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Bob Turner, VP, Union Pacific - El Paso Inc.: Q And A

Bob Turner, VP, Union Pacific

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Posted: Sunday, January 6, 2013 6:00 pm | Updated: 12:09 pm, Thu Jan 10, 2013.

SANTA TERESA, N.M. - Right now it looks like a lot of dirt and trenches, but Union Pacific's $400-million rail facility near here will soon begin to rise out of the desert.

Bob Turner, Union Pacific's senior vice president of corporate relations, was in Santa Teresa recently to announce the launch of the project's final phase.

In 2013, he said, Union Pacific will have no larger project anywhere.

Turner also discussed the economic outlook for 2013, which is a mix of good and bad. He said business has been boosted by the United States' oil and gas boom but dragged down by drought and coal.

"Our industry tends to be a barometer of economic activity," he said.

Construction of the rail facility began in August and, so far, Union Pacific has excavated 5.94 million cubic yards of desert sand - enough dirt to pack a double-stacked train of containers stretching from here to Albuquerque.

The rail yard, which includes fueling and intermodal facilities as well as crew change buildings, should be finished in 2015. It's expected to create 3,000 jobs during construction and 600 permanent jobs when complete.

Turner is a graduate of Northfield Mt. Hermon School in Massachusetts and has an economics degree from Hiram College in Ohio.

He joined Union Pacific Corp. as senior vice president of corporate relations in 2000. Before that, he was vice president of public affairs for Campion International Corp.

Turner is on the executive committees of the Greater Omaha Chamber of Commerce and the National Action Alliance for Suicide Prevention and serves on the U.S. Bank Nebraska Advisory Board.

He is president of the Union Pacific Foundation and heads the Union Pacific Railroad Museum.

The company was created more than 150 years ago when Abraham Lincoln signed the Pacific Railway Act. Today, its rails link 23 states in the western two-thirds of the country.

Last month, Turner spoke to businesspeople and government officials gathered at Santa Teresa Country Club and fielded questions from reporters.

He talked about what Union Pacific is doing in Santa Teresa and in El Paso, how the oil boom has been a boon to business and what the company is doing to be friendlier.

Q: Railroads haven't always been known for their community relations. How is Union Pacific becoming friendlier?

We were a little late in discovering that we had lost track and lost connection with most communities we are in, and we've worked very hard over the past four or five years to really make a strong connection with the community.

We can't always get to "yes" on things people want, but we are going to be engaged. We are going to talk, we are going to discuss and try to be seen as a productive citizen.

We can't pack up and move to China. We are going to be here, and we really need to be sure that, over time, we're seen as positive in the places we operate so we can continue to grow, which means the community grows. It really is the ticket to a delightful future.

Q: How are you working closer with the city of El Paso?

The city has a plan to blow up City Hall and put a ballpark down there. The issue for us is we can't afford for the structure of the trainway to be compromised when they do the demolition.

Q: You're talking about the concrete canal of sorts that trains use to travel through Downtown?

Yes. We are doing a lot of engineering to be sure that when the city implodes City Hall, an unintended consequence of that is not the trainway dropping and us being in real trouble.

Q: Where is the Santa Teresa project now?

In 2013 this is going to be the largest single capacity project under way by Union Pacific.

We have worked hard to take advantage of all the fracking and oil by rail coming out of the shale and other things, and we spent a lot of money this past year in support of that in West Texas, Louisiana, Wisconsin and Minnesota, but this project is quickly emerging as really the biggest one we have going.

It is about a $400-million project, and we are about $140 million into that. We are largely through phase one and starting phase two. Over the next six or eight months you're really going to see infrastructure coming up out of the ground, and it's really going to be remarkable.

It is a facility that will help us be more efficient; it will help us grow and, as part of that, it will help the economy in this part of the United States grow as well.

The fueling facility will let us be highly efficient in fueling locomotives. You may have noticed that more and more, if not most, of the trains that you see go through now have locomotives on both ends - one pushing and the other pulling.

This facility will be our first with two built-in fueling stations. So it will be much more efficient than what we currently do, which is use a truck to take fuel to the rear locomotive. We will be able to fuel multiple trains at once and it will get us out of fueling in Downtown El Paso where we are landlocked.

Q: How will the new rail yard in Santa Teresa impact your operations in El Paso?

