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CC 2015-04-14_11a Union Pacific Arroyo GrandeThe Ties That Bind a Nation: Union Pacific Thank you for the opportunity to visit with you about one of the oldest companies in America - Union Pacific. We have a rich history that is tied to the building of the West when Union Pacific was critical to the young nation’s growth and development. 1 Building America for more than 150 Years 2 Imagine the moment, the country divided North against South. President Abraham Lincoln signs the Pacific Railway Act of 1862, establishing Union Pacific Railroad Company . The race was on – Union Pacific moving west and Central Pacific heading east. Building with their backs and bare hands, more than 20,000 men labored in the most extreme conditions and terrain. With one mighty arc, they drove the spike that anchored a vision – connect the nation. Water stops marked the route every 25 miles – the distance a steam locomotive could travel before needing to refill. And each station held the opportunity for a new community to grow, for immigrant families to settle and for commerce to flourish. Cheyenne, Wyoming ,and Reno, Nevada, are just a couple of examples of towns whose roots are tied to the original route. Despite river and gorge, mountain and valley, Union Pacific blazed new routes to success. Not only for our past great-great grandfathers, but for our future great-great granddaughters. Through innovation and tenacity, we will continue to meet the needs of our customers, shareholders and the communities in which we live and work. 2013 Fast Facts Revenue: $22.0 B Route Miles: 32,000 in 23 States Employees: 46,500 Annual Payroll: $4.3 B Customers: 10,000 Locomotives: 8,300 This is a snapshot of Union Pacific today. We operate in 23 states, mainly west of the Mississippi River and serve, or run through more than 7,000 communities. As the saying goes, we are a 32,000-mile factory without a roof. This means blizzards, floods, tornadoes and hurricanes are part of our life at the railroad. Our employees are out there in the bitter cold of the Sierra Nevada and the brutal heat of the Mojave Desert. It’s certainly not your average desk job. That’s one of the reasons why we are extremely proud of our 46,500 employees. 3 Strength of a Unique Franchise Port Access Border Crossings You might not think of a U.S. railroad as an international company, but 30-40 percent of our freight originates or terminates outside of the U.S. Click We link every major West Coast and Gulf Coast port. This was critical the last couple of years with the increases in grain exports due to the declining U.S. dollar and changing diets in Asia. Click We connect with Canada’s rail systems, and are the only railroad serving all six major gateways to Mexico. And we interchange traffic with Eastern railroads through our gateways at Chicago, St. Louis, Memphis and New Orleans. 4 Union Pacific Hauls . . . 5 The work our employees have been doing every day for the past 150 years affects the lives of nearly everyone in this country. Think about this for a minute. When you woke up this morning and turned on the lights, the electricity you used probably came from coal or wind turbines that moved on one of our trains. Before you could use your computer or television to get the news this morning, it probably moved on one of our trains. The automobile you rode in to come here today, probably rode on a Union Pacific train before you ever laid eyes on it. The food you ate for lunch, most likely was on a train, before it was on the table. Many people don’t realize the variety of products we haul. 2013 Business Mix by Freight Revenue $20.7 Billion 6 It is this balanced diversity from our six business groups that gives our company strength. Our product mix gives us stability during the ebbs and flows of various markets. It allows us to capitalize on growing markets, producing strong financial returns for our shareholders. And it protects us when certain market segments struggle. Our business mix is a true asset to our company and allows us to meet the nation’s ever-growing needs. Why do we haul crude oil? It’s our job Union Pacific is a common carrier, a role that is defined by the federal government. If our customer delivers crude oil to us in conformity with the U.S. Department of Transportation requirements, UP must transport it. Why do we haul crude oil? Because it’s our job. Union Pacific is a common carrier, a role that is mandated by the federal government’s common carrier law. That means that if our customer delivers crude oil to us in conformity with the U.S. Department of Transportation requirements, UP must transport the crude oil. We take this legal and societal responsibility seriously, and we strive to fulfill our duty with maximum safety and efficiency. 