions, except per share data):

Year Ended December 31,	2005			2004			2003
Net income, as reported	$	1,531		$	791		$	816
Stock-based employee compensation expense included in reported net income, net of related tax effects		23			19			11
Total stock-based compensation expense determined under fair value method for all awards, net of related tax effects		(42	)		(41	)		(36	)
Pro forma net income	$	1,512		$	769		$	791
Earnings per share:
Basic – as reported	$	4.12		$	2.14		$	2.21
Basic – pro forma	$	4.07		$	2.08		$	2.14
Diluted – as reported	$	4.01		$	2.10		$	2.19
Diluted – pro forma	$	3.96		$	2.04		$	2.13

The pro forma amounts were estimated using the Black-Scholes option-pricing model with the following assumptions:

Year Ended December 31,	2005			2004			2003
Weighted average expected life (years)		4.5			3.9			4.0
Weighted average expected volatility		24.0	%		26.1	%		35.0	%
Weighted average dividend per share	$	0.69		$	0.61		$	0.49
Weighted average risk free interest rate		3.75	%		3.45	%		2.17	%
Weighted average fair value of options granted per share	$	11.33		$	7.03		$	7.20

See Note 16 of the Consolidated Financial Statements for additional information regarding developments related to SFAS No. 123 and SFAS No. 123R, Share-Based Payment.

PENSION AND OTHER POST-EMPLOYMENT BENEFITS

BNSF uses a third party actuary to assist the Company in estimating liabilities and expenses for pensions and other post-employment benefits (OPEB). Estimated amounts are based on historical information, current information and estimates regarding future events and circumstances. Significant assumptions used in the valuation of pension and/or OPEB liabilities include the expected return on plan assets, discount rate, rate of increase in compensation levels and the health care cost trend rate.

RECLASSIFICATIONS

Certain comparative prior year amounts in the Consolidated Financial Statements and accompanying notes have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported operating income and net income.

67

3. Hedging Activities

The Company uses derivatives to hedge against increases in diesel fuel prices and interest rates as well as to convert a portion of its fixed-rate long-term debt to floating-rate debt. The Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives that are designated as fair value or cash flow hedges to specific assets or liabilities on the balance sheet, commitments or forecasted transactions. The Company assesses at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the changes in fair value or cash flows. Any change in fair value resulting from ineffectiveness, as defined by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, is recognized in current period earnings. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is recorded in accumulated other comprehensive income (AOCI) as a separate component of stockholders’ equity and reclassified into earnings in the period during which the hedge transaction affects earnings.

BNSF monitors its hedging positions and credit ratings of its counterparties and does not anticipate losses due to counterparty nonperformance.

FUEL

Fuel costs represented 19 percent of total operating expenses during 2005 and 14 percent of total operating expenses during 2004 and 2003. Due to the significance of diesel fuel expenses to the operations of BNSF and the historical volatility of fuel prices, the Company has entered into hedges to partially mitigate the risk of fluctuations in the price of its diesel fuel purchases. The fuel hedges include the use of derivatives that are accounted for as cash flow hedges. The hedging is intended to protect the Company’s operating margins and overall profitability from adverse fuel price changes by entering into fuel-hedge instruments based on management’s evaluation of current and expected diesel fuel price trends. However, to the extent the Company hedges portions of its fuel purchases, it may not realize the impact of decreases in fuel prices. Conversely, to the extent the Company does not hedge portions of its fuel purchases, it may be adversely affected by increases in fuel prices. Based on fuel consumption during 2005 and excluding the impact of the hedges, each one-cent increase in the price of fuel would result in approximately $14 million of additional fuel expense on an annual basis.

TOTAL FUEL-HEDGING ACTIVITIES

As of December 31, 2005, BNSF’s total fuel hedging activities covered approximately 26 percent and 3 percent of estimated fuel purchases for 2006 and 2007, respectively. Hedge positions are closely monitored to ensure that they will not exceed actual fuel requirements in any period.

The amounts recorded in the Consolidated Statements of Income for fuel-hedge transactions were as follows (in millions):

Year Ended December 31,	2005			2004			2003
Hedge benefit	$	535		$	337		$	65
Ineffective portion of unexpired hedges		(4	)		1			3
Tax effect		(203	)		(130	)		(26	)
Hedge benefit, net of tax	$	328		$	208		$	42

68

The amounts recorded in the Consolidated Balance Sheets for fuel hedge transactions were as follows (in millions):

December 31,	2005			2004
Short-term fuel-hedging asset	$	303		$	264
Long-term fuel-hedging asset		33			105
Ineffective portion of unexpired hedges		—			(4	)
Tax effect		(129	)		(140	)
Amount included in AOCI, net of tax	$	207		$	225
Settled fuel-hedging contracts receivable	$	143		$	131

BNSF measures the fair value of hedges from data provided by various external counterparties. To value a swap, the Company uses the forward commodity price for the period hedged. The fair values of costless collars are calculated and provided by the corresponding counterparties.

NYMEX #2 HEATING OIL HEDGES

As of December 31, 2005, BNSF had entered into fuel swap and costless collar agreements utilizing New York Mercantile Exchange (NYMEX) #2 heating oil (HO). The hedge prices do not include taxes, transportation costs, certain other fuel handling costs and any differences which may occur between the prices of HO and the purchase price of BNSF’s diesel fuel. Over the twelve months ended December 31, 2005, the sum of all such costs averaged approximately 16 cents per gallon.

During 2005, the Company converted approximately 19 million gallons of 2006 West Texas Intermediate (WTI) collars into HO swaps at an average price of $1.08 per gallon. The following table provides fuel hedge data based upon the quarter being hedged for all HO fuel hedges outstanding at December 31, 2005.

	Quarter Ending
2006	March 31,		June 30,		September 30,		December 31,		Annual
HO Swaps
Gallons hedged (in millions)		18.90		—		—		—		18.90
Average swap price (per gallon)		1.08		—		—		—		1.08
Fair value (in millions)	$	13	$	—	$	—	$	—	$	13
HO Collars
Gallons hedged (in millions)		15.75		22.05		28.35		31.50		97.65
Average cap price (per gallon)	$	0.97	$	0.92	$	0.91	$	0.94	$	0.93
Average floor price (per gallon)	$	0.90	$	0.84	$	0.84	$	0.87	$	0.86
Fair value (in millions)	$	12	$	18	$	24	$	28	$	82
	Quarter Ending
2007	March 31,		June 30,		September 30,		December 31,		Annual
HO Collars
Gallons hedged (in millions)		31.50		—		—		—		31.50
Average cap price (per gallon)	$	0.93	$	—	$	—	$	—	$	0.93
Average floor price (per gallon)	$	0.86	$	—	$	—	$	—	$	0.86
Fair value (in millions)	$	28	$	—	$	—	$	—	$	28

69

WTI CRUDE OIL HEDGES

In addition, BNSF enters into fuel swap and costless collar agreements utilizing WTI crude oil. The hedge prices do not include taxes, transportation costs, certain other fuel handling costs, and any differences which may occur between the prices of WTI and the purchase price of BNSF’s diesel fuel, including refining costs. Over the twelve months ended December 31, 2005, the sum of all such costs averaged approximately 45 cents per gallon.

No additional WTI hedges were entered into during 2005. However, the Company converted approximately 19 million gallons of WTI collars into HO swaps as stated in the NYMEX #2 Heating Oil Hedges section. The following tables provide fuel hedge data based upon the quarter being hedged for all WTI fuel hedges outstanding at December 31, 2005.

	Quarter Ending
2006	March 31,		June 30,		September 30,		December 31,		Annual
WTI Swaps
Barrels hedged (in thousands)		1,350		675		375		—		2,400
Equivalent gallons hedged (in millions)		56.70		28.35		15.75		—		100.80
Average swap price (per barrel)	$	24.43	$	25.16	$	25.69	$	—	$	24.83
Fair value (in millions)	$	50	$	25	$	14	$	—	$	89
WTI Collars
Barrels hedged (in thousands)		1,050		1,500		825		525		3,900
Equivalent gallons hedged (in millions)		44.10		63.00		34.65		22.05		163.80
Average cap price (per barrel)	$	29.23	$	30.20	$	30.81	$	31.93	$	30.30
Average floor price (per barrel)	$	24.73	$	25.79	$	26.32	$	27.42	$	25.84
Fair value (in millions)	$	34	$	47	$	26	$	16	$	123
	Quarter Ending
2007	March 31,		June 30,		September 30,		December 31,		Annual
WTI Collars
Barrels hedged (in thousands)		150		—		—		—		150
Equivalent gallons hedged (in millions)		6.30		—		—		—		6.30
Average cap price (per barrel)	$	33.00	$	—	$	—	$	—	$	33.00
Average floor price (per barrel)	$	29.00	$	—	$	—	$	—	$	29.00
Fair value (in millions)	$	5	$	—	$	—	$	—	$	5

NYMEX #2 HEATING OIL REFINING SPREAD HEDGES

During 2005, the Company entered into fuel swap agreements utilizing the HO refining spread (HO-WTI) to hedge the equivalent of approximately 57 million gallons of fuel with an average swap price $15.69 per barrel. HO-WTI is the difference in price between HO and WTI; therefore, a HO-WTI swap in combination with a WTI swap is equivalent to a HO swap. The following table provides fuel hedge data based upon the quarter being hedged for all HO-WTI fuel hedges outstanding as of December 31, 2005.

70

2006	Quarter Ending March 31,
HO-WTI Swaps
Barrels hedged (in thousands)		1,350
Equivalent gallons hedged (in millions)		56.70
Average swap price (per barrel)	$	15.69
Fair value (in millions)	$	(4	)

71

SUMMARIZED COMPARATIVE PRIOR YEAR INFORMATION

The following table provides summarized comparative information for hedge transactions as of December 31, 2004.

Year ending,	December 31,
	2005		2006		2007
HO Swaps
Gallons hedged (in millions)		69.30		—		—
Average swap price (per gallon)	$	0.93	$	—	$	—
Fair value (in millions)	$	15	$	—	$	—
HO Collars
Gallons hedged (in millions)		40.95		97.65		31.50
Average cap price (per gallon)	$	0.97	$	0.93	$	0.93
Average floor price (per gallon)	$	0.89	$	0.86	$	0.86
Fair value (in millions)	$	8	$	17	$	6
WTI Swaps
Barrels hedged (in thousands)		3,750		2,400		—
Equivalent gallons hedged (in millions)		157.50		100.80		—
Average swap price (per barrel)	$	24.52	$	24.83	$	—
Fair value (in millions)	$	66	$	36	$	—
WTI Collars
Barrels hedged (in thousands)		10,950		4,350		150
Equivalent gallons hedged (in millions)		459.90		182.70		6.30
Average cap price (per barrel)	$	26.69	$	30.47	$	33.00
Average floor price (per barrel)	$	22.11	$	26.04	$	29.00
Fair value (in millions)	$	175	$	45	$	1

INTEREST RATE

From time to time, the Company enters into various interest rate hedging transactions for the purpose of managing exposure to fluctuations in interest rates and establishing rates in anticipation of future debt issuances as well as to convert a portion of its fixed-rate long-term debt to floating-rate debt. The Company uses interest rate swaps and treasury locks as part of its interest rate risk management strategy.

TOTAL INTEREST RATE HEDGING PROGRAM

All interest rate derivative transactions outstanding are reflected in the following table:

	December 31, 2005
	Maturity Date																			Fair Value
	2006			2007			2008		2009			2010			Thereafter		Total
Fair value hedges
Fixed to variable swaps (in millions)	$	—		$	300		$	—	$	200		$	250		$	—	$	750		$	—
Average fixed rate		—			7.88	%		—		6.13	%		7.13	%		—		7.16	%
Average floating rate		—			6.75	%		—		4.97	%		7.36	%		—		6.48	%
Cash flow hedges
Forward-starting swaps (in millions)	$	250		$	—		$	—	$	—		$	—		$	—	$	250		$	8
Average swap rate		4.87	%		—			—		—			—			—		4.87	%

72

BNSF’s measurement of the fair value of interest rate swaps and treasury locks is based on estimates of the mid-market values for the transactions provided by the counterparties to these agreements.

SUMMARIZED COMPARATIVE PRIOR YEAR INFORMATION

	December 31, 2004
	Maturity Date																			Fair Value
	2005			2006		2007			2008		2009			Thereafter			Total
Fair value hedges
Fixed to variable swaps (in millions)	$	300		$	—	$	300		$	—	$	200		$	250		$	1,050		$	35
Average fixed rate		6.38	%	$	—		7.88	%	$	—		6.13	%		7.13	%		6.93	%
Average floating rate		3.95	%	$	—		4.67	%	$	—		2.97	%		5.36	%		4.31	%

FAIR VALUE INTEREST RATE HEDGES

The Company enters into interest rate swaps to convert fixed-rate long-term debt to floating-rate debt. These swaps are accounted for as fair value hedges under SFAS No. 133. These fair value hedges qualify for the short-cut method of recognition; therefore, no portion of these swaps is treated as ineffective. As of December 31, 2005 and 2004, BNSF had ten and thirteen separate swaps outstanding, respectively, with an aggregate notional amount of $750 million and $1,050 million, respectively, in which it pays an average floating rate, which fluctuates quarterly, based on London Interbank Offered Rate (LIBOR). The average floating rate to be paid by BNSF as of December 31, 2005, was 6.48 percent, and the average fixed rate BNSF is to receive is 7.16 percent. These swaps will expire between 2007 and 2010.

The amounts recorded in the Consolidated Statements of Income, as a reduction of interest expense, for interest rate fair value hedge transactions are as follows (in millions):

December 31,	2005			2004			2003
Hedge benefit	$	17		$	36		$	35
Tax effect		(6	)		(14	)		(13	)
Hedge benefit, net of tax	$	11		$	22		$	22

The amounts recorded on the Consolidated Balance Sheets for interest rate fair value hedge transactions, which represent the fair value of unexpired hedges, with a corresponding increase to debt or accrued interest, are as follows (in millions):

December 31,	2005			2004
Short-term interest rate hedging asset	$	1		$	10
Long-term interest rate hedging asset	$	(1	)	$	25

73

CASH FLOW INTEREST RATE HEDGES

In anticipation of a future debt issuance, the Company entered into five forward starting interest rate swaps in July and August 2005 having an aggregate notional amount of $250 million to fix a portion of the rate for a future 30-year unsecured debt issuance. The forward starting swaps have an average swap rate of 4.87 percent, which includes an average forward treasury rate of 4.41 percent and a swap spread of 0.46 percent. The forward starting date of the swaps is October 16, 2006, but the Company may terminate the swaps at any time prior to that date. The swaps must be terminated on or prior to February 28, 2007. The resulting locked-in rate on the debt to be issued (excluding the credit spread and issuance fees) will be 4.87 percent minus the swap spread received by BNSF on the termination date. Any gain or loss on these hedges will be amortized to interest expense over the life of the issued debt. These transactions are accounted for as cash flow hedges.

The amounts recorded in the Consolidated Balance Sheets for interest rate cash flow hedge transactions, which represent the fair value of unexpired hedges, are as follows (in millions):

December 31,	2005			2004
Interest rate hedging asset	$	8		$	—
Tax effect		(3	)		—
Interest rate hedging asset in AOCI, net of tax	$	5		$	—

4. Other Expense, Net

Other expense, net includes the following (in millions):

Year Ended December 31,	2005		2004			2003
Accounts receivable sale fees	$	15	$	10		$	9
Loss from participation in synthetic fuel partnership		14		3			—
Miscellaneous, net		8		(9	)		5
Total	$	37	$	4		$	14

The increase in other expense, net was predominantly due to higher accounts receivable sales fees driven primarily by higher interest rates, losses on BNSF’s participation in a synthetic fuel partnership and the receipt of interest income on a settlement that occurred in 2004.

During the fourth quarter of 2004, BNSF indirectly purchased a 4.17 percent ownership of a synthetic fuel partnership through a 50 percent interest in a limited liability company with an unrelated entity. The synthetic fuel partnership generates Section 29 synthetic fuel tax credits, which reduce the Company’s effective tax rate (see Note 5 of the Consolidated Financial Statements for additional information). In 2005 and 2004, BNSF received a tax benefit from its participation in the partnership of approximately $16.2 and $3.5 million, respectively, related to the fuel tax credits and the deduction of partnership operating losses. In 2005 and 2004, the Company recorded approximately $14 million and $3 million, respectively, of other expense, net related to the Company’s share of the partnership’s losses under the equity method of accounting. The partnership does not qualify for consolidation under FIN 46R, as BNSF is not the primary beneficiary of the partnership. The Company’s maximum future exposure to loss related to the activities of the synthetic fuel partnership is based upon the actual synthetic fuel produced by the partnership and is estimated to equal $25 million. However, the Company believes that any losses will be more than offset by the synthetic fuel tax credits.

74

5. Income Taxes

Income tax expense (benefit) was as follows (in millions):

Year Ended December 31,	2005		2004		2003
Current:
Federal	$	620	$	212	$	(12	)
State		80		33		6
Total current		700		245		(6	)
Deferred:
Federal		183		211		408
State		34		26		52
Total deferred		217		237		460
Total	$	917	$	482	$	454

75

Reconciliation of the federal statutory income tax rate to the effective tax rate was as follows:

Year Ended December 31,	2005		2004		2003
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	3.0		3.0		3.0
Tax settlement	—		—		(1.0	)
Synthetic fuel credits	(0.4	)	(0.2	)	—
Other, net	(0.1	)	0.1		(0.1	)
Effective tax rate	37.5	%	37.9	%	36.9	%

The lower effective tax rate in 2003 primarily reflects a tax settlement attributable to prior years that was settled favorably in 2003.

The components of deferred tax assets and liabilities were as follows (in millions):

December 31,	2005			2004
Deferred tax liabilities:
Depreciation and amortization	$	(8,406	)	$	(8,222	)
Hedging		(132	)		(139	)
Other		(221	)		(210	)
Total deferred tax liabilities		(8,759	)		(8,571	)
Deferred tax assets:
Casualty and environmental		360			387
Pension and other post-employment benefits		245			227
Compensation and benefits		125			123
Employee separation costs		49			58
Other		282			264
Total deferred tax assets		1,061			1,059
Net deferred tax liability	$	(7,698	)	$	(7,512	)
Non-current deferred income tax liability	$	(7,916	)	$	(7,820	)
Current portion of deferred income taxes		218			308
Net deferred tax liability	$	(7,698	)	$	(7,512	)

All federal income tax returns of BNSF’s predecessor companies, Burlington Northern Inc. and Santa Fe Pacific Corporation, are closed through 1994 and the business combination date of September 22, 1995, respectively. Internal Revenue Service examination of the years 1995 through 1999 for BNSF is completed, and the unagreed issues are pending before Internal Revenue Service (IRS) Appeals. BNSF is currently under examination for years 2000 through 2002. In addition, BNSF and its subsidiaries have various state income tax returns in the process of examination, administrative appeal or litigation. Due to the capital-intensive nature of BNSF’s business, a significant portion of the audit issues with the IRS and other taxing authorities relate to whether expenditures are classified as maintenance or capital and whether certain asset valuations are appropriate. A provision for taxes resulting from ongoing and future federal and state audits is based on an estimation of aggregate adjustments that may be required as a result of the audits. The Company believes that adequate provision has been made for any adjustment that might be assessed for open years through 2005.

76

6. Accounts Receivable, Net

BNSF Railway transfers most of its accounts receivable to Santa Fe Receivables Corporation (SFRC), a special purpose subsidiary. SFRC transfers an undivided interest in such receivables, with limited exceptions, to a master trust, and causes the trust to issue an undivided interest in the receivables to investors (the A/R sales program). The undivided interests in the master trust may be in the form of certificates or purchased interests.

The Company’s total capacity to sell undivided interests to investors under the A/R sales program was $700 million at December 31, 2005, which was comprised of two $350 million, 364-day accounts receivable facilities. The Company amended these facilities on October 14, 2005, modifying their expiration dates to October 2006. Outstanding undivided interests held by investors under the A/R sales program were $300 million and $650 million at December 31, 2005 and 2004, respectively. These receivables were derecognized by BNSF Railway in connection with the sale of undivided interests under the A/R sales program. The undivided interests were supported by $1,008 million and $864 million of receivables transferred by SFRC to the master trust at December 31, 2005 and December 31, 2004, respectively. When SFRC transfers these receivables to the master trust, it retains an undivided interest in the receivables sold. This retained interest is included in accounts receivable in the Company’s financial statements. SFRC’s retained interest in these receivables of $708 million and $214 million at December 31, 2005 and 2004, respectively, less an allowance for uncollectible accounts, reflected the total accounts receivable transferred by SFRC to the master trust less $300 million and $650 million at December 31, 2005 and 2004, respectively, of outstanding undivided interests held by investors. Due to a relatively short collection cycle, the fair value of the undivided interest transferred to investors in the A/R sales program approximated book value, and there was no gain or loss from the transaction.

The Company retains the collection responsibility with respect to the accounts receivable. Proceeds from collections reinvested in the A/R sales program were approximately $13.6 billion, $11.6 billion and $9.8 billion in 2005, 2004 and 2003, respectively. No servicing asset or liability has been recorded because the fees the Company receives for servicing the receivables approximate the related costs. SFRC’s costs of the sale of receivables are included in other expense, net and were $15 million, $10 million and $9 million for the years ended December 31, 2005, 2004 and 2003, respectively. These costs fluctuate monthly with changes in prevailing interest rates and were based on weighted average interest rates of 3.3 percent, 1.4 percent and 1.1 percent for the years ended December 31, 2005, 2004 and 2003, respectively. These costs include interest, discounts associated with transferring the receivables under the A/R sales program to SFRC, program fees paid to banks, incidental commercial paper issuing costs, and fees for unused commitment availability.

The amount of accounts receivable transferred by BNSF Railway to SFRC fluctuates based upon the availability of receivables and is directly affected by changing business volumes and credit risks, including dilution and delinquencies. BNSF Railway has historically experienced very low levels of default or dilution. If dilution or delinquency percentages were to increase by one percentage point, there would be no impact to the amount of receivables BNSF Railway could sell.

77

Receivables funded under the A/R sales program may not include amounts over 90 days past due or concentrations over certain limits with any one customer and certain other receivables. At December 31, 2005 and December 31, 2004, $36 million and $47 million, respectively, of accounts receivable were greater than 90 days old. The Company maintains an allowance for bill adjustments and uncollectible accounts based upon the expected collectibility of accounts receivable, including receivables transferred to the master trust. Credit losses are based on specific identification of uncollectible accounts and application of historical collection percentages by aging category. At December 31, 2005 and December 31, 2004, $45 million and $59 million, respectively, of such allowances had been recorded of which $42 million and $52 million, respectively, had been recorded as a reduction to accounts receivable, net. Additionally, at December 31, 2005 and December 31, 2004, approximately $3 million and $7 million, respectively, had been recorded as an allowance for bill adjustments and uncollectible accounts in accounts payable and other current liabilities because they relate to the undivided interests held by investors. During each of the years ended December 31, 2005 and 2004, $8 million of accounts receivable were written off.

The investors in the master trust have no recourse against BNSF Railway’s other assets except for customary warranty and indemnity claims. Creditors of BNSF Railway have no recourse to the assets of the master trust or SFRC unless and until all claims of their respective creditors have been paid. The A/R sales program includes provisions that, if triggered, allow the investors participating in this program, at their option, to cancel the program. At December 31, 2005, BNSF Railway is in compliance with these provisions.

78

7. Property and Equipment, Net

Property and equipment, net (in millions), and the weighted average annual depreciation rates (%) were as follows:

December 31,	2005			2004			2005 Depreciation Rates
Land	$	1,649		$	1,554		—	%
Track structure		15,631			14,427		3.4
Other roadway		10,671			10,670		2.5
Locomotives		3,412			3,492		4.9
Freight cars and other equipment		1,949			1,807		4.9
Computer hardware and software		449			382		13.4
Total cost		33,761			32,332
Less accumulated depreciation and amortization		(7,210	)		(6,518	)
Property and equipment, net	$	26,551		$	25,814

The Consolidated Balance Sheets at December 31, 2005 and 2004, included $1,000 million, net of $372 million of amortization, and $978 million, net of $332 million of amortization, respectively, for property and equipment under capital leases, primarily for locomotives.

