(Rick Bowmer | The Associated Press) Union Pacific is seeing an uptick in shipments of chemicals, suggesting the manufacturing and export sectors of the economy are growing. The railroad is also moving pipe, construction materials and other goods to meet the expansion of oil and natural gas production in states such as North Dakota and Oklahoma.

At 150, Union Pacific’s future as wide open as its past

Bustling Utah operations a key part of railroad’s unconventional success.

By paul beebe

| The Salt Lake Tribune

First Published Jul 14 2012 10:05 pm • Last Updated Oct 30 2012 11:32 pm

It’s a toss-up. To measure the meaning of Union Pacific on its 150th birthday, you can look backward at its history or forward at the prospects for its future.

Either way, UP at its sesquicentennial is unconventional. Not many publicly traded companies have survived as long. And the ravages of time haven’t diminished its prowess. UP’s best-ever financial year was 2011. In a difficult economy, the company earned $3.3 billion on revenue that jumped 15 percent from 2010. Not surprisingly, its stock price has never been higher.

"It’s an interesting combination of the past and the future," said Dan Snow, a professor of supply chain management at Brigham Young University’s business school.

With close to 32,000 miles of track in 23 states built up over 15 decades, "I think if you were trying to start [UP] today, I don’t think you could do it if you had to. I don’t think there’s any economic way," Snow said.

"The future? It’s kind of wide open and interesting. People look at an old technology like rail and say it’s done," replaced by speedier trucks and aircraft, Snow said. But "if in the future what becomes more important to us as a society, if we shift our focus away from speed and more toward efficiency or environmental impact, then trains and Union Pacific will look really cool."

The beginning » The Omaha, Neb.-based transportation company’s story began on July 1, 1862, when President Abraham Lincoln signed the Pacific Railway Act, a measure "to aid in the Construction of a Railroad and Telegraph Line from the Missouri River to the Pacific Ocean."

The law "authorized and empowered [Union Pacific Railroad Co.] to lay out, locate, construct, furnish, maintain and enjoy a continuous railroad and telegraph," from the 100th Meridian to the western edge of the Nevada Territory on a 400-foot-wide right-of-way. Any land claimed by Indian tribes inside the swath would be "extinguish(ed) as rapidly as possible."

Grading work for the rail bed began in Omaha in March 1864. Four years and nine months later, on Dec. 10, 1868, construction was completed to Wahsatch, Utah Territory, at the top of Echo Canyon a few miles west of Evanston, in Wyoming Territory. Under terms of a contract signed by Brigham Young with UP, Mormon crews extended the line to Ogden in March 1869. Two months later, on May 10, construction was completed to Promontory Summit, where the line joined another line that Central Pacific Railroad had built eastward from Sacramento, Calif.

"All of a sudden, you could haul your family across the country in four or five days, when it used to take four months in a covered wagon," Gene Sessions, a Weber State University history professor, said.

The first transcontinental railroad had an immediate effect. Suddenly, Western goods could be shipped to the East, while products made in the East could be shipped as far as California. Sessions said the line also changed what people did for a living. Farmers, for instance, could grow cash crops that could be sold anywhere in the country where rail was available. No longer did they need to rely on local markets.

"It had the effect of shrinking the size of the country dramatically. Most people have no concept of the magic it created," Sessions said.

More for Utah » More than a century later, UP is not finished with Utah. Over the years, it has built 1,250 miles of track in the state. Payroll for 1,400 employees averaged $87,000 last year. When the company incorporated in 1969, it made Utah its legal home for reasons that seem lost to history. Every year in May, UP holds its annual stockholders meeting in Salt Lake City.

In 2006, UP opened a $90 million intermodal hub on the northwest side of Salt Lake City that in a year can lift as many as 250,000 shipping containers onto double-stack rail cars. The company also operates a center at its 2100 South rail yard where new vehicles are unloaded and distributed to dealers in the Intermountain West.

"We ship over 75 percent of all the finished vehicles west of the Mississippi. Three out of four cars at the stoplight came on Union Pacific," said Dan Harbeke, director of public affairs in Utah.

Hauling new cars and trucks is the smallest component of UP’s six business groups. The automotive segment provided 8 percent of the $18.5 billion in freight revenue generated by the groups. By contrast, energy — primarily coal — accounted for 22 percent. Next in importance were intermodal shipments, farm products, industrial products and chemicals.

With the exception of North and South Dakota, UP’s 32,000-mile rail network extends into every state west of Chicago. Although it doesn’t run trains into Canada or Mexico, UP is fast becoming a global transportation company. Harbeke said 40 percent of UP’s shipments begin or end outside the United States.

Future of railroads » Arguably the best evidence that railroads are still vital is the behavior of investors. Since fuel prices began their sharp rise in 2004, UP’s stock has quadrupled in value, to the $115 range. In late 2009, billionaire investor Warren Buffett announced that his Berkshire Hathaway investment firm would spend $44 billion to buy UP rival Burlington Northern Santa Fe Corp, or BNSF. It was the largest purchase in Berkshire’s history.

"It’s an all-in wager on the economic future of the United States," Buffett said at the time. "I love these bets."

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