Union Pacific in Houston: Investing to Meet Freight Demands Brenda Mainwaring, VP Public Affairs, November 12, 2013 1
Agenda Union Pacific Overview Developing Markets Investing for Capacity The Future of Rail in Houston, as we see it 2
Serving all Mexico interchanges and key ports. Seattle Portland Eastport Duluth Twin Cities 2012 Fast Facts (Year End) Revenue Route Miles $20.9 B 32,000 in 23 States Oakland SLC Denver Omaha KC Chicago St. Louis Employees 46,000 Annual Payroll $4.3 B Customers 10,000 Locomotives 8,400 LA Memphis Calexico Nogales El Paso Dallas New Orleans Port access - 25 Gulf Coast Ports Eagle Pass Laredo Houston Brownsville Border crossings 3
4 Source: TxDOT/HTNB study August 2007
Key commodities show strong growth Percent UP Volume Growth 2013 3Q vs 2012 3Q 27% 8% 9% 10% Metals (incl pipe) Industrial Chemicals Petroleum Products* Frac Sand *Petroleum Products excludes Crude Oil 5
Shale-related Business Stats Union Pacific Crude Oil Carloads 200,000 150,000 100,000 Rail 61% Pipeline 31% Truck to Canada Pipelines 1% 50,000 0 2010 2011 2012 Jan-Sep 2013 Refinery 7% Source: North Dakota Pipeline Authority, Aug 2013 estimate Typical tank car holds 650 barrels of crude oil. 59,000 tank cars on order as of Sept 2013. Source: Railway Supply Institute Average Start-up Well Utilizes: 30 50 carloads of sand 3 5 carloads of drilling pipe 6
These growth commodities are driving UP s southern region volume growth. Southern Region growth outpaced generally flat system growth in FY 2012 vs. FY 2011 5% growth in volume 9% growth in active workforce 9% growth in active locomotive fleet 7
What about Houston? Commodities with significant growth opportunities predominate in Houston area. Energy and byproducts Drilling materials Chemicals Mexico imports/exports Houston is consistently UP s highest volume service unit. Englewood alone averages 1,500 cars per day. Union Pacific dispatches more than 100 trains per day in the Houston Terminal complex. 8
What does that mean for Houston roadways? With 100 trains per day, the Houston Terminal rail network handles the equivalent of tens of thousands of trucks on a daily basis Intermodal trains are a highly visible example one train can take up to 300 trucks off highways Union Pacific handles the equivalent of more than 15,000 truckloads of freight in Houston each day If that freight traveled on trucks that were stacked nose-totail on Houston s roadway system, the trucks would consume more than 200 lane miles One 40-ton truck does as much damage to roadways as 9,600 automobiles, according to a government study cited in USA Today 9
Houston railroads serve public transportation interests. Moving goods from ships To rail Instead of roads. 10
Perceived future of Houston rail freight, according to the H-GAC Regional Goods Movement Study (June 2013) Rail volume is expected to increase from 152 million tons in 2007 to 218 million tons in 2035 the region s rail and waterway system may not have sufficient capacity to absorb expected growth. Rail capacity bottlenecks include single track mainlines and bridges, inadequate siding length, and rail yards at or near capacity. 11
$ How will Union Pacific change the picture? Creating Capacity. Iron in the Ground Gateways & Customers Capacity & Commercial Facilities Infrastructure condition Operating Inventory (Freight Cars in Train & Only) 200,000 Last Year 187,000 Current 172,000 Goal 188,000 175,000 Freight Cars stored on-line: 33,000 150,000 Aug Oct Dec Feb Apr Jun Aug Oct 2011 2011 2011 2012 2012 2012 2012 2012 Technology Organizational Initiatives Distributed Power Defect detection Simulation tools Unified Plan Surge resources Inventory control Celebrate & Repeat Engage Empower Process Initiatives Variability reduction Employee Engagement Standardize Support UP Way Time 12
Record Level Private Investment Increasing Investment ~$32 Billion since 2003* 2013 Capital Plan (In Millions) $3.7 ~$3.6 PTC $450 Infrastructure Replacement $1,700 $2.0 Capacity/ Commercial Facilities $650 Locomotives/ Equipment $600 2003 2006 2009 2012 2013E Train Speed 17.8 mph * Includes Cash Capital, Leases and Other Non-Cash Capital 21.0 mph Technology/ Other $200 13
Union Pacific s future for Houston Maintain a strong freight railroad Improve productivity through process, organization and technology Make targeted capacity investments Explore public-private partnerships that create greater freight fluidity, for example: Belt Junction doubletrack through UP-BNSF diamond GCRD Strang Subdivision doubletrack near PTRA/Bayport Crossing separation and closures i.e., GCRD West Belt project 14
Locations of possible public-private projects. Lloyd Spring Belt Jct Union Pacific RR Houston Belt & Terminal Railway Port Terminal Railroad Association BNSF RR Settegast Jct. Chaney Jct Eureka BNSF Depot Yd Belt Jct Quitman St Hardy St Carr St Rabbit Crossing Tower 26 Gulf Coast Jct. West Belt Settegast Tower 87 MK PTRA North Baytown Subdivision Baytown West Jct Pierce Jct Congress Old South [BNSF] Double Track Jct T&NO Jct East Belt New South [BNSF] Booth Tower 30 Katy Neck Galena Park Pasadena Deer Park Jct Barbours Cut Rosenberg HL&P Arcola Alvin Strang Algoa Sub 2MT Strang Angleton Freeport Texas City 15
At-grade Crossings Houston Terminal Subdivision Example Lloyd Spring Union Pacific RR Houston Belt & Terminal Railway Port Terminal Railroad Association BNSF RR Settegast Jct. BNSF Belt Jct Quitman St Rabbit Crossing Gulf Coast Jct. Settegast Tower 87 Eureka Jct Eureka Tower 26 Carr St MK PTRA North Baytown Subdivision Baytown West Jct 9 Crossings Pierce Jct Congress Old South [BNSF] Double Track Jct T&NO Jct East Belt New South [BNSF] Booth Tower 30 Katy Neck Galena Park Pasadena Deer Park Jct Barbours Cut Rosenberg Strang Arcola Alvin Algoa HL&P Terminal Subdivision 46 At Grade Crossings Angleton Freeport Texas City 16
Rail serves Houston s transportation needs Three times cleaner than trucks on a ton-mile basis Four times more fuel efficient than trucks Can haul one ton of freight 480 miles on one gallon of fuel Each intermodal train can take up to 300 trucks off highways Intercity Freight Transportation (Based on Ton Miles) Other Freight 26% Trucking 31% Freight RRs 43% Transportation Greenhouse Gas Emissions Trucking 74% Other Freight 17% Freight RRs 9% Source: EPA, AAR 17
Summing up and looking ahead. The highest and best use of rail is to transport freight Cleaner, cheaper and more fuel-efficient alternative to trucks 1 intermodal train = up to 300 trucks = up to 4 miles of trucks stacked nose-to-tail Growing freight rail traffic in Houston will consume available rail capacity On a shared line, a typical passenger train can consume as much capacity as 3 freight trains due to priority handling and passenger loading / unloading Where freight and passenger operations share limited capacity, a typical passenger train would displace 3 freight trains. For intermodal service, that could return up to 900 trucks to the roadways. 18