The Company capitalized $13 million, $10 million and $9 million of interest for the years ended December 31, 2005, 2004 and 2003, respectively.

SAN JACINTO RAIL LIMITED PARTNERSHIP

As described in Note 2 of the Consolidated Financial Statements, the original purpose of the San Jacinto Rail Limited Partnership was to construct and BNSF to operate a 13-mile rail line to service several chemical and plastics manufacturing facilities in the Houston, Texas area. In the fourth quarter of 2004, BNSF reached an agreement with another carrier for an alternative means of access to the facilities by using the other railroad’s existing line. As consideration for the trackage rights and alternative access rights, BNSF agreed to compensate the other railroad, in lieu of rent, by a combination of cash and waiver of certain payment obligations of the other carrier for future payments related to prospective capital projects to be performed on jointly-operated facilities of BNSF and the other carrier. In January 2005, upon implementation of the terms of this agreement, the Company recorded an intangible asset of $92 million for the trackage rights, amortization of which is estimated to be approximately $3 million per year. In February 2005, the Surface Transportation Board announced its approval of the alternative access by means of trackage rights over the other carrier’s existing lines.

The fair market value of San Jacinto’s assets, including land, was approximately $4 million, determined based on comparable sales and existing property listing information on other properties located near the subject properties. As a result of a plan to sell these assets, the Company recorded a pre-tax impairment charge of $24 million in materials and other expense, which reduced net income by $15 million or $0.04 per share for 2004. Additionally, the short-term debt that was recorded upon consolidation was repaid during the fourth quarter of 2004.

79

8. Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities consisted of the following (in millions):

December 31,	2005		2004
Compensation and benefits payable	$	596	$	545
Customer incentives		297		281
Accounts payable		278		234
Casualty and environmental liabilities		240		248
Income tax liabilities		232		79
Rents and leases		210		161
Property tax liabilities		126		134
Accrued interest		115		99
Dividends payable		75		64
Other		604		406
Total	$	2,773	$	2,251

9. Debt

Debt outstanding was as follows (in millions):

December 31,	2005			2004
Notes and debentures, weighted average rate of 6.7 percent, due 2006 to 2097	$	5,077		$	4,909
Equipment obligations, weighted average rate of 6.8 percent, due 2006 to 2016		413			476
Capitalized lease obligations, weighted average rate of 7.3 percent, due 2006 to 2023		604			632
Mortgage bonds, weighted average rate of 8.3 percent, due 2006 to 2047		384			388
Financing obligations, weighted average rate of 6.3 percent, due 2012 to 2028		153			153
Commercial paper, weighted average rate of 4.3 percent		563			—
Unamortized discount and other, net		(40	)		(42	)
Total		7,154			6,516
Less current portion of long-term debt		(456	)		(465	)
Long-term debt	$	6,698		$	6,051

Notes and debentures include a fair value adjustment decrease for hedges of less than $1 million and an increase of $31 million at December 31, 2005 and 2004, respectively.

Certain BNSF Railway properties and other assets are subject to liens securing $384 million of mortgage debt. Certain locomotives and rolling stock of BNSF Railway are subject to equipment obligations and capital leases.

80

The following tables provide fair value information for the Company’s debt obligations including principal cash flows and related weighted average interest rates by contractual maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve at December 31, 2005.

	December 31, 2005
	Maturity Date																		Total including capital leases			Total excluding capital leases		Fair value excluding capital leases
	2006			2007			2008			2009			2010			Thereafter
Fixed-rate debt (in millions)	$	456		$	164		$	161		$	135		$	149		$	4,777		$	5,842		$	5,238	$	5,843
Average interest rate		8.6	%		7.9	%		7.6	%		7.4	%		7.2	%		6.7	%		6.9	%
Variable-rate debt (in millions)	$	—		$	301		$	—		$	205		$	806		$	—		$	1,312		$	1,312	$	1,352
Average interest rate		—	%		7.3	%		—			5.2	%		5.3	%		—	%		5.8	%

BNSF has included maturities of $563 million of commercial paper in the 2010 column above.

	December 31, 2004
	Maturity Date																		Total including capital leases			Total excluding capital leases		Fair value excluding capital leases
	2005			2006			2007			2008			2009			Thereafter
Fixed-rate debt (in millions)	$	160		$	448		$	151		$	150		$	123		$	4,404		$	5,436		$	4,804	$	5,455
Average interest rate		7.8	%		8.7	%		8.0	%		7.8	%		7.5	%		6.7	%		7.0	%
Variable-rate debt (in millions)	$	305		$	—		$	311		$	—		$	214		$	250		$	1,080		$	1,080	$	1,173
Average interest rate		4.5	%		—			6.0	%		—			4.3	%		7.0	%		5.5	%

In the two tables above, maturities in 2008 exclude $200 million of 7.29 percent debentures which mature in 2036 but are redeemable in 2008 at the option of the debt holders.

The fair value of BNSF’s long-term debt is primarily based on quoted market prices for the same or similar issues, or on the current rates that would be offered to BNSF for debt of the same remaining maturities. Capital leases have been excluded from the calculation of fair value for both 2004 and 2005. The carrying amount of commercial paper and bank debt approximates fair value because of the short maturity of these instruments.

81

NOTES AND DEBENTURES

2005

In December 2005, BNSF issued $500 million of 6.613 percent junior subordinated notes due December 31, 2055. The junior subordinated notes are callable on or after January 15, 2026, at par plus accrued and unpaid interest. On January 15, 2026, if the junior subordinated notes are not called, the interest rate will change to an annual rate equal to the 3-month LIBOR rate plus 2.35%, reset quarterly. Interest payments may be deferred, at the option of the Company, on a cumulative basis for a period of up to five consecutive years; however, during this time the Company will not be permitted to declare or pay dividends on its common stock. In the event that certain financial covenants are not maintained, the Company will be required to sell common stock, the proceeds of which will be used to pay any accrued and unpaid interest. At December 31, 2005, the Company was in compliance with these covenants. Because of this structure, certain rating agencies provide a considerable degree of equity treatment for purposes of calculating various ratios and metrics. The majority of the net proceeds of the debt issuance are being used to repurchase common stock, with the remainder used for general corporate purposes.

Pursuant to existing Board authority, BNSF can issue up to an additional $1 billion of debt securities. The Company expects that it will file shelf registration statements for this additional $1 billion when it is ready to issue the debt.

2004

The Company issued $250 million of 4.88 percent notes due January 15, 2015. The net proceeds of the debt issuance were used for general corporate purposes including the repayment of outstanding commercial paper.

2003

The Company exercised an option to call $150 million of 7.50 percent bonds due July 2023 at a price of 103.02 percent of par. Commercial paper was used to fund the call.

BNSF issued $250 million of 4.30 percent notes due July 1, 2013. The net proceeds of the debt issuance were used for general corporate purposes including the repayment of outstanding commercial paper.

MORTGAGE BONDS

2003

The Company exercised an option to call $29 million of 2.63 percent mortgage bonds issued by a predecessor company and due January 1, 2010. Cash generated from operations was used to fund the call.

82

COMMERCIAL PAPER

BNSF issues commercial paper from time to time that is supported by a bank revolving credit agreement. At December 31, 2005, there were no bank borrowings against the revolving credit agreement. Outstanding commercial paper balances are considered as reducing the amount of borrowings available under this agreement. In June 2005, the Company let its $700 million 364-day facility expire. The Company amended its multi-year facility to increase the facility size to $1.2 billion and to extend the expiration date to June 2010. Annual facility fees are currently 0.100 percent for the long-term facility. This rate is subject to change based upon changes in BNSF’s senior unsecured debt ratings. Borrowing rates are based upon: (i) LIBOR plus a spread determined by BNSF’s senior unsecured debt ratings, (ii) money market rates offered at the option of the lenders, or (iii) an alternate base rate. The Company classifies commercial paper as long-term to the extent of its borrowing capacity under the facility. BNSF must maintain compliance with certain financial covenants under its revolving credit agreement. At December 31, 2005, the Company was in compliance with these covenants.

Commercial paper outstanding of $891 million as of December 31, 2005, includes $328 million issued to a consolidated subsidiary of BNSF and is eliminated upon consolidation. The maturity value of commercial paper as of December 31, 2005, of $891 million, reduces the total capacity available under the revolving credit agreements to approximately $309 million.

83

GUARANTEES

Debt and other obligations of non-consolidated entities guaranteed by the Company as of December 31, 2005 are as follows (dollars in millions):

	Guarantees
	BNSF Ownership Percentage		Principal Amount Guaranteed		Maximum Future Payments		Maximum Recourse Amount a		Remaining Term (in years)	Capitalized Obligations b
Kinder Morgan Energy Partners, L.P.	0.5	%	$	190	$	190	$	—	Termination of Ownership	$	—
Kansas City Terminal Intermodal Transportation Corporation	0.0	%	$	62	$	96	$	96	13	$	34
Westside Intermodal Transportation Corporation	0.0	%	$	43	$	69	$	—	18	$	36
The Unified Government of Wyandotte County/Kansas City, Kansas	0.0	%	$	14	$	21	$	—	18	$	11
Various lessors (Residual value guarantees)	0.0	%		N/A	$	298	$	298	Various	$	68c
All other	0.0	%	$	8	$	9	$	4	Various	$	—

a Reflects the maximum amount the Company could recover from a third party other than the counterparty.

b Reflects capitalized obligations that are recorded on the Company’s Consolidated Balance Sheets.

c Reflects the FIN 45 asset and corresponding liability for the fair value of the residual value guarantees on the Company’s Consolidated Balance Sheet.

KINDER MORGAN ENERGY PARTNERS, L.P.

Santa Fe Pacific Pipelines, Inc. (SFPP), an indirect, wholly owned subsidiary of BNSF, has a guarantee in connection with its remaining special limited partnership interest in SFPP, L.P., a subsidiary of Kinder Morgan Energy Partners, L.P. to be paid only upon default by the partnership. All obligations with respect to the guarantee will cease upon termination of ownership rights which would occur upon a put notice issued by BNSF or the exercise of the call rights by the general partners of SFPP, L.P.

KANSAS CITY TERMINAL INTERMODAL TRANSPORTATION CORPORATION

BNSF and another major railroad jointly and severally guarantee $62 million of debt of Kansas City Terminal Intermodal Transportation Corporation, the proceeds of which were used to finance construction of a double track grade separation bridge in Kansas City, Missouri, which is operated and used by Kansas City Terminal Railway Company (KCTRC). BNSF has a 25 percent ownership in KCTRC, accounts for its interest using the equity method of accounting, and will be required to fund a portion of the remaining obligation upon default by the original debtor.

WESTSIDE INTERMODAL TRANSPORTATION CORPORATION AND THE UNIFIED GOVERNMENT OF WYANDOTTE COUNTY/KANSAS CITY, KANSAS

BNSF has guaranteed $57 million of debt, the proceeds of which were used to finance construction of a bridge that connects BNSF Railway’s Argentine Yard in Kansas City, Kansas, with the KCTRC mainline tracks in Kansas City, Missouri. The bridge is operated by KCTRC, and payments related to BNSF’s guarantee of this obligation will only be called for upon default by the original debtor.

84

RESIDUAL VALUE GUARANTEES (RVG)

In the normal course of business, the Company enters into leases in which it guarantees the residual value of certain leased equipment. Some of these leases have renewal or purchase options, or both, that the Company may exercise at the end of the lease term. If the Company elects not to exercise these options, it may be required to pay the lessor an amount not exceeding the RVG. The amount of any payment is contingent upon the actual residual value of the leased equipment. Some of these leases also require the lessor to pay the Company any surplus in the actual residual value of the leased equipment over the RVG. These guarantees will expire between 2006 and 2011.

The maximum future payments, as disclosed in the Guarantees table above, represent the undiscounted maximum amount that BNSF could be required to pay in the event the Company did not exercise its renewal option and the fair market value of the equipment had significantly declined. BNSF does not anticipate such a large reduction in the fair market value of the leased equipment. As of December 31, 2005, the Company has recorded a $68 million asset and corresponding liability for the fair value of the RVGs.

ALL OTHER

As of December 31, 2005, BNSF Railway guarantees $8 million of other debt and leases. BNSF holds a performance bond and has the option to sub-lease property to recover up to $4 million of the $8 million of guarantees. These guarantees expire between 2006 and 2014.

Other than as discussed above, there is no collateral held by a third party which the Company could obtain and liquidate to recover any amounts paid under the above guarantees.

Other than as discussed above, none of the guarantees are recorded in the Consolidated Financial Statements of the Company. The Company does not expect performance under these guarantees to have a material effect on the Company in the foreseeable future.

INDEMNITIES

In the ordinary course of business, BNSF enters into agreements with third parties that include indemnification clauses. In general, these clauses are customary for the types of agreements in which they are included. At times, these clauses may involve indemnification for the acts of the Company, its employees and agents, indemnification for another party’s acts, indemnification for future events, indemnification based upon a certain standard of performance, indemnification for liabilities arising out of the Company’s use of leased equipment or other property, or other types of indemnification. Due to the uncertainty of whether events which would trigger the indemnification obligations would ever occur, the Company does not believe that these indemnity agreements will have a material adverse effect on the Company’s results of operations, financial position or liquidity. Additionally, the Company believes that due to lack of historical payment experience, the fair value of indemnities cannot be estimated with any amount of certainty and that the fair value of any such amount would be immaterial to the financial statements. Accordingly, no fair value liability related to indemnities has been recorded in the financial statements.

85

10. Commitments and Contingencies

LEASE COMMITMENTS

BNSF has substantial lease commitments for locomotives, freight cars, trailers and containers, office buildings and other property, and many of these leases provide the option to purchase the leased item at fair market value at the end of the lease. However, some provide fixed price purchase options. Future minimum lease payments as of December 31, 2005 are summarized as follows (in millions):

December 31,	Capital Leases			Operating Leases a
2006	$	145		$	461
2007		135			536
2008		123			495
2009		95			461
2010		61			436
Thereafter		161			3,754
Total		720		$	6,143
Less amount representing interest		(116	)
Present value of minimum lease payments	$	604

a Excludes leases having non-cancelable lease terms of less than one year and per diem leases.

Lease rental expense for all operating leases was $565 million, $496 million and $462 million for the years ended December 31, 2005, 2004 and 2003, respectively. Contingent rentals and sublease rentals were not significant.

OTHER COMMITMENTS

In the normal course of business, the Company enters into long-term contractual requirements for future goods and services needed for the operations of the business. Such commitments are not in excess of expected requirements and are not reasonably likely to result in performance penalties or payments that would have a material adverse effect on the Company’s liquidity.

PERSONAL INJURY AND ENVIRONMENTAL COSTS

CHARGE FOR ASBESTOS AND ENVIRONMENTAL COSTS

During 2004, BNSF recorded a $465 million pre-tax charge to reflect changes in its estimate of unasserted asbestos liabilities and environmental liabilities. Of this amount, $293 million and $172 million were related to unasserted asbestos and environmental liabilities, respectively. The $465 million pre-tax charge was recorded in materials and other expense and reduced net income by $288 million, or $0.77 per share during 2004.

PERSONAL INJURY

Personal injury claims, including asbestos claims and employee work-related injuries and third party injuries (collectively, other personal injury), are a significant expense for the railroad industry. Personal injury claims by BNSF Railway employees are subject to the provisions of the Federal Employers’ Liability Act (FELA) rather than state workers’ compensation laws. FELA’s system of requiring the finding of fault, coupled with unscheduled awards and reliance on the jury system, contributed to increased expenses in past years. Other proceedings include claims by non-employees for punitive as well as compensatory damages. A few proceedings purport to be class actions. The variability present in settling these claims, including non-employee personal injury and matters in which punitive damages are alleged, could result in increased expenses in future years. BNSF has implemented a number of safety programs designed to reduce the number of personal injuries as well as the associated claims and personal injury expense.

BNSF records a liability for personal injury claims when the expected loss is both probable and reasonably estimable. The liability and ultimate expense projections are estimated using standard actuarial methodologies. Liabilities recorded for unasserted personal injury claims are based on information currently available. Due to the inherent uncertainty involved in projecting future events such as the number of claims filed each year, developments in judicial and legislative standards, and the average costs to settle projected claims, actual costs may differ from amounts recorded.

86

ASBESTOS

The Company is party to a number of personal injury claims by employees and non-employees who may have been exposed to asbestos. The heaviest exposure for BNSF employees was due to work conducted in and around the use of steam locomotive engines that were phased out between the years of 1950 and 1967. However, other types of exposures, including exposure from locomotive component parts and building materials, continued after 1967, until it was substantially eliminated by 1985.

Prior to 2000, claim filings against the Company for asbestos were not numerous and were sporadic. Accordingly, while the Company had concluded that a probable loss had occurred, it did not believe it could estimate the range of reasonably possible loss because of the lack of experience with such claims and the lack of detailed employment records for the population of exposed employees. The Company believed, however, that the low end of the range of reasonably possible loss, as that term is used in FASB Interpretation No. 14 (FIN 14), Reasonable Estimation of the Amount of a Loss, was immaterial. Subsequent to this period, claim filings increased and, when they continued into 2004, the Company concluded that the low end of the range of reasonably possible loss would be material and that an estimate for unasserted asbestos exposure liability needed to be recorded. BNSF then engaged a third party with extensive experience in performing asbestos studies to assist in assessing the unasserted liability exposure. The objective of the assessment was to determine the number of estimated unasserted asbestos claims and the estimated average cost per claim. The Company, with the assistance of the third party, first determined its exposed population from which it was able to derive the estimated number of unasserted claims. The estimated average cost per claim was then determined utilizing recent actual average cost per claim data.

Based on the assessment, the Company recorded an undiscounted $293 million pre-tax charge for unasserted asbestos claims in the third quarter of 2004. The $293 million pre-tax charge was recorded in materials and other expense and reduced net income by $182 million, or $0.49 per share, for the year ended December 31, 2004.

During the third quarter of 2005, the Company obtained an update of this study which concluded that the original September 2004 study continues to represent a reasonable estimate of BNSF’s future asbestos exposure. Therefore, management recorded no additional expense as a result of this update. The Company plans to update the study in the third quarter of 2006. On a quarterly basis, BNSF monitors actual experience against the number of forecasted claims and expected claim payments. Adjustments to the Company’s estimates will be recorded when necessary.

The following table summarizes the activity in the Company’s accrued obligations for both asserted and unasserted asbestos matters (in millions):

	2005			2004			2003
Beginning balance	$	345		$	60		$	55
Accruals		—			308			25
Payments		(19	)		(23	)		(20	)
Ending balance at December 31,	$	326		$	345		$	60

Of the obligations at December 31, 2005, $266 million is related to unasserted claims and $60 million is related to asserted claims. At December 31, 2005 and 2004, $21 and $18 million are included in current liabilities, respectively. The recorded liability is not discounted. In addition, defense and processing costs, which are recorded on an as-reported basis, are not included in the recorded liability. The Company is presently self-insured for asbestos-related claims.

87

The following table summarizes information regarding the number of asserted asbestos claims filed against BNSF:

	2005		2004
Claims unresolved at January 1,	1,926		1,985
Claims filed	835		712
Claims settled, dismissed or otherwise resolved	(640	)	(771	)
Claims unresolved at December 31,	2,121		1,926

Based on BNSF’s estimate of the potentially exposed employees and related mortality assumptions, it is anticipated that unasserted claims will continue to be filed through the year 2050. The Company recorded an amount for the full estimated filing period through 2050 because it had a relatively finite exposed population (former and current employees hired prior to 1985) which it was able to identify and reasonably estimate and about which it had obtained reliable demographic data (including age, hire date and occupation) derived from industry or BNSF specific data that was the basis for the study. BNSF projects that approximately 50, 70, and 90 percent of the future unasserted asbestos claims will be incurred within the next 10, 15, and 25 years, respectively.

Because of the uncertainty surrounding the factors used in the study, it is reasonably possible that future costs to settle asbestos claims may range from approximately $225 million to $425 million. However, BNSF believes that the $326 million recorded at December 31, 2005, is the best estimate of the Company’s future obligation for the settlement of asbestos claims.

The amounts recorded by BNSF for the asbestos-related liability were based upon currently known facts. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

While the final outcome of asbestos-related matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, should a number of these items occur in the same period, it could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

OTHER PERSONAL INJURY

BNSF uses a third party actuary to assist the Company in estimating its other personal injury liability claims and expense. These estimates are based on the covered population, activity levels and trends in frequency, and the costs of covered injuries. These actuarial estimates include unasserted claims except for certain repetitive stress and other occupational trauma claims that result from prolonged repeated events or exposure. Such claims are estimated on an as-reported basis because, while the Company has concluded that a probable loss has occurred, it cannot estimate the range of reasonably possible loss due to other contributing causes of such injuries and the fact that continued exposure is required for the potential injury to manifest itself as a claim. The Company believes that the low end of the range of reasonably possible loss, as that term is used in FIN 14, is immaterial for these other occupational trauma claims.

BNSF obtains quarterly actuarial updates for other personal injury liabilities and monitors actual experience against the number of forecasted claims to be received, the forecasted number of claims closing with payment and expected claims payments. Adjustments to the Company’s estimates are recorded quarterly as necessary or more frequently as new events or revised estimates develop.

88

The following table summarizes the activity in the Company’s accrued obligations for other personal injury matters (in millions):

	2005			2004			2003
Beginning balance	$	459		$	453		$	441
Accruals		181			194			190
Payments		(218	)		(188	)		(178	)
Ending balance at December 31,	$	422		$	459		$	453

At December 31, 2005 and 2004, $164 million and $170 million are included in current liabilities, respectively. BNSF’s liabilities for other personal injury claims are undiscounted. In addition, defense and processing costs, which are recorded on an as-reported basis, are not included in the recorded liability. The Company is substantially self-insured for other personal injury claims.

The following table summarizes information regarding the number of personal injury claims, other than asbestos, filed against BNSF:

	2005		2004
Claims unresolved at January 1,	4,116		4,393
Claims filed	3,758		3,632
Claims settled, dismissed or otherwise resolved	(4,257	)	(3,909	)
Claims unresolved at December 31,	3,617		4,116

Because of the uncertainty surrounding the ultimate outcome of other personal injury claims, it is reasonably possible that future costs to settle other personal injury claims may range from approximately $375 million to $525 million. However, BNSF believes that the $422 million recorded at December 31, 2005, is the best estimate of the Company’s future obligation for the settlement of other personal injury claims.

The amounts recorded by BNSF for other personal injury claims were based upon currently known facts. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding personal injury litigation in the United States, could cause the actual costs to be higher or lower than projected.

While the final outcome of these other personal injury matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, should a number of these items occur in the same period, it could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

BNSF INSURANCE COMPANY

The Company has a consolidated, wholly owned subsidiary, Burlington Northern Santa Fe Insurance Company LTD. (BNSF IC) that provides insurance coverage for certain risks incurred after April 1, 1998, FELA claims, railroad protective and force account insurance claims incurred after January 1, 2002, and certain other claims which are subject to reinsurance. Beginning in 2004, BNSF IC entered into annual reinsurance pooling agreements with several other companies. The pooling agreements insure workers compensation, general liability, auto liability, and FELA risk. In accordance with the agreements, BNSF IC cedes a portion of its FELA exposure to the pool and assumes a proportionate share of the entire pool’s risk. Each year BNSF IC reviews the objectives and performance of the pool to determine its continued participation in the pool. At December 31, 2005, BNSF IC had invested in commercial paper issued by BNSF and third party time deposits and money market accounts.

