Union Pacific 'pauses' Brazos Yard construction

Union Pacific Railroad is "pausing" construction of its new $550 million Brazos Yard in Robertson County, Texas.

The Class I will shift remaining funds planned for the Brazos construction in 2019 to siding extensions on UP's Sunset route — which runs between Los Angeles and El Paso, Texas — and a block-swap yard in Santa Teresa, New Mexico, a move that will add to UP's network flexibility, Chief Operating Officer Jim Vena told analysts during a first-quarter 2019 earnings conference call last week.

When UP kicked off construction of the Brazos Yard project last year, it represented the largest capital investment in a single facility in the railroad's 156-year history. It was expected to have the capacity to switch up to 1,300 rail cars per day, making it one of the highest capacity yards on UP's network. The project was slated for completion in 2020.

But as UP moves forward with its Unified Plan 2020, it has adopted some of the tenets of precision scheduled railroading (PSR) operating model, which calls for running fewer but longer trains on tighter schedules to reduce operating costs.

"By putting more product on fewer trains, we have increased train length 7 percent the last couple of months and I expect to see continued improvement in this measure as the year progresses," Vena told analysts on the call.

UP executives did not offer a timeline for when the railroad would restart the Brazos facility's construction.

The railroad reported first-quarter operating income of $2 billion, up 1 percent; total revenue of $5.4 billion, down 2 percent; and operating expenses of $3.4 billion, down 3 percent. UP's operating ratio for the quarter was 63.6 percent, a 1 point improvement from Q1 2018.