Our facilities in El Paso are going to be repurposed. We are going to keep using them and they will be an important part of our company. A noticeable change is the fueling of trains will happen out here in Santa Teresa instead of Downtown El Paso and that will free up some capacity for throughput - getting more trains through.

In southeast El Paso, intermodal boxes are loaded and unloaded from UP's trains at the Alfalfa Yard located behind Western Refining. It's landlocked and we are out of space so we are turning down business that wants to come into the region. Moving that out here, suddenly we will have hundreds and hundreds of acres, and we will be able to let that business grow nicely.

We will move our local boxcar business to the Alfalfa Yard. We just did a test shipment from Mexico of tequila, of all things. Beer is also huge. Any bottle of Corona in the United States has been on one of our trains.

The second part of the project in Santa Teresa is the intermodal facility. That is where boxes get processed. It is built on a timeline that has us finishing the beginning of 2015. It will become a real engine of economic activity for this part of the U.S. and Mexico.

The project is really going to be a big, big part of our company's interest over the course of 2013 and as we go forward, it will be one of the shining spots in our company.

Q: How is business and what is the outlook for the economy in 2013?

We divide what we do into six different categories: agricultural products, automotive, chemicals, coal, industrial products and intermodal.

Agriculture is everything from fresh food and vegetables to grain, beans and wheat. Because of the drought in the central part of the country, that business is off. It's off for a couple reasons.

The greatest reason is prices have gotten so high that U.S. farmers are not competitive globally and are exporting far less agricultural products out than a year ago.

Another thing that has been in the news a lot is the Corps of Engineers is lowering the water levels in the Mississippi River. An awful lot of commodities are moved along the river, but what we are seeing are barges going at only half capacity so that they won't run aground.

The auto business is another big part of our company. We move about 75 percent of the finished vehicles west of the Mississippi. With the current run rate on new vehicle sales at about 15 million units, that's pretty good business.

Chemicals are next in our portfolio, and that is everything from plastics to industrial chemicals to things like fertilizer. That business has been strong, helped by low natural gas prices, which is the feedstock for chemicals. We are seeing a lot of companies that, two or three years ago, told us there was no future for chemical manufacturing in the United States expand. That is a business that has really grown, and it has grown by a huge percentage in the last year with oil by rail.

Q: Oil by rail?

Typically you drill an oil well, you put in a pipeline and it goes to a refinery. Well, with the rapid expansion of shale oil, the pipelines haven't been built so rail has had a chance to show that its service reliability is great enough. What the producers are finding is, by rail, you can divert where the oil goes based on pricing differentials. If you build a pipeline, it's going to stay in the pipeline.

We think that pipelines will still get built, it will still be part of the mix, but we're seeing the oil companies investing in tank cars and investing in loading facilities, and that is a good sign that they see rail as playing an important role in the future.

For example, the Keystone XL oil pipeline that's gotten all kinds of political heat over the last year or so is a 700,000-barrel-a-day pipeline and it will move at between two and three miles per hour. Well, that is only 10 trains for us. And 10 trains a day on our scale really is not much. It's become a great product for us, and it came at the right time because it has largely offset the decline in coal shipments, which is the fourth business.

Low natural gas prices means any utility that can convert from coal to gas has done so. You are seeing a lot of investment in coal slowing down and stopping, so coal shipments are off 15 to 18 percent and that's a big deal.

Q: What about industrial products?

That's our "all-other" category. It's everything from wind turbine blades to construction materials to roofing granules to lumber and appliances. It's hundreds and hundreds of products, and that business is holding strong.

We are seeing the construction related materials starting to pick up. We think the housing market is starting to come back. We are seeing it in lumber that moves from the Pacific Northwest down to the Southwest.

Q: What will the area around the new rail yard in Santa Teresa look like in 10 years?

I really think it is going to be extraordinarily different. When we built an intermodal facility south of Dallas six or seven years ago it was located in an undeveloped area. From the time that thing started until today, it has built up so that there really is no more land available.

In fact, we learned something from the Dallas experience. Now when we build new facilities, particularly intermodal facilities, we buy more land than we need so that, as opportunity comes into the neighborhood, we get to participate in it as well. We try not to overpromise jobs but every one of these facilities we've seen more jobs created than we anticipated.


Email El Paso Inc. reporter Robert Gray at rsgray@elpasoinc.com or call (915) 534-4422 ext. 105.

 

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