89

ENVIRONMENTAL

The Company’s operations, as well as those of its competitors, are subject to extensive federal, state and local environmental regulation. BNSF’s operating procedures include practices to protect the environment from the risks inherent in railroad operations, which frequently involve transporting chemicals and other hazardous materials. Additionally, many of BNSF’s land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. As a result, BNSF is subject to environmental cleanup and enforcement actions. In particular, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), also known as the Superfund law, as well as similar state laws generally impose joint and several liability for cleanup and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. BNSF has been notified that it is a potentially responsible party (PRP) for study and cleanup costs at Superfund sites for which investigation and remediation payments are or will be made or are yet to be determined (the Superfund sites) and, in many instances, is one of several PRPs. In addition, BNSF may be considered a PRP under certain other laws. Accordingly, under CERCLA and other federal and state statutes, BNSF may be held jointly and severally liable for all environmental costs associated with a particular site. If there are other PRPs, BNSF generally participates in the cleanup of these sites through cost-sharing agreements with terms that vary from site to site. Costs are typically allocated based on such factors as relative volumetric contribution of material, the amount of time the site was owned or operated, and/or the portion of the total site owned or operated by each PRP.

Liabilities for environmental cleanup costs are recorded when BNSF’s liability for environmental cleanup is both probable and reasonably estimable. Subsequent adjustments to initial estimates are recorded as necessary based upon additional information developed in subsequent periods. Environmental costs include initial site surveys and environmental studies as well as costs for remediation of sites determined to be contaminated.

During the first half of 2004, the Company experienced a significant increase in expense relating to environmental remediation developments at known sites for which the majority of the contamination occurred decades ago. Because of these and other developments, the Company performed an assessment in 2004 to determine if it was feasible to better estimate developments at its known sites. The Company determined that a third party actuary had proprietary data that included information from the Environmental Protection Agency (EPA) and other governmental agencies as well as information accumulated from public sources and work performed for other clients. Because of its determination that a better estimate of future development could be made with this data, BNSF engaged this third party actuary, which has an extensive background in performing various studies for large companies, including environmental matters, to assist BNSF in determining the Company’s potential future environmental exposure at known sites. As a result of this study, the Company revised its estimate of its probable environmental losses and its accrued liabilities.

Consequently, during the third quarter of 2004, BNSF recorded an undiscounted $172 million pre-tax charge related to its change in estimated environmental liabilities on a site by site basis. The $172 million pre-tax charge was recorded in materials and other expense and reduced net income by $106 million, or $0.28 per share, for 2004. The charge did not include (i) contaminated sites of which the Company is not aware, or (ii) additional amounts for third party claims, which arise out of contaminants allegedly migrating from BNSF property, due to a limited number of sites. BNSF continues to estimate third party claims on a site by site basis when the liability for such claims is probable and reasonably estimable. BNSF’s recorded liability for third party claims as of December 31, 2005 is approximately $24 million.

90

During the third quarter of 2005, the Company obtained an update of this study. Based on the results of the study, management recorded additional expense of approximately $12 million. The Company plans to update the study in the third quarter of 2006. On a quarterly basis, BNSF monitors actual experience against the forecasted remediation and related payments made on existing sites. Adjustments to the Company’s estimates will continue to be recorded when necessary based on developments in subsequent periods. Additionally, environmental accruals include amounts for newly identified sites or contaminants, third-party claims and legal fees incurred for defense of third-party claims and recovery efforts.

The Company’s estimate of ultimate cost for cleanup efforts at its known environmental sites utilizes BNSF’s historical payment patterns, its current estimated percentage to closure ratios, and the actuary’s proprietary benchmark patterns developed from data accumulated from public sources and work performed by it for other clients, including the EPA and other governmental agencies. These factors incorporate experience gained from cleanup efforts at other similar sites into the estimates for which remediation and restoration efforts are still in progress. BNSF also conducts an ongoing environmental contingency analysis, which considers a combination of factors including independent consulting reports, site visits, legal reviews and analysis of the likelihood of participation in, and the ability to pay for, cleanup of other PRPs.

BNSF is involved in a number of administrative and judicial proceedings and other mandatory cleanup efforts for 369 sites, including Superfund sites, at which it is participating in the study or cleanup, or both, of alleged environmental contamination.

The following table summarizes the activity in the Company’s accrued obligations for environmental matters (in millions):

	2005			2004			2003
Beginning balance	$	385		$	199		$	196
Accruals		33			258			59
Payments		(48	)		(72	)		(56	)
Ending balance at December 31,	$	370		$	385		$	199

At December 31, 2005 and 2004, $55 million and $60 million are included in current liabilities, respectively. BNSF’s environmental liabilities are not discounted. BNSF anticipates that the majority of the accrued costs at December 31, 2005 will be paid over the next ten years and no individual site is considered to be material.

The following table summarizes the environmental sites:

	BNSF sites				Superfund sites
	2005		2004		2005		2004
Number of sites at January 1,	384		402		24		22
Sites added during the period	24		34		—		5
Sites closed during the period	(39	)	(52	)	(4	)	(3	)
Number of sites at December 31,	369		384		20		24

91

Liabilities recorded for environmental costs represent BNSF’s best estimate of its probable future obligation for the remediation and settlement of these sites and include both asserted and unasserted claims. Unasserted claims are not a material component of the liability. Although recorded liabilities include BNSF’s best estimate of all probable costs, without reduction for anticipated recoveries from third parties, BNSF’s total cleanup costs at these sites cannot be predicted with certainty due to various factors such as the extent of corrective actions that may be required, evolving environmental laws and regulations, advances in environmental technology, the extent of other parties’ participation in cleanup efforts, developments in ongoing environmental analyses related to sites determined to be contaminated, and developments in environmental surveys and studies of contaminated sites.

Because of the uncertainty surrounding these factors, it is reasonably possible that future costs for environmental liabilities may range from approximately $300 million to $600 million. However, BNSF believes that the $370 million recorded at December 31, 2005, is the best estimate of the Company’s future obligation for environmental costs.

While the final outcome of these environmental matters cannot be predicted with certainty, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

OTHER CLAIMS AND LITIGATION

In addition to asbestos, other personal injury, and environmental matters discussed above, BNSF and its subsidiaries are also parties to a number of other legal actions and claims, various governmental proceedings and private civil suits arising in the ordinary course of business, including those related to disputes and complaints involving certain transportation rates and charges (including complaints seeking refunds of prior charges paid for coal transportation and the prescription of future rates for such movements). Some of the legal proceedings include claims for punitive as well as compensatory damages, and a few proceedings purport to be class actions. While the final outcome of these matters cannot be predicted with certainty, considering among other things the meritorious legal defenses available and liabilities that have been recorded along with applicable insurance, it is the opinion of BNSF that none of these items, when finally resolved, will have a material adverse effect on the Company’s financial position or liquidity. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

11. Employee Separation Costs

Employee separation costs activity was as follows (in millions):

	2005			2004			2003
Beginning balance at January 1,	$	154		$	179		$	210
Accruals		8			8			12
Payments		(30	)		(33	)		(43	)
Ending balance at December 31,	$	132		$	154		$	179

92

Employee separation liabilities of $132 million and $154 million are included in the Consolidated Balance Sheets at December 31, 2005 and 2004, respectively, and principally represent: (i) deferred benefits payable upon separation or retirement to certain active conductors, trainmen and locomotive engineers; (ii) employee-related severance costs for the consolidation of clerical functions, material handlers in mechanical shops and trainmen on reserve boards; and (iii) certain non-union employee severance costs. Employee separation expenses are recorded in materials and other in the Consolidated Statements of Income. At December 31, 2005, $25 million of the remaining liabilities are included in current liabilities for anticipated costs to be paid in 2006.

CONDUCTORS, TRAINMEN AND LOCOMOTIVE ENGINEERS

Liabilities related to deferred benefits payable upon separation or retirement to certain active conductors, trainmen and locomotive engineers were $116 million and $128 million at December 31, 2005 and 2004, respectively. These costs were primarily incurred in connection with labor agreements reached prior to the consummation of the business combination of BNSF’s predecessor companies Burlington Northern, Inc. and Santa Fe Pacific Corporation (the Merger) which, among other things, reduced train crew sizes and allowed for more flexible work rules. The remaining costs will be paid between 2006 and approximately 2024. In 2005, 2004 and 2003, the Company updated its estimates and recorded additional liabilities of $2 million, $2 million and $3 million, respectively, related to deferred benefits.

CONSOLIDATION OF CLERICAL FUNCTIONS

Liabilities related to the consolidation of clerical functions were $10 million and $15 million at December 31, 2005 and 2004, respectively, and primarily provide for separation programs announced in 2003, 2004 and 2005 and severance costs associated with the clerical consolidation plan adopted in 1995 upon the Merger. During 2005, BNSF recorded other liabilities of approximately $5 million primarily related to a voluntary severance program for certain union employees. The July 2004 separation program affected approximately 40 employees and resulted in accrued severance costs of approximately $4 million. Reductions related to the July 2004 separation program were substantially completed by December 31, 2004. The July 2003 separation program resulted in accrued severance cost of approximately $12 million, affected approximately 150 employees and was substantially completed in 2003. The 1995 consolidation plan resulted in the elimination of approximately 1,500 permanent positions and was substantially completed during 1999. The liability also includes costs related to the reduction of approximately 40 and 140 material handlers in 2001 and 2000, respectively.

In 2003, the Company recorded $1 million of reversals for certain liabilities associated with the consolidation of clerical functions. These reversals primarily reflect accrued payments related to workforce reductions for positions under collective bargaining agreements where the Company was able to place affected individuals in alternate positions.

OTHER EMPLOYEE SEPARATION COSTS

At December 31, 2005 and 2004, other employee separation cost liabilities of $6 million and $11 million, respectively, principally related to certain remaining non-union employee severances resulting from fourth quarter 2001 workforce reduction and the Merger. These costs will be paid over the next several years based on deferral elections made by the affected employees. Also included in the other separation cost accrual is an estimate for the remaining payments to be made to other union employees as a result of a relocation program initiated in 2005 for which a $1 million accrual was recorded. As of December 31, 2005, the remaining liability balance related to this voluntary severance program was insignificant as the program was substantially complete.

93

During 2004, the Company recorded a liability of approximately $2 million primarily related to a voluntary severance program for certain union employees. Additionally, during 2003, the Company recorded a $2 million reduction to its liability balance due to changes in certain estimates related to fourth-quarter 2001 reductions.

12. Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on basic earnings per share adjusted for the effect of potential common shares outstanding that were dilutive during the period, arising from employee stock awards and incremental shares calculated using the treasury stock method.

Weighted average stock options totaling 0.1 million, 2.0 million and 23.6 million for 2005, 2004 and 2003, respectively, were not included in the computation of diluted earnings per share, because the options’ exercise price exceeded the average market price of the Company’s stock for those periods.

13. Retirement Plans and Other Post-Employment Benefit Plans

BNSF sponsors a funded, noncontributory qualified BNSF Retirement Plan, which covers substantially all non-union employees, and an unfunded BNSF Supplemental Retirement Plan, which covers certain officers and other employees. The benefits under these pension plans are based on years of credited service and the highest consecutive sixty months of compensation for the last ten years of salaried employment with BNSF. BNSF’s funding policy is to contribute annually not less than the regulatory minimum and not more than the maximum amount deductible for income tax purposes with respect to the funded plan.

Certain salaried employees of BNSF that have met age and years of service requirements are eligible for life insurance coverage and medical benefits, including prescription drug coverage, during retirement. The retiree medical plan is contributory and provides benefits to retirees, their covered dependents and beneficiaries. Retiree contributions are adjusted annually. The plan also contains fixed deductibles, coinsurance and out-of-pocket limitations. The basic life insurance plan is noncontributory and covers retirees only. Optional life insurance coverage is available for some retirees; however, the retiree is responsible for the full cost. BNSF’s policy is to fund benefits payable under the medical and life insurance plans as they come due. Generally, employees beginning salaried employment with BNSF subsequent to September 22, 1995, are not eligible for medical benefits during retirement.

Components of the net cost (benefit) for these plans were as follows (in millions):

	Pension Benefits									Health and Welfare Benefits
Year Ended December 31,	2005			2004			2003			2005			2004			2003
Service cost	$	20		$	19		$	17		$	2		$	3		$	4
Interest cost		95			97			100			17			20			22
Expected return on plan assets		(102	)		(113	)		(123	)		—			—			—
Actuarial loss		25			12			3			—			5			8
Net amortization and deferred amounts		—			—			—			(8	)		(4	)		(2	)
Net cost (benefit) recognized	$	38		$	15		$	(3	)	$	11		$	24		$	32

94

The following table shows the change in benefit obligation based on the September 30 measurement date (in millions):

	Pension Benefits						Health and Welfare Benefits
Change in Benefit Obligation	2005			2004			2005			2004
Benefit obligation at beginning of period	$	1,710		$	1,678		$	299		$	366
Service cost		20			19			2			3
Interest cost		95			97			17			20
Plan participants’ contributions		—			—			8			7
Amendments		—			—			—			(28	)
Actuarial loss (gain)		156			41			(1	)		(39	)
Benefits paid		(123	)		(125	)		(30	)		(30	)
Benefit obligation at end of period		1,858			1,710		$	295		$	299
Component representing future salary increases		(105	)		(112	)
Accumulated benefit obligation at end of period	$	1,753		$	1,598

Both the BNSF Retirement Plan and the BNSF Supplemental Retirement Plan had an accumulated benefit obligation in excess of plan assets at September 30, 2005 and 2004.

The following table shows the change in plan assets of the plans based on the September 30 measurement date (in millions):

	Pension Benefits						Health and Welfare Benefits
Change in Plan Assets	2005			2004			2005			2004
Fair value of plan assets at beginning of period	$	1,276		$	1,224		$	—		$	—
Actual return on plan assets		176			153			—			—
Employer contribution		18			24			22			23
Plan participants’ contributions		—			—			8			7
Benefits paid		(123	)		(125	)		(30	)		(30	)
Fair value of plan assets at end of period	$	1,347		$	1,276		$	—		$	—

95

The following table shows the reconciliation of the funded status of the plans with amounts recorded in the Consolidated Balance Sheets (in millions):

	Pension Benefits						Health and Welfare Benefits
December 31,	2005			2004			2005			2004
Fair value of plan assets as of September 30	$	1,347		$	1,276		$	—		$	—
Benefit obligations as of September 30		1,858			1,710			295			299
Funded status (plan assets less benefit obligations)		(511	)		(434	)		(295	)		(299	)
Amounts not recognized:
Unrecognized net loss		524			467			61			66
Unrecognized prior service cost		(2	)		(2	)		(36	)		(44	)
Adjustment for fourth quarter contribution		45			4			5			—
Net amount recognized as of December 31	$	56		$	35		$	(265	)	$	(277	)

The following table shows the amounts recognized in the Consolidated Balance Sheets (in millions):

	Pension Benefits						Health and Welfare Benefits
December 31,	2005			2004			2005			2004
Accrued benefit cost	$	(361	)	$	(318	)	$	(265	)	$	(277	)
Accumulated other comprehensive income		417			353			—			—
Net amount recognized	$	56		$	35		$	(265	)	$	(277	)
	Pension Benefits						Health and Welfare Benefits
December 31,	2005			2004			2005			2004
Increase (decrease) in minimum liability included in other comprehensive income	$	64		$	(6	)	$	—		$	—

The expected long-term rate of return is the return the Company anticipates earning, net of plan expenses, over the period that benefits are paid. It reflects the rate of return on present investments and on expected contributions. In determining the expected long-term rate of return, BNSF considered: 1) forward looking capital market forecasts, 2) historical returns for individual asset classes and 3) the impact of active portfolio management.

The assumptions used in accounting for the BNSF plans were as follows:

Assumptions used to determine net cost (benefit) for fiscal years ended December 31,	Pension Benefits						Health and Welfare Benefits
	2005		2004		2003		2005		2004		2003
Discount rate	5.75	%	6.00	%	6.50	%	5.75	%	6.00	%	6.50	%
Expected long-term rate of return on plan assets	8.00	%	8.25	%	8.50	%	—		—		—
Rate of compensation increase	3.90	%	3.90	%	3.90	%	3.90	%	3.90	%	3.90	%

96

Assumptions used to determine benefit obligations at September 30,	Pension Benefits				Health and Welfare Benefits
	2005		2004		2005		2004
Discount rate	5.25	%	5.75	%	5.25	%	5.75	%
Rate of compensation increase	3.90	%	3.90	%	3.90	%	3.90	%

The following table presents assumed health care cost trend rates:

December 31,	2005		2004		2003
Assumed health care cost trend rate for next year	10.50	%	10.00	%	11.00	%
Rate to which health care cost trend rate is expected to decline and remain	5.00	%	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2012		2010		2010

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	One Percentage- Point Increase		One Percentage- Point Decrease
Effect on total service and interest cost	$	2	$	(2	)
Effect on post retirement benefit obligation	$	24	$	(20	)

The qualified BNSF Retirement Plan asset allocation at September 30, 2005 and 2004 and the target allocation for 2005 by asset category are as follows:

Plan Asset Allocation	Target Allocation		Percentage of Pension Plan Assets at September 30,
	2005		2005		2004
Equity Securities	45–75	%	64	%	60	%
Fixed Income Securities	20–40		28		33
Real Estate	5–15		8		7
Total			100	%	100	%

The general investment objective of the BNSF Retirement Plan is to grow the Plan assets in relation to the Plan liabilities while prudently managing the risk of a decrease in the Plan’s assets relative to those liabilities. To meet this objective, the Employee Benefits Committee has adopted the above asset allocation ranges. This allows flexibility to accommodate market changes in the asset classes within defined parameters.

97

The Company contributed $40 million to the BNSF Retirement Plan in December 2005. The Company is not required to make any contributions to this plan in 2006. Additionally, the Company expects to make benefit payments in 2006 of approximately $21 million and $7 million from its OPEB and non-qualified defined benefit plans, respectively. The following table shows expected benefit payments and Medicare Part D subsidy receipts for the next five fiscal years and the aggregate five years thereafter from the defined benefit pension plans and OPEB (in millions):

Fiscal Year	Expected Pension Plan Benefit Paymentsa		Expected OPEB Payments		Expected Medicare Subsidy
2006	$	126	$	21	$	(3	)
2007		126		22		(3	)
2008		127		23		(3	)
2009		129		24		(3	)
2010		130		24		(3	)
2011-2015		674		131		(20	)

a Primarily consists of Qualified Defined Benefit Plan payments which are made from the Plan Trust and do not represent an immediate cash outflow to the Company.

DEFINED CONTRIBUTION PLANS

BNSF sponsors qualified 401(k) plans which cover substantially all employees and a non-qualified defined contribution plan which covers certain officers and other employees. BNSF matches 50 percent of the first six percent of non-union employees’ contributions and matches 25 percent on the first four percent of a limited number of union employees’ contributions, which are subject to certain percentage limits of the employees’ earnings, at each pay period. Non-union employees are eligible to receive an annual discretionary matching contribution of up to 30 percent of the first six percent of their contributions. Employer contributions for all non-union employees are subject to a five-year length of service vesting schedule. BNSF’s 401(k) matching expense was $20 million, $17 million and $16 million in 2005, 2004 and 2003, respectively.

OTHER

Under collective bargaining agreements, BNSF participates in multi-employer benefit plans which provide certain post-retirement health care and life insurance benefits for eligible union employees. Insurance premiums paid attributable to retirees, which are generally expensed as incurred, were $43 million, $33 million and $31 million, in 2005, 2004 and 2003, respectively (see Note 11 of the Consolidated Financial Statements for other deferred benefits payable to certain conductors, trainmen and locomotive engineers).

14. Stock Plans

On April 15, 1999, BNSF shareholders approved the BNSF 1999 Stock Incentive Plan and authorized 20 million shares of BNSF common stock to be issued in connection with stock options, restricted stock, restricted stock units and performance stock. On April 18, 2001, April 17, 2002, and April 21, 2004, BNSF shareholders approved the amended BNSF 1999 Stock Incentive Plan, which authorized additional awards not to exceed 29 million, 35 million and 42 million shares, respectively, of BNSF common stock to be issued in connection with stock options, restricted stock, restricted stock units and performance stock. Approximately three million common shares were available for future grant at December 31, 2005.

Additionally, on April 18, 1996, BNSF shareholders approved the non-employee director’s stock plan and authorized 900,000 shares of BNSF common stock to be issued in connection with this plan. Approximately 500,000 common shares were available for future grant at December 31, 2005.

STOCK OPTIONS

Under BNSF’s stock plans, options may be granted to directors, officers and salaried employees at the fair market value of the Company’s common stock on the date of grant. Stock option grants awarded after April 2001 generally vest ratably over three years and expire within ten years after the date of grant. Shares issued upon exercise of options may be issued from treasury shares or from authorized but unissued shares.

98

The Company applies APB Opinion 25 and related interpretations in accounting for its stock options (see Note 2 of the Consolidated Financial Statements for the Company’s pro forma net income and earnings per share determined based on the fair value at grant dates consistent with SFAS No. 123).

A summary of the status of stock options as of December 31, 2005, 2004 and 2003, and changes during the years then ended, is presented below (options in thousands):

Year Ended December 31,	2005				2004				2003
	Options		Weighted Average Exercise Prices		Options		Weighted Average Exercise Prices		Options		Weighted Average Exercise Prices
Balance at beginning of year	25,122		$	29.42	38,320		$	28.72	39,323		$	28.31
Granted	2,676		$	50.08	2,547		$	33.20	2,957		$	27.88
Exercised	(9,349	)	$	29.30	(15,455	)	$	28.29	(3,222	)	$	22.68
Cancelled	(168	)	$	35.48	(290	)	$	30.09	(738	)	$	30.16
Balance at end of year	18,281		$	32.45	25,122		$	29.42	38,320		$	28.72
Options exercisable at year end	13,718		$	29.75	20,164		$	29.18	31,465		$	28.83

The following table summarizes information regarding stock options outstanding at December 31, 2005 (options in thousands):

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Life	Weighted Average Exercise Prices		Number Exercisable	Weighted Average Exercise Prices
$24.08 to $27.97	5,649	5.67 Years	$	26.91	4,774	$	26.76
$28.34 to $29.44	5,182	3.73 Years	$	29.12	5,182	$	29.12
$29.78 to $34.59	4,663	5.26 Years	$	32.86	3,303	$	32.92
$34.87 to $71.03	2,787	7.97 Years	$	49.15	459	$	45.09
$24.08 to $71.03	18,281	5.37 Years	$	32.45	13,718	$	29.75

OTHER INCENTIVE PROGRAMS

BNSF has other long-term incentive programs in addition to stock options as shown in the following table (shares in thousands):

Other Incentive Programs	Generally Vested (in years)	Shares Outstanding as of December 31, 2005	Shares Granted For Year Ended December 31,
			2005	2004	2003
Restricted shares/units:
Time-based	3–5	1,464	346	639	558
Performance-based	3	550	316	251	—
BNSF Incentive Bonus Stock Program	3	1,127	601	227	329
BNSF Discounted Stock Purchase Program	N/A	70	33	18	19

99

Time-based awards are granted to senior managers within BNSF primarily as a retention tool and to encourage ownership in the Company and generally vest over three years and are contingent on continued salaried employment. The weighted-average grant date fair market values of time-based awards granted in 2005, 2004 and 2003 was $49.23, $32.72 and $27.88, respectively.

Performance-based awards are granted to senior managers within BNSF to encourage ownership in the Company and to align management’s interest with those of shareholders. Performance-based awards generally vest over three years and are contingent on the achievement of certain predetermined corporate performance goals (e.g., return on invested capital (ROIC)) and continued salaried employment. The weighted-average grant date fair market values of performance-based awards granted in 2005 and 2004 was $49.21 and $32.72, respectively, with no performance-based awards granted in 2003.

Additionally, related to the 2005 performance-based grant, eligible employees may also earn performance stock that will be granted in 2008 contingent upon achievement of higher ROIC goals and continued salaried employment. The Company has committed to a maximum grant of approximately 316,000 shares.

Certain eligible employees may exchange through the BNSF Incentive Bonus Stock Program (IBSP) the cash payment of their bonus for restricted stock. The grant date fair market values of IBSP awards granted in 2005, 2004 and 2003 was $47.58, $31.97 and $25.52, respectively. In September 2005, the program was amended so that no awards will be granted after 2006.

