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The BNSF deal apparently worked out. In Berkshire’s latest annual report, Buffett said the railroad delivered record operating income in 2011, even though the economy struggled.
Fuel prices are unlikely to fall anytime soon, which works to UP’s advantage. BYU’s Snow said rail transportation is three times more fuel-efficient than trucks. It’s also cleaner. Airplanes are even more inefficient in terms of fuel consumption and greenhouse gas emissions. Rail’s chief drawback is speed; trucks and airplanes move things faster, he said.
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Union Pacific by the numbers*
Territory » 23 states
Miles of track » 31,900
Employees » 44,800
Annual payroll » $4 billion
Capital spending (2011) » $3.2 billion
Locomotives » 8,200
* All figures are for 2011
Source: Union Pacific
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Union Pacific in Utah*
Miles of track » 1,250
Employees » 1,400
Annual payroll » $121.8 million
Capital spending » $62.2 million
Rail cars with loads that originated in state » 302,913
Rail cars with loads that terminated in state » 149,065
* All figures are for 2011
Source: Union Pacific
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Trucking companies aren’t so sure that railroad companies will siphon off much of their business. For one thing, rail companies will have to expand the size of their track networks in order to increase the amount of freight they can haul — a task that would be physically difficult to pull off, as well as hugely expensive. What’s more, customers are still willing to pay for the speed and convenience that trucks offer, said Dan England, chairman of C.R. England, the Salt Lake City-based trucking giant.
"There are a lot of efficiences that go along with railroads, although in terms of service, they are not quite where trucking is. But the biggest constraint is their capacity. They’ve got only so much rail line, and they can’t expand their market share very much," England said.
But, Snow said, old technologies often experience a last gasp that in some cases keeps them alive and beats back newer technologies. Manufacturers have figured out ways of squeezing more performance out of silicon semiconductor chips, which has slowed the shift to faster, but more expensive, gallium arsenide chips.
"I think rail is a lot like this. It’s been around forever. I think you’ll see rail has an inherent advantage that won’t go away quickly," Snow said, adding that UP and other rail companies will use their advantage to develop innovations that chip away at the speed and flexibility advantages that trucks and airplanes have.
And that, presumably, will enhance the appeal of rail further.
"My prediction will be that they continue to increase their already substantial efficiency advantage. These old technologies have a way of fighting back against new ones in novel ways that you can’t predict," Snow said.
Twitter: @sltribpaul
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Union Pacific, a brief history
1862 » President Abraham Lincoln signs the UP charter
1869 » UP and Central Pacific join rails at Promontory Summit, Utah
1890 » UP emerges as the largest U.S. rail carrier
1897 » E.H. Harriman purchases UP for $10 million
1934 » “City of Portland” sets a coast-to-coast record of 56 hours and 55 minutes
1971 » Rail Passenger Service Act transfers most passengers to Amtrak, allowing railroads to focus on freight service
1996, 2002 » UP carries Olympic torches
2000 » Rails once spiked by hand are now laid with new technology
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