7 Rails Are One of America’s Safest Industries Injuries and Illnesses per 100 Full-time Employees, 2011 Source: U.S. Bureau of Labor Statistics for 2011 data. 8 8 Today, railroads are one of our nation’s safest industries. From 1980 to 2012, the rail employee injury, train derailments and crossing accidents rates have all declined more than 80 percent. According to U.S. Bureau of Labor Statistics data, railroads have lower employee injury rates than other modes of transportation like trucks, barges and airlines. Actually, we are safer than most other major industry groups – even grocery and retail stores. In addition, U.S. railroads have employee injury rates well below those of most major European railroads. *In millions. Includes cash capital, leases and other non-cash capital. Strengthening the Franchise ~$4.0 Billion 2014 Estimate* 9 We make capital investments to enhance safety, improve customer service, increase productivity and add capacity to handle our customers’ growth. Keeping what amounts to a privately owned steel highway in top condition is an expensive proposition. After oil and gas companies, railroads top the charts as the most capital-intensive businesses today. For 2014, our capital plan totals a record $4.0 billion. Almost half of that is replacement spending to harden the infrastructure, making the network more safe and resilient. To accomplish that, on average, we replace almost 3 miles of track and 10,000 ties a day. On top of that to enhance service, growth and productivity, we’ll spend upwards of $1.5 billion on capacity, commercial facilities, 261 new locomotives and equipment. We plan also to spend about $400 million this year to comply with the government mandate to install Positive Train Control, which is likely to cost $2 billion before its all done. Today’s Track Design & Construction Foundation Drainage Concrete ties Continuous welded rail 10 . UPRR Track Inspection Program 43 – Full time dedicated track inspectors working within California Training – 5 day FRA track safety standards Monthly evaluations by managers Annual training and on the job training - track maintenance field handbook 17 – Managers of Track Maintenance in California 480 – track maintenance employees in California Tracks inspected with “hy-rail” pickups more than twice per week Visual inspections prevent derailments Broken rails Track surface conditions We perform special inspections During storms After earthquakes 11 Safety Technology: Ultrasound to Auto Pilot UP Track Evaluation Car 12 12 To reduce derailments for our customers, Union Pacific employs state-of-the art technology to monitor our trains and track. This is in addition to good old-fashioned visual inspections by our experienced track safety experts. We have more than 4,000 defect devices to detect everything from hot wheel bearings and items dragging from the train to shifted goods. We use lasers and ultrasound to find rail imperfections, and we track the acoustic vibration on wheels to forecast potential failures before they happen. We perform a comprehensive analysis of every rail car moving on our system within 5 minutes of a trackside sensor. This equates to more than 20 million evaluations per day. We continue to pilot new technology onboard our locomotives and on our system. For example, the ultrasonic wheel defect detector is the world’s first facility that uses ultrasound technology to inspect wheels on a moving train. Developed by UP, this system checks about 500,000 wheels annually, finding on average 100 wheel defects that would have gone undetected each year. How is Union Pacific using technology to enhance safety? We are constantly improving our systems lasers & ultrasound identify rail imperfections acoustic vibration tracking on wheels forecast many potential failures before they happen real-time analysis distributed power technology makes trains less prone to derailments trainings on simulators help to better prepare workers of every rail car moving on our system each time it passes a trackside sensor equals 20 million car evaluations per day [This will be customized for each state] How is Union Pacific using technology to enhance safety? We are constantly innovating and improving our systems. We have 34,000 miles of fiber optics and 700 microwave sites, as well as a large software systems shop. Our systemwide technology provides real-time data enabling us to meet our strategic goals – safety, service and efficiency – faster. We have more than 6,800 trackside scanners/detectors on our network. Some notable examples of technology additions include: Using lasers and ultrasound to identify rail imperfections; Forecasting potential failures before they happen by tracking the acoustic vibration on wheels; Performing a real-time analysis of every rail car moving on our system each time it passes a trackside sensor, equaling 20 million car evaluations per day; Placing distributed power units in the middle and/or end of trains makes them less prone to derailments and facilitates more even braking to reduce wheel and track wear; and Conducting trainings on simulators helps workers become more comfortable with work processes before they set foot in a yard. In California, specifically, we have a vigorous track inspection program with 43 full-time dedicated track inspectors to look for broken