Salaried employees not eligible to participate in the IBSP may participate in the BNSF Discounted Stock Purchase Program (DSPP) and use their bonus to purchase BNSF common stock at a discount from the market price. These shares immediately vest but are restricted for a three-year period. The grant date fair market values of DSPP awards granted in 2005, 2004 and 2003 was $46.91, $31.84 and $25.38, respectively.

Shares awarded under the plans may not be sold or used as collateral and are generally not transferable by the holder until the shares awarded become free of restrictions. Compensation expense, net of tax, recorded under the BNSF Stock Incentive Programs in accordance with APB Opinion 25 is shown in the following table (in millions):

	2005		2004		2003
Awards vesting based on service conditions	$	15	$	12	$	11
Awards vesting based on performance and service conditions		8		7		—
Total	$	23	$	19	$	11

100

15. Common Stock and Preferred Capital Stock

COMMON STOCK

BNSF is authorized to issue 600 million shares of common stock, $0.01 par value. At December 31, 2005, there were 372 million shares of common stock outstanding. Each holder of common stock is entitled to one vote per share in the election of directors and on all matters submitted to a vote of stockholders. Subject to the rights and preferences of any future issuances of preferred stock, each share of common stock is entitled to receive dividends as may be declared by the Board of Directors (the Board) out of funds legally available and to share ratably in all assets available for distribution to stockholders upon dissolution or liquidation. No holder of common stock has any preemptive right to subscribe for any securities of BNSF.

PREFERRED CAPITAL STOCK

At December 31, 2005, BNSF had 50 million shares of Class A Preferred Stock, $0.01 par value and 25 million shares of Preferred Stock, $0.01 par value available for issuance. The Board has the authority to issue such stock in one or more series, to fix the number of shares and to fix the designations and the powers, rights, and qualifications and restrictions of each series. As of December 31, 2005, no Class A Preferred Stock had been issued.

SHARE REPURCHASE PROGRAM

In July 1997, the Board authorized the repurchase of up to 30 million shares of the Company’s common stock from time to time through open market transactions or otherwise. In December 1999, April 2000, September 2000, January 2003 and December 2005, the Board authorized extensions of the BNSF share repurchase program, adding 30 million shares at each date to the total shares previously authorized bringing BNSF’s share repurchase program to 180 million shares. During 2005, 2004 and 2003, the Company repurchased approximately 14 million, 10 million and 8 million shares, respectively, of its common stock at average prices of $54.95 per share, $35.98 per share, and $27.25 per share, respectively. Total repurchases through December 31, 2005, were 148 million shares at a total average cost of $29.49 per share, leaving 32 million shares available for repurchase out of the 180 million shares presently authorized. Additionally, during 2005, the Company repurchased shares from employees at a cost of $26 million to satisfy tax withholding obligations on the vesting of restricted stock or the exercise of stock options.

In December 2005, BNSF entered into prepaid forward transactions to purchase $600 million of the Company’s common stock. Shares will be delivered upon final settlement in February 2006. The number of shares will be determined based on the volume weighted average price per share through the final purchase date less a discount. There will be a net settlement in shares. This transaction is accounted for in accordance with Emerging Issues Taskforce (EITF) 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, which requires the $600 million prepayment to be recorded as a reduction in equity. At the time that the final settlement is made, the reduction in equity will be reclassified from prepaid forward repurchase of treasury stock to treasury stock. These transactions did not reduce outstanding shares in the fourth quarter and correspondingly had no impact on earnings per share. The Company’s management does not believe that the impacts of the net settlement will be material to the financial statements of the Company.

101

16. Accounting Pronouncements

STOCK-BASED COMPENSATION

The FASB issued SFAS No. 123R, Share-Based Payment, which originally required implementation for interim or annual reporting periods beginning after June 15, 2005. However, in April 2005, the Securities and Exchange Commission adopted a new rule to amend the compliance date to the beginning of the Company’s next fiscal year (January 1, 2006, for the Company). SFAS No. 123R requires the Company to recognize the cost of employee services received in exchange for the Company’s equity instruments. Currently, in accordance with APB Opinion 25, the Company records the intrinsic value of stock based compensation as expense. Accordingly, no compensation expense is currently recognized for fixed stock option plans as the exercise price equals the stock price on the date of grant. Under SFAS No. 123R, BNSF will be required to measure compensation expense over the options’ vesting period based on the stock options’ fair value at the date the options are granted. SFAS No. 123R allows for the use of the Black-Scholes or a lattice option-pricing model to value such options. The Company has determined that it will use the Black-Scholes option-pricing model to calculate the fair value of its options. Based on a study performed by the Company’s management, the fair values obtained from each of the two pricing models were not substantially different. Additionally, the Company has elected to adopt SFAS No. 123R on a modified prospective basis. Note 2 of the Consolidated Financial Statements illustrates the effects on net income and earnings per share if the Company had adopted SFAS No. 123 using the Black-Scholes option-pricing model.

17. Quarterly Financial Data–Unaudited

Dollars in millions, except per share data	Fourth a		Third b		Second		First
2005
Revenues	$	3,550	$	3,317	$	3,138	$	2,982
Operating income	$	800	$	778	$	710	$	634
Net income	$	430	$	414	$	366	$	321
Basic earnings per share	$	1.16	$	1.12	$	0.98	$	0.86
Diluted earnings per share	$	1.13	$	1.09	$	0.96	$	0.83
Dividends declared per share	$	0.20	$	0.20	$	0.17	$	0.17
Common stock price c:
High	$	71.33	$	59.32	$	53.99	$	55.66
Low	$	56.67	$	47.51	$	46.30	$	45.05
2004
Revenues	$	2,978	$	2,793	$	2,685	$	2,490
Operating income	$	668	$	100	$	508	$	410
Net income	$	347	$	2	$	249	$	193
Basic earnings per share	$	0.93	$	0.01	$	0.68	$	0.52
Diluted earnings per share	$	0.91	$	0.01	$	0.67	$	0.52
Dividends declared per share	$	0.17	$	0.17	$	0.15	$	0.15
Common stock price c:
High	$	47.80	$	38.39	$	34.87	$	33.16
Low	$	38.54	$	33.97	$	31.44	$	30.02

a 2005 operating income, income before cumulative effect of accounting change and earnings per share include a loss related to an agreement to sell certain line segments to the state of New Mexico in the future of $71 million pre-tax, $44 million net of tax, or $0.12 per diluted and basic share.

b Third-quarter 2004 operating income, net income and earnings per share include a charge for a change in estimate of unasserted asbestos and environmental liabilities of $465 million pre-tax, or $288 million net of tax, and quarterly earnings per share impacts of $0.78 per basic share and $0.76 per diluted share (see Note 10 of the Consolidated Financial Statements).

c Average of high and low reported daily stock price

102

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Based on their evaluation as of the end of the period covered by this annual report on Form 10-K, BNSF’s principal executive officer and principal financial officer have concluded that BNSF’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by BNSF in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to BNSF’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Additionally, as of the end of the period covered by this report, BNSF’s principal executive officer and principal financial officer have concluded that there have been no changes in BNSF’s internal control over financial reporting that occurred during BNSF’s fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, BNSF’s internal control over financial reporting.

Item 9B. Other Information

None.

103

Part III

Item 10. Directors and Executive Officers of the Registrant

Information concerning the directors of BNSF will be provided under the heading “Nominees for Directors” in BNSF’s proxy statement for its 2006 annual meeting of shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, and the information under that heading is hereby incorporated by reference.

Information under the heading “Audit Committee” in BNSF’s proxy statement for its 2006 annual meeting of shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, is hereby incorporated by reference into the Form 10-K.

Information concerning the executive officers of BNSF is included in Part I of this Report on Form 10-K.

Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 will be under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in BNSF’s proxy statement for its 2006 annual meeting of shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, and the information under that heading is hereby incorporated by reference.

The Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers (Code of Ethics) applicable to the Chief Executive Officer, Chief Financial Officer and Controller. A copy of the Code of Ethics is available on the Company’s website at www.bnsf.com under the “Investors Link,” and any waiver from the Code of Ethics will be timely disclosed on the Company’s website as will any amendments to the Code of Ethics.

Item 11. Executive Compensation

Information concerning the compensation of directors and executive officers of BNSF will be provided under the heading “Directors’ Compensation” and under the headings “Summary Compensation Table,” “Stock Option Grants in 2006,” “Aggregated 2005 Stock Option Exercises and Year-End Option Values,” “Pension Plans,” “Employment Contracts and Other Arrangements,” and “Trust Agreements,” in BNSF’s proxy statement for its 2006 annual meeting of shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, and the information under those headings is hereby incorporated by reference.

104

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain information about BNSF’s equity compensation plans is set forth in the table below (number of shares in thousands) as of December 31, 2005:

Plan Category	Number of shares to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of shares available for future issuance
Equity compensation plans approved by shareholders	18,281	$	32.45	3,741
Equity compensation plans not approved by shareholders a	—		—	—
Total	18,281	$	32.45	3,741

a Effective September 15, 2005, the Board of Directors of the Company terminated The Burlington Northern and Santa Fe Railway Company Achievement Award Program, pursuant to which awards of Company common stock had been made from time to time to select non-officer employees of BNSF Railway Company.

Information concerning the ownership of BNSF equity securities by certain beneficial owners and by management will be provided under the headings “Certain Beneficial Owners” and “Ownership of Management” in BNSF’s proxy statement for its 2006 annual meeting of shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, and the information under those headings is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions

Information concerning certain relationships and related transactions will be provided under the heading “Certain Relationships” in BNSF’s proxy statement for its 2006 annual meeting of shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, and the information under that heading is hereby incorporated by reference.

Item 14. Principal Accountant Fees and Services

Information concerning principal accounting fees and services will be provided under the heading “Independent Auditor Fees” in BNSF’s proxy statement for its 2006 annual meeting of shareholders which will be filed with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year, and the information under that heading is hereby incorporated by reference.

105

Part IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Consolidated Financial Statements–see Item 8.

Schedules are omitted because they are not required or applicable, or the required information is included in the Consolidated Financial Statements or related notes.

2. Exhibits:

See Index to Exhibits beginning on page E-1 for a description of the exhibits filed as a part of this Report on Form 10-K.

106

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Burlington Northern Santa Fe Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BURLINGTON NORTHERN SANTA FE CORPORATION
	By:	/s/ Matthew K. Rose
Dated: February 16, 2006		Matthew K. Rose
		Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Burlington Northern Santa Fe Corporation and in the capacities and on the date indicated.

SIGNATURE	TITLE
/s/ Matthew K. Rose Matthew K. Rose	Chairman, President and Chief Executive Officer (Principal Executive Officer), and Director
/s/ Thomas N. Hund Thomas N. Hund	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/ Paul W. Bischler Paul W. Bischler	Controller (Principal Accounting Officer)
/s/ Alan L. Boeckmann* Alan L. Boeckmann	Director
/s/ Donald G. Cook* Donald G. Cook	Director
/s/ Vilma S. Martinez* Vilma S. Martinez	Director
/s/ Marc F. Racicot* Marc F. Racicot	Director
/s/ Roy S. Roberts* Roy S. Roberts	Director
/s/ Marc J. Shapiro* Marc J. Shapiro	Director

S-1

/s/ J.C. Watts, Jr.* J.C. Watts, Jr.	Director
/s/ Robert H. West* Robert H. West	Director
/s/ J. Steven Whisler* J. Steven Whisler	Director
/s/ Edward E. Whitacre Jr.* Edward E. Whitacre, Jr.	Director

	*By:	/s/ Jeffrey R. Moreland
Dated: February 16, 2006		Jeffrey R. Moreland
		Executive Vice President Law & Government Affairs and Secretary

S-2

Burlington Northern Santa Fe Corporation and Subsidiaries – Index to Exhibits

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of BNSF (amended as of April 21, 1998). Incorporated by reference to Exhibit 3.1 to BNSF’s Report on Form 10-Q for the quarter ended June 30, 1998 (SEC File No. 1-11535). Certificate of Elimination of the Designation of the 6-1/4% Cumulative, Convertible Preferred Stock, Series A, $0.02 Par Value. Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series B, $0.01 Par Value. Incorporated by reference to Exhibit 4.1 to BNSF’s Form 8-A 12B filed December 23, 1999 (SEC File No. 1-11535). Certificate of Increase in the Number of Authorized Shares of Junior Participating Preferred Stock, Series B, $0.01 Par Value. Incorporated by reference to Exhibit 3.1 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2001 (SEC File No. 1-11535).
3.2	By-Laws of Burlington Northern Santa Fe Corporation, as amended and restated, dated December 8, 2005. Incorporated by reference to Exhibit 3.1 to BNSF’s Form 8-K dated December 8, 2005.
4.1	Indenture, dated as of December 1, 1995, between BNSF and The First National Bank of Chicago, as Trustee. Incorporated by reference to Exhibit 4 to BNSF’s Registration Statement on Form S-3 (No. 333-72013).
4.2	Form of BNSF’s 6 1/8% Notes Due 2009. Incorporated by reference to Exhibit 4.2 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1998 (SEC File No. 1-11535).
4.3	Form of BNSF’s 6 3/4% Debentures Due 2029. Incorporated by reference to Exhibit 4.3 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1998 (SEC File No. 1-11535).
4.4	Form of BNSF’s 6.70% Debenture Due August 1, 2028. Incorporated by reference to Exhibit 4.4 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1998 (SEC File No. 1-11535).
4.5	Form of BNSF’s 7.875% Note Due April 15, 2007. Incorporated by reference to Exhibit 4.5 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2000 (SEC File No. 1-11535).
4.6	Form of BNSF’s 8.125% Debenture Due April 15, 2020. Incorporated by reference to Exhibit 4.6 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2000 (SEC File No. 1-11535).
4.7	Form of BNSF’s 7.95% Debenture Due August 15, 2030. Incorporated by reference to Exhibit 4.7 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2000 (SEC File No. 1-11535).
4.8	Form of BNSF’s 6.75% Note due July 15, 2011. Incorporated by reference to Exhibit 4.1 to BNSF’s Report on Form 10-Q for the quarter ended June 30, 2001.
4.9	Officers’ Certificates as to the terms of Form of BNSF’s 5.90% Notes Due July 1, 2012 including the form of the Notes. Incorporated by reference to Exhibit 4.1 to BNSF’s Report on Form 10-Q for the quarter ended June 30, 2002.
4.10	Officers’ Certificate of Determination as to the terms of BNSF’s 4.875% Notes Due January 15, 2015, including Exhibit A thereto, the form of the Notes. Incorporated by reference to Exhibit 4.1 to BNSF’s Report on Form 8-K (Date of earliest event reported: November 18, 2004).
4.11	Indenture, dated as of December 8, 2005, between BNSF and U.S Bank Trust National Association, as Trustee. Incorporated by reference to Exhibit 4.1 to BNSF’s Registration Statement on Form S-3 ASR (No. 333-130214).
4.12	Certificate of Trust of BNSF Funding Trust I, executed and filed by U.S. Bank Trust National Association, Linda Hurt and James Gallegos, as Trustees. Incorporated by reference to Exhibit 4.3 to BNSF’s Registration Statement of Form S-3 (No. 333-130214).

E-1

Exhibit Number	Description
4.13	Amended and Restated Declaration of Trust of BNSF Funding Trust I, dated as of December 15, 2005. Incorporated by reference to Exhibit 4.4 to BNSF’s Report on Form 8-K filed December 15, 2005.
4.14	Guarantee Agreement between BNSF and U.S. Bank Trust National Association, as Guarantee Trustee, dated as of December 15, 2005. Incorporated by reference to Exhibit 4.5 to BNSF’s Report on Form 8-K filed December 15, 2005.
4.15	First Supplemental Indenture, dated as of December 15, 2005, between BNSF and U.S. Bank Trust National Association, as Trustee. Incorporated by reference to Exhibit 4.6 to BNSF’s Report on Form 8-K filed December 15, 2005.
4.16	Agreement as to Expenses and Liabilities between BNSF and BNSF Funding Trust I. Incorporated by reference to Exhibit C to Exhibit 4.4 to BNSF’s Report on Form 8-K filed December 15, 2005.
4.17	Trust Preferred Securities Certificate of BNSF Funding Trust I. Incorporated by reference to Exhibit D to Exhibit 4.4 to BNSF’s Report on Form 8-K filed December 15, 2005.
	Certain instruments evidencing long-term indebtedness of BNSF are not being filed as exhibits to this Report because the total amount of securities authorized under any single such instrument does not exceed 10% of BNSF’s total assets. BNSF will furnish copies of any material instruments upon request of the Securities and Exchange Commission.
10.1*	Burlington Northern Santa Fe Non-Employee Directors’ Stock Plan as amended February 11, 2005. Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2004.
10.2*	The BNSF Railway Company Incentive Compensation Plan, as amended and restated, effective January 1, 2006.
10.3*	Burlington Northern Santa Fe Corporation Deferred Compensation Plan, as amended and restated, effective December 9, 2004. Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.4*	Burlington Northern Inc. Senior Executive Survivor Benefit Plan as of April 1, 1986. Incorporated by reference to Amendment No. 1 to BNI’s Report on Form 10-K for the fiscal year ended December 31, 1987 (SEC File No. 1-8159).
10.5*	Burlington Northern Santa Fe Corporation Senior Management Stock Deferral Plan, as amended and restated effective December 9, 2004. Incorporated by reference to Exhibit 10.4 to BNSF’s Report on Form 8-K dated December 31, 2004.
10.6*	Burlington Northern Santa Fe Long Term Incentive Stock Plan. Incorporated by reference to Exhibit 4(c) to BNSF’s Registration Statement on Form S-8 (File No. 33-63247).
10.7*	Burlington Northern Santa Fe Corporation 1990 Directors Stock Option Plan. Incorporated by reference to BNSF’s Registration Statement on Form S-8 (File No. 33-62825).
10.8*	Burlington Northern Santa Fe Incentive Bonus Stock Program, as amended and restated September 14, 2005. Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 8-K dated September 19, 2005.
10.9*	Burlington Northern Santa Fe Corporation 1992 Stock Option Incentive Plan. Incorporated by reference to BNSF’s Registration Statement on Form S-8 (File No. 33-62839).

E-2

Exhibit Number	Description
10.10*	Burlington Northern Santa Fe 1996 Stock Incentive Plan. Incorporated by reference to Appendix B to BNSF’s Proxy Statement dated March 5, 1996 (SEC File No. 1-11535). Amendment of Burlington Northern Santa Fe 1996 Stock Incentive Plan dated January 15, 1998. Incorporated by reference to Exhibit 10.13 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1997 (SEC File No. 1-11535). Amendment dated December 3, 1998. Incorporated by reference to Exhibit 10.13 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1999 (SEC File No. 1-11535).
10.11*	Burlington Northern Santa Fe Supplemental Retirement Plan, effective October 1, 1996, as amended through July 21, 2005. Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 8-K dated July 21, 2005.
10.12*	Burlington Northern Santa Fe Estate Enhancement Program, as amended and restated, effective October 1, 1996. Incorporated by reference to Exhibit 10.15 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1996 (SEC File No. 1-11535). Amendment to Burlington Northern Santa Fe Estate Enhancement Program. Incorporated by reference to Exhibit 10.2 to BNSF’s Report on Form 10-Q for the quarter ended June 30, 1999 (SEC File No. 1-11535).
10.13*	Form of BNSF Change-in-Control Agreement (applicable to Messrs. Ice, Hund, Moreland, and Lanigan, and two other executive officers). Incorporated by reference to Exhibit 10.17 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1996 (SEC File No. 1-11535). Amendment dated December 17, 1998. Incorporated by reference to Exhibit 10.15 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2001.
10.14*	Burlington Northern Santa Fe Deferred Compensation Plan for Directors, as amended and restated, effective December 9, 2004. Incorporated by reference to Exhibit 10.5 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.15*	Burlington Northern Santa Fe Corporation Supplemental Investment and Retirement Plan, effective January 1, 1997, as amended through July 21, 2005. Incorporated by reference to Exhibit 10.2 to BNSF’s Report on Form 8-K dated July 21, 2005.
10.16*	Burlington Northern Inc. Form of Severance Agreement and amendments through September 18, 1995 (applicable to Mr. Rose). Incorporated by reference to Exhibit 10.21 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1995 (SEC File No. 1-11535). Amendment to Form of Severance Agreement dated December 3, 1997 is incorporated by reference to Exhibit 10.21 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1997 (SEC File No. 1-11535). Amendment dated January 6, 1999 is incorporated by reference to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2001.
10.17*	Burlington Northern Inc. Director’s Charitable Award Program. Incorporated by reference to Exhibit 10.22 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1995 (SEC File No. 1-11535).
10.18*	Burlington Northern Santa Fe Salary Exchange Option Program, as amended and restated, October 1, 2004. Incorporated by reference to Exhibit 10.18 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2004.
10.19*	Santa Fe Pacific Corporation Supplemental Retirement Plan (Supplemental Plan). Incorporated by reference to Exhibit 10(d) to SFP’s Report on Form 10-K for the fiscal year ended December 31, 1984 (SEC File No. 1-8627). Supplemental Plan as amended October 1, 1989, and Amendment to Supplemental Plan dated February 27, 1990, are incorporated by reference to Exhibit 10(d) to SFP’s Report on Form 10-K for the fiscal year ended December 31, 1989 (SEC File No. 1-8627). Amendment to Supplemental Plan dated March 22, 1994, and effective January 1, 1994, is incorporated by reference to Exhibit 10.24 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1995 (SEC File No. 1-11535).

E-3

Exhibit Number	Description
10.20*	The Burlington Northern and Santa Fe Railway Company Severance Plan as amended and restated October 16, 2001. Incorporated by reference to Exhibit 10.22 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2001.
10.21*	Burlington Northern Santa Fe 1999 Stock Incentive Plan, as amended and restated, effective December 8, 2005.
10.22*	Benefits Protection Trust Agreement by and between Burlington Northern Santa Fe Corporation and Wachovia Bank, approved by the board of directors February 11, 2005. Incorporated by reference to Exhibit 10.22 of BNSF’s Report on Form 10-K for the fiscal year ended December 31, 2004.
10.23*	Burlington Northern Santa Fe Directors’ Retirement Plan. Incorporated by reference to Exhibit 10.29 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1995 (SEC File No. 1-11535).
10.24*	Form of indemnification agreement dated as of September 17, 1998 between BNSF and directors. Incorporated by reference to Exhibit 10.37 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1998 (SEC File No. 1-11535).
10.25*	Form of indemnification agreement dated as of September 17, 1998 between BNSF and certain officers, including Matthew K. Rose, Thomas N. Hund, Carl R. Ice, John P. Lanigan, Jr., Jeffrey R. Moreland, Dennis R. Johnson, and Peter J. Rickershauser. Incorporated by reference to Exhibit 10.38 to BNSF’s Report on Form 10-K for the fiscal year ended December 31, 1998 (SEC File No. 1-11535).
10.26*	Amendment to Burlington Northern Santa Fe Supplemental Retirement Plan (Matthew K. Rose) dated April 18, 2002. Incorporated by reference to Exhibit 10.2 to BNSF’s Report on Form 10-Q for the period ended June 30, 2002.
10.27*	Retirement Benefit Agreement dated April 19, 2002 between BNSF and Matthew K. Rose. Incorporated by reference to Exhibit 10.3 to BNSF’s Report on Form 10-Q for the period ended June 30, 2002.
10.28*	Retirement Benefit Agreement dated January 16, 2003 between BNSF and John P. Lanigan. Incorporated by reference to Exhibit 10.29 to BNSF’s Report on Form 10-K for the year ended December 31, 2003.
10.29*	Form of Notice of Grant of Incentive Stock Options and Non-Qualified Stock Options and Award Agreement. Incorporated by reference to Exhibit 99.1 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.30*	Form of Burlington Northern Santa Fe 1999 Stock Incentive Plan Stock Option Award Agreement Terms and Conditions. Incorporated by reference to Exhibit 99.2 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.31*	Form of 1999 Stock Incentive Plan Master Restricted Stock Award Agreement. Incorporated by reference to Exhibit 99.3 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.32*	Form of 1999 Stock Incentive Plan Reload Stock Option Agreement. Incorporated by reference to Exhibit 99.4 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.33*	Form of 1999 Stock Incentive Plan Exchange Option Grant Agreement. Incorporated by reference to Exhibit 99.5 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.34*	Form of 1999 Stock Incentive Plan Senior Management Stock Deferral Plan Award Agreement. Incorporated by reference to Exhibit 99.6 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.35*	Form of 1999 Stock Incentive Plan Individual Stock Award Agreement. Incorporated by reference to Exhibit 99.7 to BNSF’s Report on Form 8-K dated December 9, 2004.

