(The following article by Phil Pitchford was posted on the Press-Enterprise website on January 28.)
RIVERSIDE, Calif. — One of the region’s two main railroads, Union Pacific Corp., has nearly dug itself out from the mudslides that put a crimp in its effort to move goods from Southern California to the rest of the country.
But Union Pacific continues to struggle with capacity issues that threaten its ability to satisfy its customers and could contribute to a slowdown in the Inland area’s burgeoning logistics industry, analysts said.
The railroad is closely monitoring the effect capacity problems could have on shippers, a company official said. But he said there is no data that suggests they are taking business elsewhere.
“We don’t have a real feel for diversion yet, but certainly they have expressed their concerns,” Union Pacific spokesman John Bromley said.
Both Union Pacific and its main competitor, Burlington, Northern, Santa Fe, face potential difficulties in handling an increasingly large amount of cargo entering the United States through the ports of Los Angeles and Long Beach.
“We’ve signed all these trade agreements, and companies have realized they can manufacture in Asia and move it back here cheaper (than make it here),” Inland economist John Husing said. “But that assumes it can get back into the country.”
Burlington Northern is doing a better job now, but neither can rest, Husing said. Forecasts call for the number of containers entering through local ports to increase from 9.5 million in 2000 to 17.1 million in 2010. That figure is expected to jump to 30.3 million by 2025, according to the Southern California Association of Governments.
“Both of them have a problem that is a piece of a much bigger problem: the overwhelming amount of goods coming into the ports,” Husing said. “Each piece of this puzzle has some major problems.”
Many of those containers will enter the country on super-sized ships that dwarf the existing fleets of most shipping companies. The new, much larger, ships are so big they cannot use the Panama Canal, leaving the only a few options – Los Angeles, Long Beach or Seattle/Tacoma – for docking along the West Coast.
“If we cannot get it out of this market, they’re going to start taking it up there,” Husing said. “They will get the jobs up there instead of us getting them here.”
How the industry adjusts to these larger ships will contribute to whether the logistics business flourishes and replaces manufacturing as a way for blue-collar workers to move up the ladder in the Inland area, Husing said.
“For the economy of this area, this whole set of factors is hugely important,” Husing said. “We’re talking about the ability of blue-collar workers to have upwardly-mobile jobs.”
Bromley, the Union Pacific spokesman, said the company saw five rail lines affected by the recent two-week rains; three are back in service.
One, which runs north from Los Angeles to the Santa Barbara area was expected to open recently to limited freight traffic. The other, which runs through the Cajon Pass to Las Vegas, also is expected to reopen soon on a limited basis, Bromley said. It likely will be late February before all lines are fully operational, Bromley said.
Wednesday’s Metrolink derailment in Glendale that killed at least 10 people and damaged a Union Pacific maintenance train is not expected to affect the railroad’s cargo operations, according to Kathryn Blackwell, UP spokeswoman.
To combat capacity problems, the railroad is adding a second set of tracks on its prized lime that runs through Colton, Beaumont and onto to Arizona before linking the railroad to the Midwest. The railroad added about 50 miles of track last year, and will add another 100 miles this year, Bromley said.
“That’s our most important route, especially for goods moving from the ports,” he said. The railroad anticipates added cargo flowing through the ports and hopes to at least match the added demand. .”
The process of adding track, however, is expensive and time-consuming, said Jack Kyser, chief economist for the Los Angeles County Economic Development Agency. Railroads do not get federal subsidies like freeways and instead have to pay taxes on their track improvements.
“Every time they build new track, it comes out of their pocket, so it will take several years for them to double-track that line,” Kyser said. “And eventually they will have to triple-track it.”
The railroad is somewhat hampered by its acquisition of a former competitor, Southern Pacific, which has required about $15 billion in upgrades, Kyser said. Southern Pacific was held together with “scotch tape and hope” for years before Union Pacific bought it, he said.
Union Pacific’s main competitor, Burlington Northern Santa Fe, did a better job of anticipating the growth and, seeing Union Pacific’s problems, limited some of the business it accepted to prevent capacity problems, Kyser said.
About 90 percent of Burlington Northern’s line from Los Angeles to Chicago is double-tracked, compared to only about 30 percent for Union Pacific, Kyser said. That’s good for Burlington Northern because a shortage of long-haul truck drivers and the high cost of diesel fuel is pushing more freight to the railroads.
“Most of the 20th century was tough for the railroads,” Kyser said. “But in the 21st century, it’s becomes a real growth industry.”
Railroad officials are optimistic.
“We are putting a lot of money to meet that demand,” Bromley said. “I am confident we are going to get a return on that investment.”