rails and track surface conditions. Our tracks are inspected with “hy-rail” pickups more than twice a week, and we perform special inspections during storms and after earthquakes. The track inspection program is supplemented with a comprehensive track evaluation system: We have 2 state-of-the-art track geometry cars that test main lines in California at least twice per year. They measures track geometry parameters according to Federal Railroad Administration standards and UPRR policies -Track Gage, Track Cross level, Track profile, Track Alignment. They also provide: Rail Profile measurements of curve, clearances in tunnels and bridges, and video of track. We also use a Rail detector system in California, which is key technology to prevent broken rail derailments. UPRR tests main line rail in California every 3 to 6 months; Test frequency is based on tonnage, at a tougher standard than Federal Railroad Administration requirements. We have 4 dedicated full time rail detectors in California, with ultrasonic (sound waves) that search internally for rail flows. Our cars in CA are the latest technology, 2 years old or less, and average 7 mph. 13 UPRR Rail Detector System Key technology to prevent broken rail derailments UPRR tests main line rail in California every 3 to 6 months Test frequency is based on tonnage Test frequency is more than FRA requirement We dedicate 4 rail detectors full time in California Ultrasonic (sound wave) searches internally for rail flows Cars in California are the latest technology 2 years old or less Car averages 7 mph. 14 UPRR Bridge Inspection Program Ensure structural integrity of bridges, culverts, and tunnels. Comply with FRA CFR 49 Part 237 Bridge Safety Standards All bridges are inspected between 1 and 3 times per year 15 UPRR Bridge Inspection Program Structures Assessment Team 6 – 2 person - full time teams working within California 1 snooper truck (hyrail access truck) on Western Region 66 bridge maintenance employees in California 2 Managers of Bridge Maintenance in California 1 Director of Bridge Maintenance in California All report to Assistant Chief Engineer Structures 16 UPRR Signal Inspection Program 218 – Signal Maintenance employees in California 10 Managers of Signal Maintenance 23 Signal maintenance foreman 4 Signal inspectors 20 Electronic technicians 161 Signal Maintainers (50% of time spent testing) 16 Electricians What they do Maintain the wayside signal system Maintain and inspect crossing gates Signal System Governs movement of trains Provides broken rail protection 17 Positive Train Control (PTC) – Signal Construction 18 Hazardous Materials Management’s Mission Prevention – Prevent releases of hazardous materials in transportation. Preparedness - Develop internal and external assets for response and recovery. Response – Emergency response to releases to protect health minimize impact and stabilize the incident.  Recovery – Progress incident to normal operations and to the point where closure work can begin. Pictures: clockwise starting upper right Tank Car Exception Alameda Corridor – Award Presentation Golf Teas in Locomotive Site Glass Recovery Operations UP hazmat responders (13) 19 Preparedness Response Plans HMERP Community-Right-to-Know OPA-90 Training Public Responders Employees Private/Industry Drills/Exercises Commodity Flow Data In addition to RR101 training---Pueblo, Longview… 20 Single Car Lookup © 2014 Railinc. All rights reserved. 21 View Response Guide © 2014 Railinc. All rights reserved. 22 Armour Yellow Outside Green Inside UP Genset Yard Locomotive One train takes up to 300 trucks off congested highways Rail is almost four times more fuel efficient than trucks UP can haul one ton of freight 471 miles on one gallon of diesel fuel Rail transportation is three times cleaner than trucks on a ton-mile basis 23 There are additional benefits railroads bring to the communities beyond the goods we haul. According to the 2012Urban Mobility Report published by the Texas Transportation Institute, highway congestion in the United States costs us $121 billion in wasted travel time (5.5 billion hours) and wasted fuel (2.9 billion gallons) per year . . . not to mention the emissions impact of idling cars and trucks. So what does that mean to the average commuter? It means 38 hours of wasted time and 19 gallons of wasted fuel each year. The good news for those who fight the rush hour is that a single UP intermodal train can take up to 300 trucks off our highways. Union Pacific can move one ton of freight 471 miles per gallon of fuel. I’m sure we all wish our vehicles got that type of gas mileage. And in terms of emissions, the EPA estimates that for every ton-mile, a typical truck emits roughly three times more oxides of nitrogen and particulates than a locomotive does. Union Pacific is aggressively innovating to become even more environmentally friendly. Our employees understand that protecting the environment is part of every job, and they are creating world-class energy conservation techniques to move even more freight with less fuel and emissions.