E-4

Exhibit Number	Description
10.36*	Form of Burlington Northern Santa Fe Non-Employee Directors’ Stock Plan Director’s Restricted Stock Unit Award Agreement. Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 8-K dated May 17, 2005.
10.37*	Form of Burlington Northern Santa Fe Non-Employee Directors’ Stock Plan Non-Qualified Stock Option Grant Agreement. Incorporated by reference to Exhibit 99.9 to BNSF’s Report on Form 8-K dated December 9, 2004.
10.38*	Form of 1999 Stock Incentive Plan Incentive Bonus Stock Program Award Agreement.
10.39*	Form of Burlington Northern Santa Fe 1999 Stock Incentive Plan Performance Stock Award Agreement. Incorporated by reference to Exhibit 10.4 to BNSF’s Report on Form 8-K dated May 2, 2005.
10.40*	Burlington Northern Santa Fe 2005 Deferred Compensation Plan for Non-Employee Directors, effective April 21, 2005. Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 8-K dated April 21, 2005.
10.41	Replacement Capital Covenant, dated as of December 15, 2005, by BNSF in favor of and for the benefit of each Covered Debtholder (as defined therein).
10.42*	Form of Award Agreement Including Notice of Grant and Master Stock Option Terms and Conditions, dated May 2, 2005 (Incentive Stock Options). Incorporated by reference to Exhibit 10.1 to BNSF’s Report on Form 8-K dated May 2, 2005.
10.43*	Form of Award Agreement Including Notice of Grant and Master Stock Option Terms and Conditions, dated May 2, 2005 (Incentive Stock Options and Non-qualified Stock Options). Incorporated by reference to Exhibit 10.2 to BNSF’s Report on Form 8-K dated May 2, 2005.
10.44*	Form of Award Agreement Including Notice of Grant and Master Restricted Stock Unit Terms and Conditions, dated May 2, 2005. Incorporated by reference to Exhibit 10.3 to BNSF’s Report on Form 8-K dated May 2, 2005.
10.45*	Summary of Non-Employee Director’s Compensation.
10.46*	Summary of Executive Officer Compensation.
12.1	Computation of Ratio of Earnings to Fixed Charges.
21.1	Subsidiaries of BNSF.
23.1	Consent of PricewaterhouseCoopers LLP.
24.1	Powers of Attorney.
31.1	Principal Executive Officer’s Certifications Pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002).
31.2	Principal Financial Officer’s Certifications Pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002).
32.1	Certification Pursuant to Rule 13a-14(b) and 18 U.S.C. § 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
99.1	Certification Pursuant to Section 303A.12 of the New York Stock Exchange Listed Company Manual.
*	Management contract or compensatory plan or arrangement.

E-5

EX-10.2

Exhibit 10.2

BNSF RAILWAY COMPANY

Incentive Compensation Plan

Amended and Restated Effective January 1, 2006

1.0 OBJECTIVE

The BNSF Railway Company (“BNSF Railway” or the “Company”) Incentive Compensation Plan (“ICP” or the “Plan”) has as its objective to:

1.1 Communicate and focus attention on key BNSF Railway business goals.

1.2 Identify and reward superior performance.

1.3 Provide a competitive compensation package to attract and retain high quality employees.

2.0 ADMINISTRATION

The ICP Committee shall provide overall administration of the Plan. The ICP Committee shall be comprised of the Chief Executive Officer, the Executive Vice President and CFO, the Executive Vice President Law & Government Affairs and Secretary, and the Vice President-Human Resources and Medical.

The ICP Committee will have discretionary authority to review and approve any changes in eligibility, levels of participation, incentive opportunity, basis for award determination, performance objectives, etc., subject to other requirements of the Plan. Review and approval of Plan details will be performed on an annual basis.

The ICP Committee will appoint a plan administrator whose responsibility to the ICP Committee will include:

2.1 Establishment of procedures for the Plan operation.

2.2 Timely and effective management of the day-to-day operations of the Plan.

2.3 Performance of periodic analyses to ensure the Plan’s effectiveness.

3.0 ELIGIBILITY

All regularly assigned, active salaried employees of BNSF Railway and its rail subsidiaries shall be eligible to participate in the ICP subject to the discretion of the ICP Committee. Employees hired into a salaried position after October 1, will not be eligible until the next calendar year. The ICP Committee shall designate an employee’s level of participation. The extent of participation in the ICP may vary according to the employee’s level of responsibility. Depending on one’s level within the organization and departmental discretion, some percentage of an employee’s payout potential may be based upon achievement of personal goals.

3.1 ICP eligibility of newly hired salaried employees or scheduled employees promoted to a salaried position will be treated as follows:

3.1.1 A new employee hired into an eligible position on or before October 1 will be eligible to participate in the current calendar year.

3.1.2 A scheduled employee promoted to a regularly assigned salaried position on or before October 1 will be eligible to participate in the current calendar year.

3.1.3 The ICP award for a new salaried employee or a scheduled employee promoted into an eligible position for the first time, on or before October 1, will be prorated based upon the number of days worked in active service in the eligible position.

3.2 Promotions, transfers, and assignments of active employees to temporary, part-time, red-circle or other similar salary band continuation status will be treated in the following manner:

3.2.1 A scheduled employee placed on temporary assignment to a salaried position will not be eligible for an ICP payout.

3.2.2 A regularly-assigned salaried employee placed on a temporary assignment to another salaried position of a higher salary band will maintain his/her regularly assigned position’s ICP participation level.

3.2.3 A regularly-assigned salaried employee promoted (or demoted) from one position to another with a higher (or lower) ICP participation level will have his/her ICP award calculated on a pro-rata basis for the number of days employed at each level.

3.2.4 A regularly-assigned salaried employee who is assigned for all or a portion of the year to a part-time position will have his/her ICP award calculated on a pro-rata basis for the number of days employed at each ICP participation level and full-time-equivalency level.

3.2.5 A regularly-assigned salaried employee who has red-circle or other similar salary band continuation status at a higher salary band will have his/her ICP award calculated on a pro-rata basis at the ICP participation level of the higher salary band for the number of days of red-circle or other similar salary band continuation status and at the ICP participation level of the assigned band for the number of days without such status.

3.3 ICP eligibility with respect to voluntary and involuntary separation will be determined as follows:

2

3.3.1 VOLUNTARY RESIGNATIONS

3.3.1(a) If a participating employee voluntarily resigns after December 31, but before award payout, the amount that would have otherwise been received had there been no resignation will be paid to the employee.

3.3.1(b) If a participating employee voluntarily resigns on or before December 31, and is not eligible for participation in a company-sponsored severance program, the employee forfeits all rights to an ICP award.

3.3.1(c) If a participating employee voluntarily resigns in conjunction with a Company-sponsored severance program, the participant is eligible to receive a pro-rata share of the ICP award he/she would otherwise have earned based upon the number of days worked in active service during the severance year.

3.3.2 INVOLUNTARY SEPARATION

3.3.2(a) If a participating employee is terminated for cause, the participant forfeits all rights to an ICP award. Cause shall be defined by the ICP Committee.

3.3.2(b) If a participating employee is terminated at the discretion of the Company as part of a Company-sponsored severance program and other than for cause, the participant is eligible to receive a pro-rata share of the ICP award he/she would otherwise have earned based upon the number of days worked in active service during the severance year.

3.4 ICP eligibility with respect to the following events will be determined as indicated.

MISCELLANEOUS EVENTS AFFECTING ELIGIBILITY

3.4.1 Retirement—The participant is eligible to receive a pro-rata share of the ICP award he/she would otherwise have earned based upon the number of days’ service prior to retirement.

3.4.2 Disability—A participating employee on short-term disability is eligible to receive the full ICP payout. A participating employee who is placed on long-term disability (“LTD”) is eligible to receive a pro-rata share of the ICP award he/she would have earned based upon the number of days’ of otherwise eligible service accrued prior to being placed on LTD. No ICP eligibility accrues for any employee while on LTD, but eligibility will be reinstated should the employee be removed from LTD and return to an active, regularly-assigned salaried position.

3

3.4.3 Medical Leave—A participating employee on short-term paid medical leave is eligible to receive the full ICP payout. An employee on unpaid medical leave will be ineligible to receive an ICP payout for those days comprising the unpaid medical leave period. The employee will receive a pro-rata ICP payout based upon the total of all otherwise eligible salaried service during the year, excluding the days on unpaid medical leave of absence.

3.4.4 Suspension—A participating employee suspended (without pay) for disciplinary reasons is ineligible to receive an ICP payout for any and all days comprising the suspension period.

3.4.5 Leave of Absence with Pay—A participating employee on leave of absence with pay is entitled to receive the full ICP payout.

3.4.6 Leave of Absence without Pay—A participating employee on leave of absence without pay will be ineligible to receive an ICP payout for those days comprising the unpaid leave period. The employee will receive a pro-rata ICP payout based upon the total of all otherwise eligible salaried service during the year, excluding the days on unpaid leave of absence.

3.4.7 Military Leave—A participating employee on paid military leave is entitled to the full ICP payout. An employee on unpaid military leave will be ineligible to receive an ICP payout for those days comprising the unpaid military leave period. The employee will receive a pro-rata ICP payout based upon the total of all otherwise eligible salaried service during the year, excluding the days on unpaid military leave of absence.

3.4.8 Death—A pro-rata share of the ICP award the participant would otherwise have earned will be paid to the deceased employee’s estate based upon the total number of days of eligible service during the award year.

3.4.9 Seniority Exercise—A participating employee who exercises his/her seniority at any time during the year forfeits all rights to an ICP award for that year except under circumstances when an employee exercises seniority in lieu of a severance package which had been offered to the employee.

3.4.10 Position Abolishment—If the Company abolishes a participating salaried employee’s position and the Company offers a severance package, the participant is eligible to receive a pro-rata share of the ICP award he/she would otherwise have earned based upon the number of days’ service prior to abolishment.

3.4.11 The ICP Committee may, at its discretion, decide to pay all or a portion of the award a participant would otherwise have earned when termination occurs under any subsection to Section 3.0 ELIGIBILITY.

4

For purposes of Section 3.0, a pro-rata share of the ICP award a participant would otherwise have earned shall be based upon the nearest whole number of days in active service during the award year. Performance awards for eligible persons terminating employment during the award year shall be based on actual Company and individual performance through the full year and will be payable at the payment date for continuing employees.

4.0 INCENTIVE OPPORTUNITIES

The incentive awards will be designed to reflect the position’s impact on BNSF Railway performance and will provide incentives that are in line with key competitors. Incentive levels will be determined and communicated to employees on an annual basis.

5.0 INCENTIVE AWARD BASES

The ICP Committee shall annually review the mix of Company goals and individual or departmental goals (defined further in Section 6.0) and may modify them at its discretion.

6.0 PERFORMANCE OBJECTIVES

Payments of ICP awards shall be based on performance measured against objectives established by the Compensation and Development Committee of the Board of Directors of Burlington Northern Santa Fe Corporation (“BNSF Corporation”).

6.1. COMPANY-WIDE GOALS

Company-wide performance objectives shall be established at the beginning of each year for BNSF Railway.

6.2. PERSONAL AND DEPARTMENTAL GOALS

If the ICP Committee determines that departments may have departmental or personal goals, then each department may establish its own departmental goals and assign them to some or all departmental employees. The department may also establish personal goals for selected employees to be accomplished in addition to or in lieu of any departmental goals.

The personal goals element of the ICP is intended to be used by the immediate supervisor of an employee whose salary band is a level approved by the ICP Committee to have personal goals assigned as part of an employee’s plan participation. In such circumstances, the manager may deem it necessary or desirable to encourage the planning and review of written individual objectives in order to accomplish the following:

6.2.1 Provide a system whereby senior management and subordinates mutually agree on important objectives to be attained.

5

6.2.2 Provide an opportunity for regular review and feedback regarding progress towards stated objectives.

6.2.3 Introduce a discretionary element into the ICP to give senior management greater flexibility in ensuring that the ICP accomplishes its basic purposes.

At the beginning of each year for which there are to be personal goals, it is recommended that approximately two goals be mutually agreed upon by the participating employee and his/her immediate supervisor. These objectives are to represent specific accomplishments desired within the framework of the responsibilities of the participating employee, or could represent specific goals beyond the scope of the employee’s usual job requirements. Objectives may be related solely to one individual, or may relate to a group of two or more individuals whose efforts are required to complete a common task. Objectives may apply to the full year, or to a portion of the year, as appropriate. Each objective shall be designed to be measurable and attainable, but not without significant effort.

Personal goals, when they apply, will be established for each participating employee by the employee and his or her manager subject to the approval of the department head and the ICP Committee.

7.0 PERFORMANCE

Company performance will be reviewed each quarter when quarterly financial and operating results are available. The determination and distribution of awards will occur as soon as practicable after the compilation of the full year results.

Senior management and the ICP Committee shall have the discretion to apply judgment to their performance evaluation at the company, departmental and individual performance levels. Performance shall be evaluated in light of opportunities and conditions prevailing during the measurement period.

7.1 The ICP Committee shall approve all awards except as described in Section 7.3.

7.2 Subject to Section 7.3, the ICP Committee has the discretion of increasing or decreasing individual or collective awards on any basis including the following considerations:

7.2.1 BNSF Railway performance relative to its competitors.

7.2.2 Long term as well as short term performance considerations.

7.2.3 Unforeseen opportunities and obstacles.

7.2.4 The ICP Committee’s judgment of BNSF Railway and individual performance.

6

7.3 The awards of all executive officers of BNSF Railway who are also executive officers of BNSF Corporation shall be recommended by the Compensation and Development Committee of the BNSF Corporation Board of Directors and approved by the BNSF Corporation Board of Directors, provided, however, that the award for the Chief Executive Officer shall be approved by the independent directors on the BNSF Corporation Board of Directors.

8.0 AWARD PAYMENT

The ICP Committee will select the payment date at its discretion as soon as practicable after the close of the year and completion of performance evaluations, provided, however, that the payment date shall be no later than the 15^th day of the third month following the close of the year unless unforeseeable events make it impractical to make the payments by such date. ICP awards are subject to all usual tax and withholding requirements.

To the extent that the Plan and the awards under the Plan are subject to the rules applicable to nonqualified deferred compensation plans under section 409A of the Code, such portion of the Plan and such awards are not intended to result in acceleration of income recognition or imposition of penalty taxes by reason of section 409A, and the terms of such portion of the Plan and such awards shall be interpreted in a manner (and such portion of the Plan and such awards will be amended to the extent determined necessary or appropriate by the Committee) to avoid such acceleration and penalties.

NOTE: If the Company fails to meet its financial threshold objectives, then no ICP awards (companywide, departmental, or individual) shall be due or payable for that year above 200 percent of target for each non-financial measure except to the extent that the ICP Committee shall decide, in its discretion, that ICP awards shall nevertheless be paid above that level (provided, however, that with respect to any employees who are executive officers of BNSF Corporation, the Compensation and Development Committee and the Board of Directors of BNSF Corporation must concur in this decision, provided, however, that in the case of the Chief Executive Officer, only the independent directors on the BNSF Corporation Board of Directors must concur in this decision).

9.0 COMMUNICATIONS

The Plan administrator, under the direction of the ICP Committee, shall be responsible for maintaining records and communicating information concerning the ICP.

10.0 TERMINATION OR AMENDMENT

The ICP shall remain in effect until terminated or ended by the Board of Directors or the ICP Committee. However, if a Change in Control shall have occurred during the term of this Plan, this Plan shall continue in effect through the end of the year in which such Change in Control occurred, during which time the Company is contractually bound to maintain the Plan, and provided further that the membership of the Committee cannot be changed during such period.

A “Change in Control” shall be deemed to have occurred if

7

(a) any “person”, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than BNSF Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of BNSF Corporation, or any company owned, directly or indirectly, by the stockholders of BNSF Corporation in substantially the same proportions as their ownership of stock of BNSF Corporation), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of BNSF Corporation representing 25% or more of the combined voting power of BNSF Corporation’s then outstanding securities;

(b) during any period of two consecutive years (not including any period prior to the effective date of this provision), individuals who at the beginning of such period constitute the Board of BNSF Corporation, and any new director (other than a director designated by a person who has entered into an agreement with BNSF Corporation to effect a transaction described in clause (a), (c) or (d) of this definition) whose election by the Board of BNSF Corporation or nomination for election by BNSF Corporation’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(c) the stockholders of BNSF Corporation approve a merger or consolidation of BNSF Corporation with any other company other than (i) a merger or consolidation which would result in the voting securities of BNSF Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of BNSF Corporation (or such surviving entity) outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of BNSF Corporation (or similar transaction) in which no “person” (as hereinabove defined) acquires more than 25% of the combined voting power of BNSF Corporation’s then outstanding securities; or

(d) the stockholders of BNSF Corporation adopt a plan of complete liquidation of BNSF Corporation or approve an agreement for the sale or disposition by BNSF Corporation of all or substantially all of BNSF Corporation’s assets. For purposes of this clause (d), the term “the sale or disposition by BNSF Corporation of all or substantially all of BNSF Corporation’s assets” shall mean a sale or other disposition transaction or series of related transactions involving assets of BNSF Corporation or of any direct or indirect subsidiary of BNSF Corporation (including the stock of any direct or indirect subsidiary of BNSF Corporation) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefore or by such other method as the Board of Directors of BNSF Corporation determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than two-thirds of the fair market value of BNSF Corporation (as hereinafter defined). For

8

purposes of the preceding sentence, the “fair market value of BNSF Corporation” shall be the aggregate market value of BNSF Corporation’s outstanding shares of common stock (on a fully diluted basis) plus the aggregate market value of BNSF Corporation’s other outstanding equity securities. The aggregate market value of the shares of BNSF Corporation’s common stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions (the “Transaction Date”) shall be determined by the average closing price for BNSF Corporation’s common stock for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of BNSF Corporation shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the shares of BNSF Corporation’s common stock or by such other method as the Board of Directors of BNSF Corporation shall determine is appropriate.

Subject to Section 10.0 hereof, BNSF Railway and its subsidiaries reserve the right to change Plan provisions or terminate the Plan at any time.

11.0 EFFECTIVE DATE

The Amended and Restated ICP is effective January 1, 2006.

12.0 NON-DUPLICATION OF BENEFITS

The ICP is in place of the Burlington Northern Santa Fe Incentive Compensation Plan effective as of January 1, 1996, and there shall be no duplication of benefits under such plan and the ICP.

9

EX-10.21

Exhibit 10.21

BURLINGTON NORTHERN SANTA FE 1999 STOCK INCENTIVE PLAN,

AS AMENDED AND RESTATED

SECTION 1

STATEMENT OF PURPOSE

1.1. The BURLINGTON NORTHERN SANTA FE 1999 STOCK INCENTIVE PLAN (the “Plan”) has been established by BURLINGTON NORTHERN SANTA FE CORPORATION (the “Company”) to:

(a) attract and retain executive, managerial and other salaried employees;

(b) motivate participating employees, by means of appropriate incentives, to achieve long-range goals;

(c) provide incentive compensation opportunities that are competitive with those of other major corporations; and

(d) further identify a Participant’s interests with those of the Company’s other stockholders through compensation that is based on the Company’s common stock;

and thereby promote long-term financial interest of the Company and the Related Companies, including the growth in value of the Company’s equity and enhancement of long-term stockholder return.

SECTION 2

DEFINITIONS

2.1. Unless the context indicates otherwise, the following terms shall have the meanings set forth below:

(a) Award. The term “Award” shall mean any award or benefit granted to any Participant under the Plan, including, without limitation, the grant of Options, Restricted Stock, Restricted Stock Units, Performance Stock, Achievement Award Stock, or Stock acquired through purchase under Section 10.

(b) Board. The term “Board” shall mean the Board of Directors of the Company.

(c) Cause. The term “Cause” shall mean (a) the willful and continued failure by the Participant to substantially perform his or her duties with the Company (other than any

such failure resulting from his or her incapacity due to physical or mental illness), or (b) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this definition, no act, or failure to act, shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.

(d) Change in Control. A “Change in Control” shall be deemed to have occurred if

(1) any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;

(2) during any period of two consecutive years (not including any period prior to the effective date of this provision), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (1), (3) or (4) of this definition) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds ( ²/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(3) the stockholders of the Company approve a merger or consolidation of the Company with any other company other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires more than 25% of the combined voting power of the Company’s then outstanding securities; or

(4) the stockholders of the Company adopt a plan of complete liquidation of the Company or approve an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets. For purposes of this clause (4), the term “the sale or disposition by the Company of all or substantially all of the Company’s assets” shall mean a sale or other disposition transaction or series of related transactions involving assets of the company or of any direct or indirect subsidiary of the Company (including the stock of any direct or indirect subsidiary of the Company) in which the

2

value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by another objective method in a case where there is no readily ascertainable purchase price) constitutes more than two-thirds of the fair market value of the Company (as hereinafter defined). For purposes of the preceding sentence, the “fair market value of the Company” shall be the aggregate market value of the outstanding shares of Stock (on a fully diluted basis) plus the aggregate market value of the Company’s other outstanding equity securities. (excluding employee stock options). The aggregate market value of the shares of Stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions (the “Transaction Date”) shall be determined by the average closing price of the shares of Stock for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of the Company shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the shares of Stock.

Notwithstanding the foregoing, a merger, consolidation, acquisition of common control, or business combination of the Company and a Class I Railroad or a holding company of a Class I Railroad that is approved by the Board shall not constitute a “Change in Control” unless the Board makes a determination that the transaction shall constitute a “Change in Control”.

(e) Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.

(f) Date of Termination. A Participant’s “Date of Termination” shall be the date on which his or her employment with all Employers and Related Companies terminates for any reason; provided that a Date of Termination shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Related Company (including Employers) or between two Related Companies (including Employers); and further provided that unless agreed otherwise by the Participant, a Participant’s employment shall not be considered terminated while the Participant is on a military leave, sick leave or other bona fide leave of absence from an Employer or a Related Company where the Employee may return to service and which is approved by the Participant’s employer, except that the leave shall be deemed to end on the earlier of (i) the six-month anniversary of the commencement of the leave (or, if later, the termination of the Participant’s right to reemployment with the Employers and Related Companies provided either by statute or by contract); or (ii) the date on which the leave in fact ends without the individual returning to active employment with the Employers and Related Companies.

(g) Disability. Except as otherwise provided by the Committee, a Participant shall be considered to have a “Disability” during the period in which he or she is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the discretion of the Committee, is expected to have a duration of not less than 120 days.

3

(h) Employee. The term “Employee” shall mean a person with an employment relationship with the Company or a Related Company.

(i) Employer. The Company and each Related Company which, with the consent of the Company, participates in the Plan for the benefit of its eligible employees are referred to collectively as the “Employers” and individually as an “Employer.”

(j) Fair Market Value. The “Fair Market Value” of the Stock shall be the mean between the highest and lowest quoted sales prices of a share of Common Stock on the New York Stock Exchange Composite Transaction Report; provided, that if there were no sales on the valuation date but there were sales on dates within a reasonable period both before and after the valuation date, the Fair Market Value is the weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the valuation date. The average is to be weighed inversely by the respective numbers of trading days between the selling dates and the valuation date and shall be determined in good faith by the Committee. In any event the determination of “Fair Market Value” shall be consistent with the requirements of Treasury Regulation Section 1.409A-1(b)(5)(iv)(A).

(k) Immediate Family. With respect to a particular Participant, the term “Immediate Family” shall mean the Participant’s spouse, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren.

(l) Option. The term “Option” shall mean any Incentive Stock Option or Non-Qualified Stock Option granted under the Plan.

