Commentary – UP Narrowly Avoided Disaster

Written by Rick Paterson, Managing Director, Loop Capital Markets
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Union Pacific

When we set the stage for Tropical Storm Hilary, it was a good exercise in knowing what to look for and what to worry about. Specifically, we expected some track washouts but didn’t worry about it, because they’re relatively quickly repaired within a few days, and it’s primarily bridge outages on key arteries that represent a threat to broader network health.

BNSF made it through the storm in good shape, stating after the storm on late 8/21 that “we were able to protect our infrastructure and operations. BNSF intermodal facilities in the Greater Los Angeles area are fully operational, and there are no impacts at the Ports of Los Angeles and Long Beach.”

Union Pacific wasn’t so lucky, with service interrupted at three locations:

The top two blue markers represent track washouts, which were quickly fixed and returned to service. The marker on the bottom right, however, represents … you guessed it … a bridge:

The location of the bridge is West Palm Springs, on the Yuma Subdivision, and there are actually two separate structures. This route is almost all double track, and in this location the parallel tracks each have their own independent span over a washout area (lower image):

We’re not talking about the Golden Gate here; these are two fairly small and unremarkable structures. Regardless, they’re critical, and the good news is that UP was able to bring one of them back in service on the morning of Aug. 23. It’s the other that’s the problem, with an estimated timeframe to do the bridge repair and corresponding track work of about two weeks. UP has a history of beating its own public projections, so 10 days might be a better bet, which puts it around Sept. 2. Regardless, we now have a bottleneck on a key route.

How key? It’s on Union Pacific’s Sunset Route, which runs between Los Angeles and El Paso. It’s one of the railroad’s highest volume routes and its primary transcontinental route between Southern California and the Midwest, including Chicago. Chicago traffic splits off northeast at El Paso while Texas traffic continues east.

Here’s another way to get a sense for the bullet UP just dodged, which is the railroad’s density map. The thicker the line, with more traffic runs over the route. The red X shows the location of the partial blockage on the Sunset….now imagine if both bridges were down for two weeks and the route was completely severed.

So that’s what happened. UP is still going to struggle with the bottleneck and equipment and crew imbalances over the next few weeks, and there’s always the risk of unpredictable domino effects, but whatever happens, realize that it could have been much worse. We basically came within inches of another meltdown.

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