"Union Pacific executives said seizing land on the U.S. side of the border through eminent domain would be a last resort."
Goal is to boost flow of Asian goods to U.S.
March 21, 2007
By Diane Lindquist
San Diego Union-Tibune
Union Pacific executives say they're eager to build a rail line to carry containers of Asian goods into the U.S. heartland from a planned mega seaport at Baja California's Punta Colonet.
But they won't reveal details of their plans until Mexico begins the competitive bidding process to develop the project.
Because the Mexican government plans to offer the rail project through an auction, the process of building the 200-mile-plus rail line differs from other developments undertaken by North America's largest railroad, UP executives told The San Diego Union-Tribune in an interview yesterday.
“We're waiting for the bid rules to see what the formal parameters are for the project,” said Christopher D. Peterson, a Union Pacific government affairs and corporate relations director.
Although Mexican officials have not indicated when they'll move forward with the auction, Union Pacific is laying the groundwork for what it hopes will be the winning bid. The auction is expected to attract several bidders.
Essential to the company's involvement, said Robert W. Turner, senior vice president for corporate relations, is that the port and rail projects be linked in the bidding.
“The port without a rail line is valueless, and a rail line without a port is pointless,” he said. “Linking the combination into one project is probably the biggest go/no-go situation.”
Omaha, Neb.-based Union Pacific had partnered with Hutchison Port Holdings, a Hong Kong firm that is the world's largest port developer, on the project.
The goal is for the Colonet port, planned 150 miles south of San Diego, to take some pressure off the Long Beach and Los Angeles ports, which are growing saturated with containerized cargo shipments from Asia.
“At some point . . . there's going to be a lack of capacity for a lot of the freight that drives the U.S. economy,” Turner said.
The rail company is adding a second track to its Sunset line, which runs from Los Angeles through Yuma, Ariz., to El Paso, Texas. But it was looking for additional capacity when Hutchison approached it with the proposal to partner on the Colonet project.
“On the physical side, it is possible to build a port. And, while it would be a real engineering challenge to get over the mountains (in Baja California), it, in fact, can be done,” Turner said.
Union Pacific's current efforts are focused on securing a rail connection between the new line that would be built from Baja California to the company's Sunset line. The plans have upset many residents of Yuma, which is bisected by at least one of UP's proposed routes.
“We think we'll be able to identify a route and come to an agreement with the landowners,” said Peterson, who has held three public meetings in Yuma to discuss the project.
At least one landowner has given Union Pacific an option on property, but the executives would not discuss terms of the agreement.
“It would be very disappointing if we got the bid if we found the land wasn't available,” Turner said. “So we've been trying to keep our options open while the political process moves forward in the Mexican federal and state governments.”
The executives said seizing land on the U.S. side of the border through eminent domain would be a last resort.
“It's something very rarely used and something we try not to use,” Peterson said.
He wouldn't rule out that the process would be used or that it would be employed to secure the 180-mile right of way needed in Mexico running from Colonet to the border.
“It's a different dynamic because of the concession process,” Peterson said.
To enter the bidding, the executives said, they will need the approval of Union Pacific's board of directors.
With the rail industry standard that building a line costs a couple of million dollars a mile, plus the number of tunnels and bridges that will be needed on a Colonet-Yuma line, the project is certain to prove costly.
“The economics is that you have to factor in the cost of sending back boxes empty,” Turner said. “But if the concession is structured properly it can be a very attractive bid.”
He declined to be specific. “We've not done a formal economic analysis that I'm going to share with you,” Turner said.
He expressed confidence that Union Pacific's directors will go forward with the Colonet project. The company is spending $3.2 billion on capital projects this year.
“We have a very large capital budget,” Turner said. “We've got a very healthy balance sheet.”
Diane Lindquist: (619) 293-1812; firstname.lastname@example.org
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