(m) Participant. The term “Participant” means an Employee who has been granted an award under the Plan.

(n) Performance-Based Compensation. The term “Performance-Based Compensation” shall have the meaning ascribed to it in section 162(m)(4)(C) of the Code.

(o) Performance Period. The term “Performance Period” shall mean the period over which applicable performance is to be measured, provided that such period shall not be less than one year.

(p) Qualified Retirement Plan. The term “Qualified Retirement Plan” means any plan of the Company or a Related Company that is intended to be qualified under section 401(a) of the Code.

(q) Related Company. The term “Related Company” means any company during any period in which it is a “subsidiary corporation” (as that term is defined in Code section 424(f)) with respect to the Company.

(r) Restricted Period. The term “Restricted Period” shall mean the period of time for which Restricted Stock is subject to forfeiture pursuant to the Plan or during which Options are not exercisable.

4

(s) Retirement. “Retirement” of a Participant shall mean the occurrence of a Participant’s Date of Termination under circumstances that constitute a retirement with immediate eligibility for benefits under Article 6 or Article 7 of the Burlington Northern Santa Fe Retirement Plan, or under the terms of the Qualified Retirement Plan of an Employer or Related Company that is extended to the Participant immediately prior to the Participant’s Date of Termination or, if no such plan is extended to the Participant on his or her Date of Termination, under the terms of any applicable retirement policy of the Participant’s employer.

(t) SEC. “SEC” shall mean the United States Securities and Exchange Commission.

(u) Stock. The term “Stock” shall mean shares of common stock of the Company, par value $0.01 per share.

SECTION 3

ELIGIBILITY

3.1. The Committee shall determine and designate from time to time, from among the salaried, full-time officers and employees of the Employers those Employees who will be granted one or more awards under the Plan.

SECTION 4

OPERATION AND ADMINISTRATION

4.1. Subject to the approval of the stockholders of the Company at the Company’s 2004 annual meeting of the stockholders, the Plan, as amended and restated, shall be effective as of the date of such approval (“Effective Date”), provided however, that any awards made under the Plan, as amended and restated, prior to approval by stockholders, shall be contingent on approval of the Plan, as amended and restated, by stockholders of the Company and all dividends on such Awards shall be held by the Company and paid only upon such approval and all other rights of a Participant in connection with such an Award shall not be effective until such approval is obtained. The Plan will terminate (except with respect to then outstanding awards) on April 17, 2012, or, if shareholders approve the Plan, as amended and restated, at the 2004 annual meeting of stockholders, ten years from the date of such approval, provided however, that no Incentive Stock Options may be granted under the Plan on a date that is more than ten years from the Effective Date or, if earlier, the date the Plan is adopted by the Board.

4.2. The Plan shall be administered by the Committee which shall be selected by the Board in accordance with the charter of the Committee adopted by the Board. The authority to manage and control the operation and administration of the Plan is subject to the following:

5

(a) Subject to the provisions of the Plan, the Committee will have the authority and discretion to select Employees to receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and to cancel or suspend Awards. In making such Award determinations, the Committee may take into account the nature of services rendered by the respective Employee, his or her present and potential contribution to the Company’s success, and such other factors as the Committee deems relevant.

(b) Subject to the provisions of the Plan, the Committee will have the authority and discretion to determine the extent to which Awards under the Plan will be structured to conform to the requirements applicable to Performance-Based Compensation as described in Code section 162(m), and to take such action, establish such procedures, and impose such restrictions at the time such awards are granted as the Committee determines to be necessary or appropriate to conform to such requirements.

(c) The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.

(d) Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.

(e) Except as otherwise expressly provided in the Plan, where the Committee is authorized to make a determination with respect to any Award, such determination shall be made at the time the Award is granted; except that the Committee may reserve the authority to have such determination made by the Committee in the future (but only if such reservation is either made at the time the Award is granted and is stated in the Agreement reflecting the Award or, if the Agreement does not address the issue, is provided in the Plan); and further provided that the Committee may, in its discretion, accelerate the vesting, distribution, or settlement of any Award if such acceleration does not cause the imposition of penalties or accelerated recognition of income under section 409A of the Code.

(f) Except to the extent prohibited by applicable law or the rules of any stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and other than in respect to eligibility, times of Awards, and terms, conditions, performance criteria, restrictions and other provisions of Awards, and except as otherwise provided by the Committee from time to time, the Committee delegates its responsibilities and powers to the Vice President-Human Resources or his or her successor. Any such allocation or delegation may be revoked by the Committee at any time.

(g) No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his or her own fraud or willful misconduct; nor shall the Employers be

6

liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Employers. The Committee, the individual members thereof, and persons acting as the authorized delegates of the committee under the plan, shall be indemnified by the Employers (to the maximum extent permitted by law) against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable by-law, contract or insurance.

4.3. Notwithstanding any other provision of the Plan to the contrary, no Participant shall receive any Award of an Option under the Plan to the extent that the sum of:

(a) the number of shares of Stock subject to such Award;

(b) the number of shares of Stock subject to all other prior Awards of Options under the Plan during the one-year period ending on the date of the Award; and

(c) the number of shares of Stock subject to all other prior stock options granted to the Participant under other plans or arrangements of the Employers and Related Companies during the one-year period ending on the date of the Award;

would exceed the Participant’s Individual Limit under the Plan. The determination made under the foregoing provisions of this subsection 4.3 shall be based on the shares subject to the awards at the time of grant, regardless of when the awards become exercisable. Subject to the provisions of Section 13, a Participant’s “Individual Limit” shall be 1,000,000 shares per calendar year.

4.4. To the extent that the Committee determines that it is necessary or desirable to conform any Awards under the Plan with the requirements applicable to “Performance-Based Compensation,” as that term is used in Code section 162(m)(4)(C), it may, at or prior to the time an Award is granted, take such steps and impose such restrictions with respect to such Award as it determines to be necessary to satisfy such requirements. To the extent that it is necessary to establish performance goals for a particular performance period, those goals will be based on one or more of the following business criteria: net income, earnings per share, debt reduction, safety, on-time train performance, return on investment, operating ratio, cash flow, return on assets, stockholders’ return, revenue, customer satisfaction, and return on equity. If the Committee establishes performance goals for a performance period relating to one or more of these business criteria, the Committee may determine to approve a payment for that particular performance period upon attainment of the performance goal relating to any one or more of such criteria.

4.5. To the extent that the Plan and the Awards under the Plan are subject to the rules applicable to nonqualified deferred compensation plans under section 409A of the Code, such portion of the Plan and such awards are not intended to result in acceleration of income

7

recognition or imposition of penalty taxes by reason of section 409A, and the terms of such portion of the Plan and such awards shall be interpreted in a manner (and such portion of the Plan and such awards will be amended to the extent determined necessary or appropriate by the Committee) to avoid such acceleration and penalties.

SECTION 5

SHARES AVAILABLE UNDER THE PLAN

5.1 The shares of Stock with respect to which Awards may be made under the Plan shall be shares currently authorized but unissued or treasury shares acquired by the Company, including shares purchased in open market or in private transactions. Subject to the provisions of Section 12, the total number of shares of Stock available for grant of Awards shall not exceed forty-two million (42,000,000) shares of Stock. Except as otherwise provided herein, any shares subject to an Award which for any reason expires or is terminated without issuance of shares (whether or not cash or other consideration is paid to a Participant in respect to such Award) as well as shares used to pay an Option Purchase Price under this Plan or a predecessor plan shall again be available under the Plan.

SECTION 6

OPTIONS

6.1. The grant of an “Option” under this Section 6 entitles the Participant to purchase shares of Stock at a price fixed at the time the Option is granted, or at a price determined under a method established at the time the Option is granted, subject to the terms of this Section 6. Options granted under this section may be either Incentive Stock Options or Non-Qualified Stock Options, and subject to Sections 11 and 16, shall not be exercisable for six months from date of grant, as determined in the discretion of the Committee. An “Incentive Stock Option” is an Option that is intended to satisfy the requirements applicable to an “incentive stock option” described in section 422(b) of the Code. A “Non-Qualified Stock Option” is an Option that is not intended to be an “incentive stock option” as that term is described in section 422(b) of the Code.

6.2. The Committee shall designate the Participants to whom Options are to be granted under this Section 6 and shall determine the number of shares of Stock to be subject to each such Option. To the extent that the aggregate fair market value of Stock with respect to which Incentive Stock Options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and all Related Companies) exceeds $100,000, such options shall be treated as Non-Qualified Stock Options, to the extent required by section 422 of the Code.

6.3. The determination of the purchase price of a share of Stock under each Option and the payment of the purchase price of a share of Stock under each Option shall be subject to the following:

8

(a) The purchase price of an Option shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option is granted; provided, however, that in no event shall such price be less than Fair Market Value on the date of the grant.

(b) Subject to the following provisions of this subsection 6.3, the full purchase price of each share of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise and, as soon as practicable thereafter, a certificate representing the shares so purchased shall be delivered to the person entitled thereto.

(c) The purchase price of an Option shall be payable in cash or in shares of Stock (valued at Fair Market Value as of the day of exercise).

(d) A Participant may elect to pay the purchase price upon the exercise of an Option through a cashless exercise arrangement as may be established by the Company.

(e) Except for either adjustments pursuant to Section 12 of the Plan (relating to the adjustments to shares), or reductions of the purchase price approved by the Company’s stockholders, and subject to any applicable restrictions imposed by section 409A of the Code, the purchase price for any outstanding Option may not be decreased after the date of grant nor may an outstanding Option granted under the Plan be surrendered to the Company as consideration for the grant of a replacement Option with a lower purchase price.

6.4. Except as otherwise expressly provided in the Plan, the terms and conditions relating to the exercise of an Option shall be established by the Committee, and may include, without limitation, conditions relating to completion of a specified period of service, achievement of performance standards prior to exercise of the Option, or achievement of Stock ownership objectives by the Participant. No Option may be exercised by a Participant after the expiration date applicable to that Option.

6.5. The exercise period of any Option shall be determined by the Committee and shall not extend more than ten years after the Date of Grant.

6.6. In the event the Participant exercises an Option granted before February 28, 2005, under this Plan or a predecessor plan of the Company or a Related Company and pays all or a portion of the purchase price in Common Stock, in the manner permitted by subsection 6.3, such Participant, pursuant to the exercise of Committee discretion at the time the Option is exercised or to the extent previously authorized by the Committee, may be issued a new Option to purchase additional shares of Stock equal to the number of shares of Stock surrendered to the Company in such payment. Such new Option shall have an exercise price equal to the Fair Market Value per share on the date such new Option is granted, shall first be exercisable six months from the date of grant of the new Option and shall have an expiration date on the same date as the expiration date of the original Option so exercised by payment of the purchase price in shares of Stock. No new

9

Option shall be granted pursuant to this subsection 6.6 in connection with the exercise of any Option granted on or after February 28, 2005.

SECTION 7

RESTRICTED STOCK

7.1. Subject to the terms of this Section 7, Restricted Stock Awards under the Plan are grants of Stock to Participants, the vesting of which is subject to certain conditions established by the Committee, with some or all of those conditions relating to events (such as performance or continued employment) occurring after the date of grant, provided however that to the extent that vesting of a Restricted Stock Award is contingent on continued employment, then (i) the required employment period shall not be less than three years following the grant of the Award unless such grant is in substitution for an Award under this Plan or a predecessor plan of the Company or a Related Company, and (ii) the grant may provide for equal, annual, pro-rata vesting during the employment period.

7.2. The Committee shall designate the Participants to whom Restricted Stock is to be granted, and the number of shares of Stock that are subject to each such Award. In no event shall more than twelve million shares be granted under Sections 7, 8 and 9 of the Plan. The Award of shares under this Section 7 may, but need not, be made in conjunction with a cash-based incentive compensation program maintained by the Company, and may, but need not, be in lieu of cash otherwise awardable under such program, provided, however, that one million of the shares remaining to be granted under Sections 7, 8 and 9 of the Plan as of April 18, 2002, shall only be used for Awards of shares of Performance-Based Restricted Stock, performance-based Restricted Stock Units or Performance Stock or in lieu of cash otherwise awardable under such program.

7.3. Shares of Restricted Stock granted to Participants under the Plan shall be subject to the following terms and conditions:

(a) Except as otherwise hereinafter provided, Restricted Stock granted to Participants may not be sold, assigned, transferred, pledged or otherwise encumbered during the Restricted Period. Except for such restrictions, the Participant as owner of such shares shall have all the rights of a stockholder, including but not limited to the right to vote such shares and, except as otherwise provided by the Committee or as otherwise provided by the Plan, the right to receive all dividends paid on such shares.

(b) Each certificate issued in respect of shares of Restricted Stock granted under the Plan shall be registered in the name of the Participant and, at the discretion of the Committee, each such certificate may be deposited with the Company with a stock power endorsed in blank or in a bank designated by the Committee.

(c) The Committee may award Performance-Based Restricted Stock, which shall be Restricted Stock that becomes vested (or for which vesting is accelerated) upon the achievement of performance goals established by the Committee. The Committee may

10

specify the number of shares that will vest upon achievement of different levels of performance. Except as otherwise provided by the Committee, achievement of maximum targets during the Performance Period shall result in the Participant’s receipt of the full Performance-Based Restricted Stock Award. For achievement of the minimum target but less than the maximum target the Committee may establish a portion of the Award which the Participant is entitled to receive.

(d) Except as otherwise provided by the Committee, any Restricted Stock which is not earned by the end of a Performance Period shall be forfeited. If a Participant’s Date of Termination occurs during a Performance Period with respect to any Restricted Stock subject to a Performance Period granted to him or her, the Committee may determine that the Participant will be entitled to settlement of all or any portion of the Restricted Stock subject to a Performance Period as to which he or she would otherwise be eligible or make such other adjustments as the Committee, in its sole discretion, deems desirable. Subject to the limitations of the Plan and the Award of Restricted Stock, upon the vesting of Restricted Stock, such Restricted Stock will be transferred free of all restrictions to a Participant (or his or her legal representative, beneficiary or heir).

SECTION 8

RESTRICTED STOCK UNITS

8.1. Subject to the terms of this Section 8, a Restricted Stock Unit entitles a Participant to receive shares for the units at the end of a Restricted Period to the extent provided by the Award with the vesting of such units to be contingent upon such conditions as may be established by the Committee (such as continued employment which, when required, shall be not less than three years (although the grant may provide for equal, annual, pro-rata vesting during that period), or satisfaction of performance criteria). The Award of Restricted Stock Units under this Section 8 may, but need not, be made in conjunction with a cash-based incentive compensation program maintained by the Company, and may, but need not, be in lieu of cash otherwise awardable under such program, provided, however, that one million of the shares remaining to be granted under Sections 7, 8 and 9 of the Plan as of April 18, 2002, shall only be used for Awards of shares of Performance-Based Restricted Stock, performance-based Restricted Stock Units or Performance Stock or in lieu of cash otherwise awardable under such program.

8.2. The Committee shall designate the Participants to whom Restricted Stock Units shall be granted and the number of units that are subject to each such Award. In no event shall more than twelve million shares be granted under Sections 7, 8 and 9 of the Plan. During any period in which units are outstanding and have not been settled in stock, the Participant shall not have the rights of a stockholder, but shall have the right to receive a payment from the Company in lieu of a dividend in an amount equal to such dividends and at such times as dividends would otherwise be paid.

8.3. If a Participant’s Date of Termination occurs during a Restricted Period with respect to any Restricted Stock Units granted to him or her, the Committee may determine that the

11

Participant will be entitled to settlement of all or any portion of the Restricted Stock Units as to which he or she would otherwise be eligible or make such other adjustments as the Committee, in its sole discretion, deems desirable.

SECTION 9

PERFORMANCE STOCK

9.1. Subject to the terms of this Section 9, a Performance Stock Award provides for the distribution of Stock to a Participant upon the achievement of performance objectives established by the Committee. For purposes of the Plan, the “Performance Period” with respect to any Award shall be the period over which the applicable performance is to be measured.

9.2. The Committee shall designate the Participants to whom Performance Stock Awards are to be granted, and the number of shares of Stock that are subject to each such Award. In no event shall more than twelve million shares be granted under Sections 7, 8 and 9 of the Plan. The Award of shares under this Section 9 may, but need not, be made in conjunction with a cash-based incentive compensation program maintained by the Company, and may, but need not, be in lieu of cash otherwise awardable under such program, provided, however, that one million of the shares remaining to be granted under Sections 7, 8 and 9 of the Plan as of April 18, 2002, shall only be used for Awards of shares of Performance-Based Restricted Stock, performance-based Restricted Stock Units or Performance Stock or in lieu of cash otherwise awardable under such program.

9.3. If a Participant’s Date of Termination occurs during a Performance Period with respect to any Performance Stock granted to him or her, the Committee may determine that the Participant will be entitled to settlement of all or any portion of the Performance Stock as to which he or she would otherwise be eligible or make such other adjustments as the Committee, in its sole discretion, deems desirable.

SECTION 10

STOCK PURCHASE PROGRAM

10.1. The Committee may, from time to time, establish one or more programs under which Participants will be permitted to purchase shares of Stock under the Plan, and shall designate the Participants eligible to participate under such Stock purchase programs. The purchase price for shares of Stock available under such programs, and other terms and conditions of such programs, shall be established by the Committee. The purchase price may not be less than 85% of the Fair Market Value of the Stock at the time of purchase (or, in the Committee’s discretion, the average Stock value over a period determined by the Committee), and the purchase price may not be less than par value. Issuances under the Stock purchase programs authorized under this Section 10.1 shall not exceed a cumulative total of 400,000 shares subsequent to April 17, 2002.

12

10.2. The Committee may impose such restrictions with respect to shares purchased under this section, as the Committee determines to be appropriate. Such restrictions may include, without limitation, restrictions of the type that may be imposed with respect to Restricted Stock under Section 7.

SECTION 11

TERMINATION OF EMPLOYMENT

11.1 If a Participant’s Date of Termination occurs for any reason other than death, Disability, Retirement, or by reason of the Participant’s employment being terminated by the Participant’s employer for any reason other than Cause, all outstanding Awards shall be forfeited.

11.2 If a Participant’s Date of Termination occurs by reason of death, all Options outstanding immediately prior to the Participant’s Date of Termination shall immediately become exercisable and all restrictions on Restricted Stock, Restricted Stock Units, Performance Stock and shares purchased under the Stock Purchase Program outstanding immediately prior to the Participant’s Date of Termination shall lapse.

11.3 If a Participant’s Date of Termination occurs by reason of Disability or Retirement, the Restricted Period shall lapse on a proportion of any Awards outstanding immediately prior to the Participant’s Date of Termination (except that to the extent an Award of Restricted Stock, Restricted Stock Units or Performance Stock is subject to a Performance Period, such proportion of the Award shall remain subject to the same terms and conditions for vesting as were in effect prior to termination). The proportion of an Award upon which the Restricted Period shall lapse shall be a fraction, the denominator of which is the total number of months of any Restricted Period applicable to an Award and the numerator of which is the number of months of such Restricted Period which elapsed prior to the Date of Termination.

11.4 If a Participant’s Date of Termination occurs by reason of the Participant’s employment being terminated by the Participant’s employer for any reason other than for Cause, the Restricted Period shall lapse on a proportion of any outstanding Awards (except that to the extent an Award of Restricted Stock, Restricted Stock Units or Performance Stock is subject to a Performance Period, such proportion of the Award shall remain subject to the same terms and conditions for vesting as were in effect prior to termination). The proportion of an Award upon which the Restricted Period shall lapse shall be a fraction, the denominator of which is the total number of months of any Restricted Period applicable to an Award and the numerator of which is the number of months of such Restricted Period which elapsed prior to the Date of Termination.

11.5 Non-Qualified Stock Options which are exercisable at the time of (or become exercisable by reason of) the Participant’s death, Disability, Retirement, or other termination of employment by the Participant’s employer for reasons other than Cause shall expire on the expiration date set forth in the award or, if earlier, five years after the Date of Termination, if the

13

Participant’s termination occurs because of death, Disability, or Retirement or if the Participant’s employment is terminated by the Participant’s employer for reasons other than Cause.

Incentive Stock Options which are exercisable at the time of (or become exercisable by reason of) the Participant’s death, Disability, Retirement, or other termination of employment by the Participant’s employer for reasons other than Cause and not exercised prior to the Date of Termination shall be treated as Non-Qualified Stock Options on the day following the Date of Termination and shall expire on the expiration date set forth in the award or, if earlier, five years after the Date of Termination, if the Participant’s termination occurs because of death, Disability, or Retirement or if the Participant’s employment is terminated by the Participant’s employer for reasons other than Cause.

11.6 If a Participant’s employment is terminated by the Participant’s employer for reasons other than Cause in connection with a merger, consolidation, acquisition of common control, or business combination of the Company and a Class I Railroad or a holding company of a Class I Railroad:

(a) All outstanding options then held by the Participant shall become exercisable on the Participant’s Date of Termination.

(b) Any restrictions on awards held by the Participant as of the Participant’s Date of Termination shall lapse and all Awards vested as if all performance objectives have been attained.

11.7 Except to the extent the Committee shall otherwise determine, if as a result of a sale or other transaction, a Participant’s employer ceases to be a Related Company (and the Participant’s employer is or becomes an entity that is separate from the Company), the occurrence of such transaction shall be treated as the Participant’s Date of Termination caused by the Participant being discharged by the Employer other than for cause.

11.8 Notwithstanding the foregoing provisions of this section, the Committee may, with respect to any Awards of a Participant (or portion thereof) that are outstanding immediately prior to the Participant’s Date of Termination, determine that a Participant’s Date of Termination will not result in forfeiture or other termination of the Award.

SECTION 12

ADJUSTMENTS TO SHARES

12.1 If the Company shall effect a reorganization, merger, or consolidation, or similar event or effect any subdivision or consolidation of shares of Stock or other capital readjustment, payment of stock dividend, stock split, spin-off, combination of shares or recapitalization or other increase or reduction of the number of shares of Stock outstanding without receiving compensation therefor in money, services or property, then the Committee shall adjust (i) the number of shares of Stock available under the Plan; (ii) the number of shares available under any

14

individual or other limits; (iii) the number of shares of Stock subject to outstanding Awards; and (iv) the per-share price under any outstanding Award to the extent that the Participant is required to pay a purchase price per share with respect to the Award.

12.2 If the Committee determines that the adjustments in accordance with the foregoing provisions of this section would not be fully consistent with the purposes of the Plan or the purposes of the outstanding Awards under the Plan, the Committee may make such other adjustments to the Awards to the extent that the Committee determines such adjustments are consistent with the purposes of the Plan and of the affected Awards.

SECTION 13

TRANSFERABILITY OF AWARDS

13.1 Awards under the Plan are not transferable except as designated by the Participant by will or by the laws of descent and distribution. To the extent that the Participant who receives an Award under the Plan has the right to exercise such Award, the Award may be exercised during the lifetime of the Participant only by the Participant. Notwithstanding the foregoing provisions of this Section 13, the Committee may permit Awards under the Plan (other than an Incentive Stock Option) to be transferred by a Participant for no consideration to or for the benefit of the Participant’s Immediate Family (including, without limitation, to a trust for the benefit of a Participant’s Immediate Family or to a Family Partnership for members of the Immediate Family), subject to such limits as the Committee may establish, and the transferee shall remain subject to all of the terms and conditions applicable to such Award prior to such transfer.

SECTION 14

AWARD AGREEMENT

14.1 Each employee granted an Award pursuant to the Plan shall execute an Award Agreement which signifies in writing, electronically or by such other means as the Company may designate, the offer of the Award by the Company and the acceptance of the Award by the employee in accordance with the terms of the Award and the provisions of the Plan. Each Award Agreement shall reflect the terms and conditions of the Award. In the event of a disagreement between the individual Award Agreement and the Plan or the Compensation and Development Committee resolution, the Plan or the resolution will govern. Participation in the Plan shall confer no rights to continued employment with the Company nor shall it restrict the right of the Company to terminate a Participant’s employment at any time.

