Appendices To: The UP/SP Merger: An Assessment of the Impacts on the State of Texas Page: 1

                                
B-1

APPENDIX B
DRAFT REPORT
Prepared By Hoy A. Richards
Richards & Associates
At our Task Force meeting in Austin we were each asked to identify specific areas
of interest regarding the proposed merger of the Union Pacific and Southern Pacific
Railroads. At that time I agreed to address the following topics:
o     Safety
o     Mexico Border Crossings
o     Ports of Corpus Christi & Brownsville
o     Impact on shortlines
o     Intermodal Terminals
The following is my initial response to those topics.
Introduction
The "railway" is the only segment of the Texas transportation system not funded
with public monies. Highways, waterways and airways receive significant financial
assistance from federal, state and local governmental sources in the construction
maintenance and operation of this portion of the State's transportation infrastructure.
Public ownership of transportation infrastructure provides an opportunity for federal, state
and local governmental planners to determine the location, routes and structure of the
system. Since railroads operating in Texas are privately owned and financed, decisions
related to the location, routes and structure of the rail system are based upon return-on-
investment.
In recent years the Texas rail industry has been in a continual state of transition.
Mergers, consolidations, acquisitions and abandonments have brought about both
geographical and operational changes in the system. The merger of the AT&SF with the
Burlington Northern is the most recent example of major reorganization of rail operations
in Texas. The merger of these two large western railroads was just a continuation of what
has occurred in the past two decades. For example the "First" Texas State Rail Plan,
published in March of 1978 listed 33 railroads operating in the state. Of these, eleven
were Class I, the remainder were either Class II or Class III. The Texas State-Wide
Transportation Plan of 1994 listed forty four railroads operating in the state. Only four of
the carriers are classified as Class I. Still, as reported in the State-Wide Plan, Texas ranks
first in the nation in total rail miles and second in the number of railroad employees.
Chemicals are the major commodities originated in Texas and account for almost one-
third of all rail tonnage originating in Texas. Coal is currently the highest volume
commodity terminating in Texas. Farm products originating in the state account for less
than ten percent of the originating rail tonnage. However, farm products terminating in