Union Pacific Railroad anticipates “slow but steady” growth in freight volume this year, driven by the industrial products sector and continued diversion of traffic from over-the-road trucking to domestic intermodal, a top marketing executive said Tuesday.
Eric Butler, executive vice president of marketing and sales, told the Los Angeles Traffic Club that shale oil and gas drilling from North Dakota down to Texas is creating opportunities for two-way traffic. UP carries pipe, fracking sands and barites into the drilling areas and moves crude oil out. Shale oil and gas drilling is creating opportunities for trucking as well.
The rig count in the U.S. is up 50 percent since 2009 largely because of the “shale plays” such as the Bakken formation in North Dakota. UP’s shale volumes are up 400 percent system-wide, including 198 percent in the Bakken play, Butler said.
Significant growth in natural gas production has been a good news-bad news story for the railroads. A glut of natural gas has pushed prices down to the point where industrial consumers and utilities are shifting from coal to natural gas. Coal has traditionally been one of the higher-volume commodities carried by railroads, but UP’s energy freight was down 9 percent in the first quarter of 2012 due to a drop in coal freight.
Intermodal volumes continue to grow, due primarily to shipments moving in domestic containers. Although international intermodal volume was flat last year, 2011 was a record year for domestic intermodal. UP is responding by stepping up its purchases of domestic containers, Butler said. In the first quarter of 2012, UP’s total intermodal freight volume was up 1 percent.
UP this year will spend a record $3.6 billion on capital projects throughout its system, including track and other infrastructure, the purchase of 200 locomotives and safety-related investments such as positive train control.
In Southern California, UP will spend $190 million on the Colton flyover project east of Los Angeles. The Colton Crossing, which is more than 100 years old, handles about 100 freight and passenger trains each day at grade, causing lengthy delays in the goods movement supply chain.
Butler said about 80 percent of the trains must come to a full stop at the crossing. The flyover project (PDF) will elevate UP’s tracks over those of the BNSF Railway. When the project is completed, transit times will be reduced an estimated 45 minutes to an hour, he said.
UP continues to double-track its Sunset Corridor, the main line that carries intermodal freight from Los Angeles-Long Beach to the eastern half of the country. Double-tracking of the corridor will be 70 percent complete by the end of this year. UP since 2004 has been working with local authorities to win environmental approval for expansion of its near-dock Intermodal Container Transfer Facility. UP plans to spend $400 million to expand and modernize the ICTF.