15

SECTION 15

TAX WITHHOLDING

15.1 All Awards and other payments under the Plan are subject to withholding of all applicable taxes, which withholding obligations shall be satisfied (without regard to whether the Participant has transferred an Award under the Plan) by a cash remittance, or with the consent of the Committee, through the surrender of shares of Stock which the Participant owns or to which the Participant is otherwise entitled under the Plan pursuant to an irrevocable election submitted by the Participant to the Company at the office designated for such purpose, provided that if shares are used for awards granted on or after July 1, 2000, shares from the Stock Awards may be used only in an amount equal to the minimum applicable tax withholding rate as established by the Internal Revenue Code and relevant state or local tax authorities, and any additional amount due must be satisfied by use of attestation of ownership of other shares. The number of shares of Stock needed to be submitted in payment of the taxes shall be determined using the Fair Market Value as of the applicable tax date rounding down to the nearest whole share; provided that no election to have shares of Stock withheld from an Award or submission of shares shall be effective with respect to an Award which was transferred by a Participant in accordance with the Plan.

SECTION 16

TERMINATION AND AMENDMENT

16.1. The Board may suspend, terminate, modify or amend the Plan, provided that any amendment that would increase the aggregate number of shares which may be issued under the Plan; materially increase the benefits accruing to Participants under the Plan; modify Section 6.3(e) or materially modify the requirements as to eligibility for participation in the Plan, shall be subject to the approval of the Company’s stockholders, except that any such increase or modification that may result from adjustments authorized by Section 12 does not require such approval. No suspension, termination, modification or amendment of the Plan may terminate a Participant’s existing Award or materially and adversely affect a Participant’s rights under such Award without the Participant’s consent.

16

EX-10.38

Exhibit 10.38

BURLINGTON NORTHERN SANTA FE

1999 STOCK INCENTIVE PLAN

INCENTIVE BONUS STOCK PROGRAM AWARD AGREEMENT

This Agreement (“Agreement”) was made and entered into this 16th day of February, 2005 by and between Burlington Northern Santa Fe Corporation, a Delaware Corporation, (hereinafter “BNSF”) and

[Employee’s Name]

an employee of BNSF or one of its subsidiary companies (hereinafter “Employee”).

W I T N E S S E T H

BNSF has adopted the Burlington Northern Santa Fe 1999 Stock Incentive Plan (the “Plan”) for Burlington Northern Santa Fe Corporation and Affiliated Companies. The purpose of the Plan is to attract and retain salaried employees possessing outstanding ability, to motivate salaried employees to achieve the growth goals of BNSF by making a portion of their total compensation dependent on the accomplishment of these goals, and to further the identity of salaried employees of BNSF and its subsidiaries with the interests of the BNSF shareholders by increasing the opportunities for these salaried employees to become shareholders.

WHEREAS, the Compensation and Development Committee (“Committee”) of the Board of Directors wishes to encourage superior performance by the Employee by granting Employee an award of Restricted Stock as defined in the Plan;

WHEREAS, the Employee understands that this grant is to help such Employee to achieve share ownership goals as may be established by BNSF and agrees to attain such goals; and

WHEREAS, the Employee desires to perform services for BNSF and to accept said grant in accordance with the terms and provisions of the Plan and this Agreement;

NOW THEREFORE, BNSF grants to the Employee # of shares shares of Restricted Stock subject to vesting at the end of the Restricted Period, which is February 16, 2008.

BNSF and Employee hereby agree that this Award of Restricted Stock shall be subject to the following terms, conditions and restrictions:

1. §83(b) Elections. The Employee shall not make any elections to which he or she may be entitled pursuant to §83(b) of the Internal Revenue Code, as amended, that is to elect to

recognize income on the date of this grant.

2. No Assignment. The Restricted Stock shall not be sold, pledged, assigned, transferred, or encumbered during the period the stock is subject to restrictions. The Restricted Stock shall not be permitted to be used in payment of a stock option exercise for a period of six months following the lapse of restrictions.

3. Stock Left on Deposit. Each certificate of Restricted Stock awarded hereunder shall be registered in the name of the Employee and left on deposit with BNSF with a Stock Power endorsed in blank during the Restricted Period.

4. Stockholder Rights; Termination. The Employee shall have the right to receive dividends paid on the Restricted Stock and to vote such Restricted Stock during the Restricted Period. Subject to paragraph 7, all such Restricted Stock is subject to forfeiture upon retirement or termination of employment for any reason other than death, Disability, or termination by the Employer other than for Cause. In the event of an Employee’s Date of Termination due to death, all restrictions shall lapse. In the event of an Employee’s Date of Termination due to Disability or termination by the Employer other than for Cause, the restrictions shall lapse on a proportion of the Award outstanding prior to termination and the balance of the Award shall be forfeited. The employee shall have such further rights as described in the Burlington Northern Santa Fe Incentive Bonus Stock Program.

5. Payment of Tax Liabilities. The Employee agrees that BNSF or its subsidiaries may require payment by Employee of federal, state, railroad retirement or local taxes upon the vesting of this Award. Employee may use cash or shares to satisfy tax liabilities incurred, provided that if shares are used, shares from this Award may be used only to an amount equal to the Supplemental Federal Income Tax Withholding Rate as established by the Internal Revenue Code and any additional amount due must be satisfied by use of attestation of ownership of other shares.

6. Change in Capitalization. In the event of a change in the capitalization of BNSF due to a stock split, stock dividend, recapitalization, merger, consolidation, combination, or similar event, the aggregate shares subject to the Plan and the terms of any existing Awards shall be adjusted to reflect such change, pursuant to the terms of the Plan.

7. Change in Control. If a Change in Control as defined in the Plan occurs while an Award of Restricted Stock remains outstanding under the Plan, all restrictions shall lapse and all Restricted Stock shall be fully vested.

8. No Right of Employment. Nothing in this Agreement or in the Plan shall confer any right to continue employment with BNSF or its subsidiaries nor restrict BNSF or its subsidiaries from termination of the employment relationship of Employee at any time.

9. No Violation of Law. Notwithstanding any other provision of this Agreement, Employee agrees that BNSF shall not be obligated to deliver any shares of Common Stock or make any cash payment, if counsel to BNSF determines such exercise, delivery or payment

would violate any law or regulation of any governmental authority or agreement between BNSF and any national securities exchange upon which the Common Stock is listed.

10. Conflicts. In the event of a conflict between the terms of this Agreement and the Plan, the Plan shall be the controlling document.

11. Terms. The capitalized terms used herein shall have the same meaning as set forth in the Plan.

Anything herein contained to the contrary notwithstanding, this Agreement shall cease to be of any force or effect unless executed by the Employee and delivered to the Secretary of BNSF by March 31, 2005. Electronic acceptance of this agreement on or before March 31, 2005, shall constitute delivery to the Secretary of BNSF.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

BURLINGTON NORTHERN

SANTA FE CORPORATION

Secretary

Click Here to Accept Award Agreement

Employee

EX-10.41

Exhibit 10.41

Replacement Capital Covenant, dated as of December 15, 2005 (this “Replacement Capital Covenant”), by Burlington Northern Santa Fe Corporation, a Delaware corporation (together with its successors and assigns, the “Corporation”), in favor of and for the benefit of each Covered Debtholder (as defined below).

Recitals

A. On the date hereof, the Corporation is issuing $500,010,000 aggregate principal amount of its 6.613% Fixed Rate/Floating Rate Junior Subordinated Notes due December 15, 2055 (the “Notes”) to BNSF Funding Trust I (the “Trust”).

B. On the date hereof, the Trust is issuing 500,000 shares of its 6.613% Fixed Rate/Floating Rate Trust Preferred Securities (the “Trust Preferred Securities” and together with the Notes, the “Securities”).

C. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the Prospectus Supplement, dated December 12, 2005, relating to the Trust Preferred Securities.

D. The Corporation desires that the covenants provided in this Replacement Capital Covenant be enforceable by each Covered Debtholder (as defined herein) and that the Corporation be estopped from disregarding the covenants in this Replacement Capital Covenant, in each case to the fullest extent permitted by applicable law.

NOW, THEREFORE, the Corporation hereby covenants and agrees as follows in favor of and for the benefit of each Covered Debtholder.

SECTION 1. Definitions. Capitalized terms used in this Replacement Capital Covenant (including the Recitals), have the meanings set forth in Schedule I hereto.

SECTION 2. Limitations on Redemption and Repurchase of Securities. The Corporation hereby promises and covenants to and for the benefit of each Covered Debtholder that the Corporation shall not, and shall cause the Trust not to, redeem or repurchase all or any part of the Securities on or before December 15, 2040 except to the extent that the total redemption or repurchase price therefor is equal to or less than the sum of (a) the Applicable Percentage of the aggregate net cash proceeds received by the Corporation or its Subsidiaries from non-affiliates during the 180 days prior to the applicable redemption or repurchase date from the issuance and sale of Common Stock plus (b) 100% of the aggregate net cash proceeds received by the Corporation or its Subsidiaries from non-affiliates during the 180 days prior to the applicable redemption or repurchase date from the issuance and sale of Replacement Capital Securities (other than Common Stock). For the avoidance of doubt, persons covered by Corporation’s dividend reinvestment plan and employee benefit plans shall be deemed non-affiliates for purposes of this Section 2.

SECTION 3. Covered Debt. (a) The Corporation represents and warrants that the Initial Covered Debt is Eligible Debt.

(b) (i) During the period commencing on the earlier of (x) the date two years and 30 days prior to the final maturity date for the then effective Covered Debt and (y) the date on which the Corporation gives notice of redemption of the then effective Covered Debt if such redemption is in whole or in part and, after giving effect to such redemption, the outstanding principal of such Covered Debt would be less than $100,000,000, or (ii) if earlier than the date specified in clauses (x) and (y) of this Section 3(b)(i), on the date on which the Corporation or a Subsidiary of the Corporation repurchases the then effective Covered Debt in whole or in part and, after giving effect to such repurchase, the outstanding principal amount of such Covered Debt would be less than $100,000,000, the Corporation shall identify the series of its Eligible Debt that will become the Covered Debt on the related Redesignation Date in accordance with the following procedures:

(A) the Corporation shall identify each series of its then outstanding long-term indebtedness for money borrowed that is Eligible Debt;

(B) if only one series of the Corporation’s then outstanding long-term indebtedness for money borrowed is Eligible Debt, such series shall become the Covered Debt commencing on the related Redesignation Date;

(C) if the Corporation has more than one outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, then the Corporation shall identify the series that has the latest occurring final maturity date as of the date the Corporation is applying the procedures in this Section 3(b) and such series shall become the Covered Debt on the upcoming Redesignation Date;

(D) the series of the Corporation’s then outstanding long-term indebtedness for money borrowed that is determined to be Covered Debt pursuant to clause (B) or (C) above shall be the Covered Debt for purposes of this Replacement Capital Covenant for the period commencing on the related Redesignation Date and continuing to but not including the Redesignation Date as of which a new series of the Corporation’s outstanding long-term indebtedness is next determined to be the Covered Debt pursuant to the procedures set forth in this Section 3(b);

(E) in connection with such identification of a new series of Covered Debt, the Corporation shall give the notice provided for in Section 4 within the time frame provided for in such section.

(c) Notwithstanding any other provisions of this Replacement Capital Covenant, if on any date the Corporation has then outstanding one or more series of Eligible Subordinated Debt, such one or more series of Eligible Subordinated Debt shall be identified as Covered Debt in accordance with Section 3(b) and no Eligible Senior Debt shall then be Covered Debt.

2

SECTION 4. Notice. The Corporation covenants that:

(a) simultaneous with the execution of this Replacement Capital Covenant or as soon as practicable after the date hereof, the Corporation shall give notice to the Holders of the Initial Covered Debt, in the manner provided in the indenture relating to the Initial Covered Debt, of this Replacement Capital Covenant and the rights granted to such Holders hereunder;

(b) within 30 days after a series of the Corporation’s long-term indebtedness for money borrowed (1) becomes Covered Debt or (2) ceases to be Covered Debt, give notice of such occurrence to the holders of such long-term indebtedness for money borrowed in the manner provided for in the indenture, fiscal agency agreement or other instrument under which such long-term indebtedness for money borrowed was issued and, thereafter, publicly announce such occurrence in the Corporation’s quarterly report on Form 10-Q or Form 10-K, as applicable (or any successor to such forms), that immediately follows the giving of such notice;

(c) promptly upon request by any Holder of Covered Debt, provide such Holder with an executed copy of this Replacement Capital Covenant.

SECTION 5. Term. (a) The obligations of the Corporation pursuant to this Replacement Capital Covenant shall remain in full force and effect until the earliest date (the “Termination Date”) to occur of (i) December 15, 2040, (ii) with respect to particular series of Covered Debt, the date, if any, on which the Holders of at least 51% by principal amount of each of such Covered Debt consent or agree in writing to the elimination of such covenants as covenants in favor of such Holders and (iii) the date on which the Corporation has no outstanding Eligible Senior Debt or Eligible Subordinated Debt (in each case without giving effect to the rating requirement in clause (iv) of the definition of each such term). From and after the Termination Date, the obligations of the Corporation pursuant to this Replacement Capital Covenant shall be of no further force and effect with respect to such Holders, or otherwise.

(b) For purposes of Section 5(a), the Holders whose consent or agreement is required to terminate the covenants in Section 2 shall be the Holders of the then effective Covered Debt as of a record date established by the Corporation that is not more than 30 days prior to the date on which the Corporation proposes to cause the covenants in Section 2 to be of no further force and effect.

SECTION 6. Miscellaneous. (a) This Replacement Capital Covenant shall be governed by and construed in accordance with the laws of the State of New York without regard to choice of law principles.

(b) This Replacement Capital Covenant shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of the Covered Debtholders as they exist from time-to-time (it being understood and agreed by the Corporation that any Person who is a Covered Debtholder at the time such Person acquires or sells Covered Debt shall retain its status as a Covered Debtholder for so long as the series of long-term indebtedness for borrowed money of the Corporation owned by

3

such Person is Covered Debt and, if such Person initiates a claim or proceeding to enforce its rights under this Replacement Capital Covenant after the Corporation has violated its covenants in Section 2 and before the series of long-term indebtedness for money borrowed held by such Person is no longer Covered Debt, such Person’s rights under this Replacement Capital Covenant shall not terminate by reason of such series of long-term indebtedness for money borrowed no longer being Covered Debt).

(c) The Corporation acknowledges that reliance by each Covered Debtholder upon the covenants in this Replacement Capital Covenant is reasonable and foreseeable by the Corporation and that, were the Corporation to disregard its covenants in this Replacement Capital Covenant, each Covered Debtholder would have sustained an injury as a result of its reliance on such covenants.

(d) All demands, notices, requests and other communications to the Corporation under this Replacement Capital Covenant shall be deemed to have been duly given and made if in writing and (i) if served by personal delivery upon the Corporation, on the day so delivered (or, if such day is not a Business Day, the next succeeding Business Day), (ii) if delivered by registered post or certified mail, return receipt requested, or sent to the Corporation by a national or international courier service, on the date of receipt by the Corporation (or, if such date of receipt is not a Business Day, the next succeeding Business Day), or (iii) if sent by telecopier, on the day telecopied, or if not a Business Day, the next succeeding Business Day, provided that the telecopy is promptly confirmed by telephone confirmation thereof, and in each case to the Corporation at the address set forth below, or at such other address as the Corporation may thereafter post on its website as the address for notices under this Replacement Capital Covenant:

Burlington Northern Santa Fe Corporation

2650 Lou Menk Drive

Forth Worth, Texas 76131-2830

(800) 795-2673

4

IN WITNESS WHEREOF, the Corporation has caused this Replacement Capital Covenant to be executed by its duly authorized officer, as of the day and year first above written.

Burlington Northern Santa Fe Corporation
By:	/s/ Linda J. Hurt
	Linda J. Hurt Assistant Vice President- Finance and Treasurer of the Company

Definitions

“Alternative Payment Mechanism” means, with respect to any securities or combination of securities referred to in the definition of Replacement Capital Securities, that such securities or related transaction agreements include a provision, substantially similar to Section 5.4 of the First Supplemental Indenture, to the effect that (i) if required by a Mandatory Trigger Provision or if the Corporation has exhausted its rights to defer Distributions at its option pursuant to an Optional Deferral Provision, the Corporation shall, unless a Market Disruption Event has occurred and is continuing, (a) issue and sell shares of its common stock and/or Qualifying Preferred Stock in amount such that the net proceeds of such sale shall equal or exceed such Distributions and (b) apply the net proceeds of such sale to pay Distributions to be paid in full, or (ii) if permitted, but not required, by a Mandatory Trigger Provision, the Corporation may (a) issue and sell shares of its common stock and/or Qualifying Preferred Stock in amount such that the net proceeds of such sale shall equal or exceed such Distributions and (b) apply the net proceeds of such sale to pay Distributions to be paid in full, provided that the aggregate net proceeds from the issuance or sale of Qualifying Preferred Stock that may be used to pay Distributions shall not exceed 25% of the aggregate initial principal amount of the Notes.

“Applicable Percentage” means, in respect of any issuance and sales of Common Stock during the 180 days prior to the date of redemption or repurchase of any Securities, (a) if such Securities are redeemed or repurchased after December 15, 2005 and on or before December 15, 2025, 133.33%, (b) if such Securities are redeemed or repurchased after December 15, 2025 and on or prior to December 15, 2035, 200.00%, and (c) if such Securities are redeemed or repurchased after December 15, 2035 and on or prior to December 15, 2040, 400.00%.

“Business Day” means each day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the City of New York are authorized or obligated by law, regulation or executive order to close.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means common stock of the Corporation (including treasury shares of common stock and shares of common stock sold pursuant to the Corporation’s dividend reinvestment plan and employee benefit plans).

“Corporation” has the meaning specified in the introduction to this instrument.

“Covered Debtholder” means each Person (whether a Holder or a beneficial owner holding through a participant in a clearing agency) that buys, holds or sells long-term indebtedness for money borrowed of the Corporation during the period that such long-term indebtedness for money borrowed is Covered Debt.

“Covered Debt” means (i) at the date of this Replacement Capital Covenant and continuing to but not including the first Redesignation Date, the Initial Covered Debt and

(ii) thereafter, commencing with each Redesignation Date and continuing to but not including the next succeeding Redesignation Date, the Eligible Debt identified pursuant to Section 3(b) as the Covered Debt for such period.

“Distribution Date” means, as to any securities or combination of securities, the dates on which periodic Distributions on such securities are scheduled to be made.

“Distribution Period” means, as to any securities or combination of securities, each period from and including a Distribution Date for such securities to but not including the next succeeding Distribution Date for such securities.

“Distributions” means, as to a security or combination of securities, dividends, interest payments or other income distributions to the holders thereof that are not Subsidiaries of the Corporation.

“Eligible Debt” means, at any time, Eligible Subordinated Debt or if no Eligible Subordinated Debt is then outstanding, Eligible Senior Debt.

“Eligible Senior Debt” means, at any time, each series of the Corporation’s then outstanding long-term indebtedness for money borrowed that (i) upon a bankruptcy, liquidation, dissolution or winding up of the Corporation, ranks most senior among the Corporation’s then outstanding classes of indebtedness for money borrowed, (ii) is then assigned a rating by at least one NRSRO (provided that this clause shall apply on a Redesignation Date only if on such date the Corporation has outstanding senior long-term indebtedness for money borrowed that satisfies the requirements of clauses (i), (iii) and (iv) that is then assigned a rating by at least one NRSRO), (iii) has an outstanding principal amount of not less than $100,000,000, and (iv) was issued through or with the assistance of a commercial or investment banking firm or firms acting as underwriters, initial purchasers or placement or distribution agents. For purposes of this definition as applied to securities with a CUSIP number, each issuance of long-term indebtedness for money borrowed of the Corporation that has (or, if such indebtedness is held by a trust or other intermediate entity established directly or indirectly by the Corporation, the securities of such intermediate entity have) a separate CUSIP number shall be deemed to be a series of the Corporation’s long-term indebtedness for money borrowed that is separate from each other series of such indebtedness.

“Eligible Subordinated Debt” means, at any time, each series of the Corporation’s then outstanding long-term indebtedness for money borrowed that (i) upon a bankruptcy, liquidation, dissolution or winding up of the Corporation, ranks subordinate to the Corporation’s then outstanding series of indebtedness for money borrowed that ranks most senior, (ii) is then assigned a rating by at least one NRSRO (provided that this clause (ii) shall apply on a Redesignation Date only if on such date the Corporation has outstanding subordinated long-term indebtedness for money borrowed that satisfies the requirements in clauses (i), (iii) and (iv) that is then assigned a rating by at least one NRSRO), (iii) has an outstanding principal amount of not less than $100,000,000, and (iv) was issued through or with the assistance of a commercial or investment banking firm or firms acting as underwriters, initial purchasers or placement or distribution

agents. For purposes of this definition as applied to securities with a CUSIP number, each issuance of long-term indebtedness for money borrowed of the Corporation that has (or, if such indebtedness is held by a trust or other intermediate entity established directly or indirectly by the Corporation, the securities of such intermediate entity have) a separate CUSIP number shall be deemed to be a series of the Corporation’s long-term indebtedness for money borrowed that is separate from each other series of such indebtedness.

“Explicit Replacement Covenant” means, as to any security or combination of securities, that the Corporation has made a covenant, substantially similar to the Replacement Capital Covenant to the effect that the Corporation will redeem or repurchase such securities only if and to the extent that the total redemption or repurchase price is equal to or less than the Replacement Capital Securities as defined herein but as applied to such securities instead of to the Securities, and that the Corporation has reasonably determined, after consultation with counsel, that such covenant is binding on the Corporation for the benefit of one or more series of the Corporation’s long-term indebtedness for money borrowed.

“First Supplemental Indenture” means the First Supplemental Indenture, dated as of December 15, 2005, between the Corporation and U.S. Bank Trust National Association, as trustee thereunder.

“Holder” means, as to the Covered Debt then in effect, each holder of such Covered Debt as reflected on the securities register maintained by or on behalf of the Corporation with respect to such Covered Debt.

“Indenture” means the Indenture, dated as of December 8, 2005, between the Corporation and U.S. Bank Trust National Association, as trustee thereunder, as amended, supplemented or otherwise modified by the First Supplemental Indenture.

“Initial Covered Debt” means the Corporation’s 7.25% Debentures due August 1, 2097, CUSIP No. 12189TAF1.

“Intent-Based Replacement Disclosure” means, as to any security or combination of securities, that the Corporation has publicly stated its intention, either in the prospectus or other offering document under which such securities were initially offered for sale or in filings with the Commission made by the Corporation under the Securities Exchange Act prior to or contemporaneously with the issuance of such securities, that the Corporation will redeem or repurchase such securities only with Replacement Capital Securities, as defined herein but as applied to such securities instead of to the Securities, raised within 180 days prior to the applicable redemption or repurchase date.

“Mandatory Trigger Provision” means, as to any security or combination of securities, a provision in the terms thereof or of the related transaction agreements to the effect that (i) if Distributions are cumulative, the Corporation is required to settle Distributions on such securities pursuant to the Alternative Payment Mechanism or (ii) if Distributions are non-cumulative, the Corporation is permitted to settle Distributions on

such securities pursuant to the Alternative Payment Mechanism, in each case, if the Corporation fails to satisfy one or more financial tests set forth in the terms of such securities or related transaction agreements.

“Market Disruption Event” means the occurrence or existence of any of the following events or sets of circumstances:

(a) trading in securities generally on the New York Stock Exchange or any other national securities exchange or over-the-counter market on which the Corporation’s common stock or preferred stock is then listed or traded shall have been suspended or its settlement generally shall have been materially disrupted;

(b) the Corporation would be required to obtain the consent or approval of a regulatory body (including, without limitation, any securities exchange) or governmental authority to issue shares of the Corporation’s common stock or perpetual non-cumulative preferred stock and the Corporation fails to obtain that consent or approval notwithstanding the Corporation’s commercially reasonable efforts to obtain that consent or approval; or

(c) an event occurs and is continuing as a result of which the offering document for the offer and sale of the Corporation’s common stock or perpetual non-cumulative preferred stock would, in the Corporation’s reasonable judgment, contain an untrue statement of a material fact or omit to state a material fact required to be stated in that offering document or necessary to make the statements in that offering document not misleading and either (a) the disclosure of that event at the time the event occurs, in the Corporation’s reasonable judgment, would have a material adverse effect on the Corporation’s business or (b) the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Corporation’s ability to consummate that transaction, provided that one or more events described in this subsection (c) shall not constitute a Market Disruption Event with respect to more than one interest payment date.

