Southwest Association of Rail Shippers
Domestic Energy Production and Its Impact on Rail Freight
Jack Koraleski - February 23, 2012
1
Building America… for 150 Years!
Lincoln signs Pacific Rail Act in 1862
2
3
Today’s Union Pacific
Building America
Seattle
Eastport
Portland
Duluth
Twin Cities
Chicago
Omaha
SLC
Oakland
Denver
KC
St. Louis
LA
Memphis
Dallas
Calexico
Nogales
New
Orleans
El Paso
Eagle Pass
Laredo
4
Houston
Brownsville
Focusing On Creating Value for Customers
Union Pacific’s Value Proposition
Strong
Strong
Relationships
Relationships
GOOD
Innovative
Innovative
Products
Products
Excellent
Excellent
Service
Service
Strategic
Strategic
Investments
Investments
The
The Best
Best
Franchise
Franchise in
in
the
the Industry
Industry
5
Value and Stronger Markets Drove 2011 Growth
Average 7-Day Carloadings
Union Pacific
+3%
6
Energy…The Next Gold Rush?
Shale
Plays
7
A New Era: Shale Energy
“Could S
hale Pow
er the W
orld?”
an U.S.
e
M
m
o
o
a le B
ear?”
N
e
“Does Sh
c
n
e
d
n
ndepe
Energy I
“Saudi Se
es Threat
of
Shale Oil
Revolution
”
ows”
r
G
m
o
o
ale B
“U.S. Sh
“The Sa
udi Ara
bia of N
atural G
as”
8
A New Era: Shale Energy
• Since 2009…
Canadian Oil
Sands
Rig Count
Growth
Bakken
Niobrara
Marcellus
U.S.
+50%
Permian
+212%
Bakken
+198%
Eagle Ford
+131%
Barnett
Permian
Eagle Ford
9
Haynesville –
Bossier
• UP shale-related
volume up over 400%
Rail’s Role in Shale Energy
• Frac Sand
• Minerals
• Pipe
• Hydrochloric Acid
• Rock
• Crude Oil
10
Creating Value for Shale Energy Customers
Union Pacific’s Value Proposition
Strong
Strong
Relationships
Relationships
• Delivering Inbound Materials
– Connect supply to demand
– Efficient handling of large volumes
Innovative
Innovative
Products
Products
Excellent
Excellent
Service
Service
– Service flexibility
– Short Line relationships
• Delivering Outbound Crude
– Speed to market
11
Strategic
Strategic
Investments
Investments
– Geographic reach
The
The Best
Best
Franchise
Franchise in
in
the
the Industry
Industry
– St James terminal – entry into
established delivery network
– Service flexibility
Positioned for Growth
A Wide Range of Opportunities
CONSUMER
• Consumer goods
• Construction materials
• Industrial materials
• Autos
• Plastics
ENERGY
• Coal
• Ethanol
• Wind Turbines
• Shale Oil
12
FOOD
• Food/Refrigerated
• Whole grains
• Grain products
Innovative Solutions for Customers
• New Products
• Value-Added
Services Across the
Supply Chain
• Extend Reach of the
Franchise
• Ease of Doing
Business
13
Consistent Network Performance
(MPH)
(000s)
• Recovered from 2011’s
Weather Challenges
• Agility and Resiliency
• Positioned for Growth
– 875 Employees Furloughed
– 700 Locomotives Stored
2008
2009
7-Day Carloads
14
2010
2011 2012
Velocity
Preparing for Southern Region Growth
UP Manifest Volume Growth
2011 Carloads vs. 2010 (000)
• Shale energy leads strong
growth in the South
• Solid service, but rapid
growth can be a challenge
Southern Region Velocity
(MPH)
• Working to ensure growth
with service excellence
– Strong hiring
– Slow order miles
reduced 50%
– Targeted growth capital
15
Investing for Growth
2011-2015: Annual Capital ~17% to 18% of Revenue
$15 Billion in 5 Years
$36 Billion Since 1999
• Safety
• Service
• Growth
• Productivity
16
2012 Capital Plan
Replacement, Growth & Productivity
2012 vs. 2011 Capital*
($ In Millions)
• $3.6+ Billion in 2012
• Safe and Resilient
Infrastructure
• Increased Capacity
Spending
$160
– Santa Teresa Facility
– Southern Region Projects
• 200 New Locomotives
2011 2012
2011 2012
2011 2012
• Increased PTC Spend
*Includes cash capital, leases and other non-cash capital
17
Union Pacific . . .
• Focusing on creating
customer value
• Providing excellent
customer service
• Investing for growth
• Offering a wide-range
of options and support
• Working together to
grow
18
19