“Non-Cumulative Preferred Stock” means preferred stock having Distributions which may be skipped by the issuer thereof for any number of distribution periods without any remedy arising under the terms of such securities or related transaction agreements in favor of the holders of such securities as a result of such issuer’s failure to pay Distributions, other than Permitted Remedies.

“NRSRO” means a nationally recognized statistical rating organization within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.

“Optional Deferral Provision” means, as to any security or combination of securities, a provision in the terms thereof or of the related transaction agreements, substantially similar to Section 4.1 of the First Supplemental Indenture, to the effect that the issuer thereof may, in its sole discretion, defer in whole or in part payment of Distributions on such securities for one or more consecutive Distribution Periods of up to

five years or, if a Market Disruption Event is then continuing, ten years, without any remedy other than Permitted Remedies as a result of such issuer’s failure to pay Distributions.

“Permitted Remedies” means, as to any security or combination of securities, any one or more of (i) rights in favor of the holders thereof permitting such holders to elect one or more directors of the Corporation (including any such rights required by the listing requirements of any stock or securities exchange on which such securities may be listed or traded), (ii) prohibitions on the Corporation paying Distributions on or repurchasing common stock or other securities that rank junior as to Distributions to such securities for so long as Distributions on such securities, including deferred distributions, have not been paid in full or to such lesser extent as may be specified in the terms of such securities, and (iii) provisions obliging the Corporation to cause such unpaid Distributions to be paid in full pursuant to an Alternative Payment Mechanism.

“Person” means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof.

“Qualifying Preferred Stock” means preferred stock of the Corporation that (i) rank pari passu with or junior to the Securities, (ii) are perpetual with no prepayment obligation on the part of the issuer thereof, whether at the election of the holders or otherwise, (iii) are Non-Cumulative Preferred Stock and (iv) either (a) whether by its terms or when taken together with any related transaction agreement, includes an Explicit Replacement Covenant or (b) includes a Mandatory Trigger Provision.

“Redesignation Date” means, as to the then effective Covered Debt, the earliest of (i) the date that is two years prior to the final maturity date of such Covered Debt, (ii) if the Corporation elects to redeem, or the Corporation or a Subsidiary of the Corporation elects to repurchase, such Covered Debt either in whole or in part with the consequence that after giving effect to such redemption or repurchase the outstanding principal amount of such Covered Debt is less than $100,000,000, the applicable redemption or repurchase date and (iii) if the then outstanding Covered Debt is not Eligible Subordinated Debt, the date on which the Corporation issues long-term indebtedness for money borrowed that is Eligible Subordinated Debt.

“Replacement Capital Covenant” has the meaning specified in the introduction to this instrument.

“Replacement Capital Securities” shall mean:

(a) with respect to Securities that are redeemed or repurchased after December 15, 2005 and on or prior to December 15, 2025,

(i) Common Stock;

(ii) Non-Cumulative Preferred Stock having either:

(A) no maturity or a maturity of at least 60 years and (1) an Explicit Replacement Covenant or (2) a Mandatory Trigger Provision and Intent-Based Replacement Disclosure; or

(B) no maturity or a maturity of at least 40 years and both (1) an Explicit Replacement Covenant and (2) a Mandatory Trigger Provision;

(iii) cumulative preferred stock with

(A) no prepayment obligation on the part of the issuer thereof, whether at the election of the holders or otherwise; and

(B) a requirement that the Preferred Stock converts into common stock of the Corporation within three years from the date of issuance; or

(iv) other securities that:

(A) rank upon on a liquidation, dissolution or winding-up of the Corporation either (1) pari passu with or junior to the Notes or (2) pari passu with the claims of the Corporation’s trade creditors and junior to all of the Corporation’s long-term indebtedness for money borrowed (other than the Corporation’s long-term indebtedness for money borrowed from time to time outstanding that by its terms ranks pari passu with such securities on a liquidation, dissolution or winding-up of the Corporation); and

(B) include distribution deferral provisions in the terms thereof or of the related transaction agreements, substantially similar to Sections 4.1 and 4.2 of the First Supplemental Indenture; and

(C) either (1) have no maturity or a maturity of at least 60 years and Intent-Based Replacement Disclosure, or (2) have no maturity or a maturity of at least 40 years and an Explicit Replacement Covenant;

(b) with respect to Securities that are redeemed or repurchased after December 15, 2025 and on or prior to December 15, 2035,

(i) Common Stock;

(ii) securities described in paragraph (a)(ii)-(iv) of this definition;

(iii) Non-Cumulative Preferred Stock having either

(A) no maturity or a maturity of at least 60 years, and either (1) Intent-Based Replacement Disclosure or (2) a Mandatory Trigger Provision; or

(B) a maturity of at least 40 years but not more than 59 years, and both (1) an Intent-Based Replacement Disclosure and (2) a Mandatory Trigger Provision; or

(iv) other securities that:

(A) rank upon a liquidation, dissolution or winding-up of the Corporation either (1) pari passu with or junior to the Notes or (2) pari passu with the claims of the Corporation’s trade creditors and junior to all of the Corporation’s long-term indebtedness for money borrowed (other than the Corporation’s long-term indebtedness for money borrowed from time to time outstanding that by its terms ranks pari passu with such securities on a liquidation, dissolution or winding-up of the Corporation); and

(B) include distribution deferral provisions in the terms thereof or of the related transaction agreements, substantially similar to Sections 4.1 and 4.2 of the First Supplemental Indenture;

(C) a maturity of at least 40 but not more than 59 years and have Intent-Based Replacement Disclosure; and

(c) with respect to Securities are that redeemed or repurchased after December 15, 2035 and on or prior to December 15, 2040,

(i) Common Stock;

(ii) securities described in paragraph b(ii)-(iv) of this definition, or

(iii) preferred stock, having a maturity, if any, of at least 60 years, and either (A) cumulative Distributions and Intent-Based Replacement Disclosure, or (B) non-cumulative Distributions.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Securities” has the meaning specified in Recital A.

“Subsidiary” means, at any time, any Person the shares of stock or other ownership interests of which having ordinary voting power to elect a majority of the board of directors or other managers of such Person are at the time owned, or the management or policies of which are otherwise at the time controlled, directly or indirectly through one or more intermediaries (including other Subsidiaries) or both, by another Person.

EX-10.45

Exhibit 10.45

BURLINGTON NORTHERN SANTA FE CORPORATION

NON-EMPLOYEE DIRECTORS’ COMPENSATION FOR 2006

Directors’ Compensation

On February 14, 2006, the Board, after review of competitive compensation levels and director responsibilities, revised certain elements of the compensation to be received by non-employee directors through fees, equity, and other programs as described below. Non-employee directors continue to receive an annual retainer fee of $60,000, paid in quarterly installments. The Chairman of the Audit Committee is paid a supplemental annual retainer fee, which was increased from $10,000 to $15,000, and each director who chairs any other Board committee is paid a supplemental annual retainer fee, which was increased from $5,000 to $10,000. In addition, for attendance at each Committee meeting or any inspection trip or similar meeting, a meeting fee of $1,000 plus expenses continues to be paid, including expenses for attendance by spouses in connection with certain meetings. Directors who are also officers or employees of the Company receive no compensation for duties performed as a director or a committee chairman.

Burlington Northern Santa Fe Directors’ Retirement Plan

The Directors’ Retirement Plan was terminated as of July 17, 2003. The plan provided non-employee directors an annual benefit if they served as a member of the Board for ten consecutive years, attained the mandatory retirement age, or were designated by the Directors and Corporate Governance Committee as eligible for benefits. Individual participants who met the eligibility requirements of the Retirement Plan are eligible to receive annual payments for benefits accrued through July 17, 2003. The annual payment is the amount of the annual retainer for services as a Board member at the time of termination of service for those individuals who are already retired. Non-employee members of the Board who meet the eligibility requirements will receive an annual payment in the amount of $40,000 upon departure from the Board, which was the amount of the annual retainer for services as a Board member at the time the Retirement Plan was terminated. Payment ceases upon an individual’s death. Service as a member on the board of directors of one or more of BNSF’s predecessor companies counts toward the requirement of ten consecutive years of service.

An individual Board member as of July 17, 2003, who had not served as a member of the Board for a period of at least ten consecutive years as of such date and had not attained age 72 as of July 17, 2003, but who subsequently meets the eligibility requirements, will be entitled to receive a pro rata annual payment for benefits at the time of departure from the Board. See Exhibit 10.23 to this Form 10-K.

Burlington Northern Santa Fe Non-Employee Directors’ Stock Plan

Under the Plan, each non-employee director is entitled to receive a one-time grant of 1,000 Restricted Stock Units as of the annual meeting at which he or she is first elected to the Board.

On February 14, 2006, the Board of Directors amended the Plan to reduce the number of Restricted Stock Units granted to each non-employee director elected to the Board of Directors at the 2006 annual meeting and each subsequent annual meeting, from 2,500 Restricted Stock Units to 2,100 units. As previously provided by the Plan, if an individual becomes a director on a date other than the date of the annual meeting, he or she will receive a pro rata grant of Restricted Stock Units for the portion of the one-year term following the date on which the individual becomes a director. The Restricted Stock Units will vest upon the date the director’s term of service ends by reason of retirement, death, disability, or change in control, subject to the director having served on the Board at least until the next annual meeting following election to the Board. Upon vesting, the director will receive one share of the Company’s common stock for each Restricted Stock Unit. Directors holding Restricted Stock Units do not have any rights of a shareholder but have the right to receive a cash payment in lieu of a dividend at such times and in such amounts as dividends are paid on the Company’s common stock.

Prior to 2004, the Non-Employee Directors’ Stock Plan also permitted directors by timely election to forego up to 25 percent of their annual retainer and receive a Retainer Stock Award in the form of restricted stock equal to 150 percent of the amount foregone based on the fair market value of BNSF’s common stock on the date of grant (December 31 of each calendar year), to vest three years from the date of grant, or

earlier if a director left the Board by reason of retirement, death, disability, or change in control. All Retainer Stock Awards will vest by December 31, 2006. See Exhibit 10.1 to this Form 10-K.

Burlington Northern Santa Fe Deferred Compensation Plan for Directors and Burlington Northern Santa Fe 2005 Deferred Compensation Plan for Non-Employee Directors

Prior to 2005, under the Deferred Compensation Plan for Directors, non-employee directors could voluntarily defer all or a portion of the fees they would otherwise receive into a Prime Rate interest account, a Company stock-equivalent (phantom stock) account or other investment option established under the plan’s terms, which now includes an S&P 500 index fund and a long-term capital appreciation stock fund. Participants receive subsequent distributions from the Company in amounts determined by reference to the investment options chosen. Distributions will be made in cash in either annual installments or as a lump sum after a director’s departure from the Board. Participation in this plan is frozen, and no new contributions may be made under the plan after December 31, 2004. See Exhibit 10.3 to this Form 10-K.

On April 21, 2005, the Board established the 2005 Deferred Compensation Plan for Non-Employee Directors, which has substantially the same provisions and investment options as did the Deferred Compensation Plan for Directors, but with additional provisions which comply with Section 409A of the Internal Revenue Code. See Exhibit 10.40 to this Form 10-K.

EX-10.46

Exhibit 10.46

BURLINGTON NORTHERN SANTA FE CORPORATION

DESCRIPTION OF EXECUTIVE OFFICER CASH COMPENSATION

FOR 2006

Annual Cash Compensation

Base Salary – Set forth below are the base salaries of the Chief Executive Officer and each of the four most highly compensated executive officers in 2005 and their increased annual base salaries effective February 16, 2006. The Company considers various factors in assigning executive officers to specific salary ranges, including job content, level of responsibility, accountability, and the competitive compensation market. On an annual basis, all executive officers’ salaries are reviewed and adjusted to reflect individual performance and position within their respective ranges.

Incentive Compensation Plan (ICP) Target – Executive officers are eligible for annual performance-based awards under the Company’s ICP, as are all salaried employees. If the Company attains its targeted performance goals, cash compensation levels (base salary plus annual incentives) will approximate the 50^th percentile of companies from general industry with revenue comparable to the Company (“comparison group”). At the 2006 annual meeting, shareholders will consider amending the ICP to qualify performance-based compensation under Section 162(m) of the Internal Revenue Code. Contingent on that approval, the 2006 ICP goal for the CEO and executive vice presidents will be weighted 100 percent upon achievement of the targeted level of cash flow (from operations). The Compensation and Development Committee of the Board (the “Committee”) has the authority to reduce the amount of the awards for the CEO and executive vice presidents based on those factors the Committee determines to be relevant. For all other participants, including all other executive officers, the Company’s goals will be weighted 55 percent, 30 percent and 15 percent upon achievement of targeted levels of earnings per share, velocity and safety, respectively. Performance against these annual goals, which are consistent with the Company’s long-term objectives and aligned with shareholder returns, will be among the factors that the Committee will consider in determining any reductions to the awards for the CEO and the executive vice presidents.

Long-Term Incentives – Opportunities provided to executive officers under long-term incentive programs are targeted to approximate the 60^th percentile of the comparison group for total direct compensation (cash plus long-term incentives).

Incentive Bonus Stock Program – To encourage individual stock ownership, executive officers had previously been given the opportunity to exchange up to 100 percent of their ICP cash awards for a grant of restricted stock. Participants electing the exchange received a restricted stock grant equal to 150 percent of the ICP award foregone. Shares vested three years after grant. On February 28, 2005, the Committee amended the Program to provide that the maximum which could be exchanged from the 2005 ICP award was 100 percent of the individual’s target ICP award, and that the restricted stock grant would be equal to 135 percent of the ICP award foregone. On September 14, 2005, the Committee amended the Program so that no exchanges are permitted beyond those for ICP awards earned in 2005. See Exhibits 10.8 and 10.38 to this Form 10-K.

Salary Exchange Option Program – To reinforce the link between stock price performance and executive compensation, executive officers have had the opportunity to elect to exchange up to 25 percent of their base salary each year for a grant of non-qualified stock options with an exercise price equal to the fair market value of the Company’s common stock on the date of grant and with a term of up to ten years from the date of grant. Participants received 450 non-qualified stock options for each $1,000 of base salary exchanged and may have elected salary exchanges for up to three consecutive years at one time. Options vest on the anniversary of the date of grant following the year for which the base salary was exchanged. On February 28, 2005, the Compensation and Development Committee amended the Program to provide that no elections are permitted beyond that date. See Exhibits 10.18 and 10.33 to this Form 10-K.

Stock Options, Restricted Stock, Restricted Stock Units and Performance Stock – Under the Stock Plan, the Company makes periodic grants of stock options, restricted stock or restricted stock units and performance stock to executive officers. Stock options cannot be issued with an exercise price below the fair market value of the Company common stock on the date of grant, thus ensuring that recipients will benefit only when the price of the Company’s stock appreciates, and they vest pro rata over three years. Stock options granted to executive officers prior to February 28, 2005, may have also included a reload feature that encourages them to exercise their options using previously acquired shares of the Company’s common stock and helps them achieve their stock ownership goals; reload grants of options vest in six months but expire under the terms of the original option grant. Grants of restricted stock or restricted stock units provide for vesting in three years after grant; vesting may also be contingent on achievement of Company performance goals. Awards of performance stock vest three years after award date, contingent on achievement of Company performance goals. See Exhibits 10.21, 10.31, 10.32, 10.33, 10.34, 10.35 and 10.38 to this Form 10-K.

Matthew Rose

Chairman, President and Chief Executive Officer

	Base
2005	$	1,100,000
2006	$	1,100,000

Thomas Hund

Executive Vice President and Chief Financial Officer

	Base
2005	$	473,500
2006*	$	487,700

Carl Ice

Executive Vice President and Chief Operations Officer

	Base
2005	$	520,000
2006*	$	535,600

John Lanigan

Executive Vice President and Chief Marketing Officer

	Base
2005	$	500,000
2006*	$	515,000

Jeffrey Moreland

Executive Vice President Law & Government Affairs and Secretary

	Base
2005	$	455,000
2006*	$	468,700

* Salary increases from 2005 levels are effective February 16, 2006

EX-12.1

Exhibit 12.1

Burlington Northern Santa Fe Corporation and Subsidiaries Computation of Ratio of Earnings to Fixed Charges

Dollars in millions, except ratio amounts

(Unaudited)

	Year Ended December 31,
	2005			2004			2003			2002			2001
Earnings:
Income before income taxes and cumulative effect of accounting change	$	2,448		$	1,273		$	1,231		$	1,216		$	1,173
Add:
Interest and other fixed charges, excluding capitalized interest		437			409			420			428			463
Portion of rent under long-term operating leases representative of an interest factor		221			195			182			178			173
Distributed income of investees accounted for under the equity method		4			4			3			3			5
Amortization of capitalized interest		8			8			8			8			7
Less:
Undistributed equity in earnings of investments accounted for under the equity method		15			9			14			17			23
Total earnings available for fixed charges	$	3,103		$	1,880		$	1,830		$	1,816		$	1,798
Fixed charges:
Interest and fixed charges	$	450		$	419		$	429		$	441		$	477
Portion of rent under long-term operating leases representative of an interest factor		221			195			182			178			173
Total fixed charges	$	671		$	614		$	611		$	619		$	650
Ratio of earnings to fixed charges		4.62	x		3.06	x		3.00	x		2.93	x		2.77	x

EX-21.1

Exhibit 21.1

BURLINGTON NORTHERN SANTA FE CORPORATION

SUBSIDIARIES AND ASSOCIATED COMPANIES

BURLINGTON NORTHERN SANTA FE CORPORATION (DE)
BNSF Acquisition, Inc. (DE)	100	%
Burlington Northern Santa Fe Insurance Company, Ltd. (Bermuda)	100	%
FreightWise, Inc. (DE)	100	%
BNSF Logistics, LLC (DE)	100	%
FreightWise Commercial Services, LLC (DE)	100	%
Iron Horse Power, LLC (DE)	100	%
BNSF Railway Company (DE)	100	%
BN Leasing Corporation (DE)	100	%
BNSF Equipment Acquisition Company, LLC (DE)	100	%
Bayport Systems, Inc. (TX)	100	%
BayRail, LLC (DE)	100	%
Burlington Northern Dock Corporation (DE)	100	%
The Burlington Northern and Santa Fe Railway Company de Mexico, S.A. de C.V. (Mexico)	99	%
Burlington Northern Santa Fe British Columbia, Ltd. (DE)	100	%
BNSF Railway International Services, Inc. (DE)	100	%
Burlington Northern (Manitoba) Limited. (Manitoba)	100	%
Burlington Northern Railroad Holdings, Inc. (DE)	100	%
Burlington Northern Santa Fe Manitoba, Inc. (DE)	100	%
Burlington Northern Santa Fe Properties, L.L.C. (DE)	100	%
The Dodge City and Cimarron Valley Railway Company (KS)	100	%
Electro Northern, Inc. (DE)	100	%
INB Corp. (NV)	100	%
Los Angeles Junction Railway Company (CA)	100	%
M-R Holdings Acquisition Company (DE)	100	%
Midwest/Northwest Properties Inc. (DE)	100	%
Northern Radio Limited (British Columbia)	100	%
Oklahoma City Junction Railway Company (OK)	100	%
Pine Canyon Land Company (DE)	100	%
Rio Grande, El Paso and Santa Fe Railroad Company (TX)	100	%
SFP Pipeline Holdings, Inc. (DE)	100	%
Santa Fe Pacific Pipelines, Inc. (DE)	100	%
Santa Fe Pacific Insurance Company (VT)	100	%
Santa Fe Pacific Railroad Company (Act of Congress)	100	%
Santa Fe Receivables Corporation (DE)	100	%
Santa Fe Terminal Services, Inc. (DE)	100	%
Star Lake Railroad Company (DE)	100	%
Sunset Communications Company (DE)	100	%
Transportation Group Management, Inc. (DE)	100	%
Wyoming Transportation Group, L.L.C. (WY)	100	%
Western Fruit Express Company (DE)	100	%
Winona Bridge Railway Company (MN)	100	%
The Zia Company (DE)	100	%

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-130214) and the Registration Statements on Form S-8 (Nos. 33-62825, 33-62827, 33-62829, 33-62831, 33-62833, 33-62835, 33-62837, 33-62839, 33-62841, 33-62943, 33-63247, 33-63249, 33-63253, 333-03275, 333-03277, 333-118732, 333-19241, 333-77615, 333-59854 and 333-108384) of Burlington Northern Santa Fe Corporation of our report dated February 13, 2006 relating to the consolidated financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Fort Worth, Texas

February 16, 2006

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

WHEREAS, BURLINGTON NORTHERN SANTA FE CORPORATION, a Delaware corporation (the “Company”), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for the fiscal year ended December 31, 2005; and

WHEREAS, the undersigned serve the Company in the capacity indicated;

NOW, THEREFORE, the undersigned hereby constitutes and appoints THOMAS N. HUND or JEFFREY R. MORELAND, his or her attorney with full power to act for him or her in his or her name, place and stead, to sign his or her name in the capacity set forth below, to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2005, and to any and all amendments to such Annual Report on Form 10-K, and hereby ratifies and confirms all that said attorney may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, this Power of Attorney has been executed by the undersigned this 16th day of February, 2006.

/s/ Alan L. Boeckmann Alan L. Boeckmann, Director	/s/ Donald G. Cook Donald G. Cook, Director
/s/ Vilma S. Martinez Vilma S. Martinez, Director	/s/ Marc F. Racicot Marc F. Racicot, Director
/s/ Roy S. Roberts Roy S. Roberts, Director	Matthew K. Rose, Director and Chairman, President and Chief Executive Officer
/s/ Marc J. Shapiro Marc J. Shapiro, Director	/s/ J.C. Watts, Jr. J.C. Watts, Jr., Director
/s/ Robert H. West Robert H. West, Director	/s/ Edward E. Whitacre, Jr. Edward E. Whitacre, Jr., Director
/s/ J. Steven Whisler J. Steven Whisler, Director

EX-31.1

Exhibit 31.1

Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Matthew K. Rose, certify that:

1. I have reviewed this annual report on Form 10-K of Burlington Northern Santa Fe Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 16, 2006
	/s/ Matthew K. Rose
	Matthew K. Rose
	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas N. Hund, certify that:

1. I have reviewed this annual report on Form 10-K of Burlington Northern Santa Fe Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 16, 2006
	/s/ Thomas N. Hund
	Thomas N. Hund
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. § 1350

(Section 906 of Sarbanes-Oxley Act of 2002)

Burlington Northern Santa Fe Corporation

In connection with the Annual Report of Burlington Northern Santa Fe Corporation (the “Company”) on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Matthew K. Rose, Chairman, President and Chief Executive Officer of the Company, and Thomas N. Hund, Executive Vice President and Chief Financial Officer of the Company, each hereby certifies that, to his knowledge on the date hereof:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 16, 2006

/s/ Matthew K. Rose	/s/ Thomas N. Hund
Matthew K. Rose	Thomas N. Hund
Chairman, President and Chief Executive Officer	Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Burlington Northern Santa Fe Corporation and will be retained by Burlington Northern Santa Fe Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

Annual CEO Certification

(Section 303A.12 (a) of the New York Stock Exchange Listed Company Manual)

As the Chief Executive Officer of Burlington Northern Santa Fe Corporation, and as required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, I hereby certify that as of the date hereof I am not aware of any violation by the Company of NYSE’s Corporate Governance listing standards, other than has been notified to the Exchange pursuant to Section 303A.12(b) and disclosed as an attachment hereto.

/s/ Matthew K. Rose

Matthew K. Rose

Chairman, President and Chief Executive Officer

May 19, 2005

[No attachment accompanied this Annual CEO Certification.]