American Shipper

UP backs out of Baja California port project

More oily waste problems at U.S. companies

   Union Pacific Railroad Wednesday revealed that it does not plan to bid on a rail line project connecting the proposed Punta Colonet port in Baja California with the American rail system.

   The decision, based on an increasingly bleak picture for the rail project's cost competitiveness, could represent a major obstacle for the entire port project.

   The Omaha, Neb.-based railroad, along with partner Hutchison Port Holdings, had been considered front runners to build and operate the proposed Mexican port as well as the 200-plus-mile long rail line that would run from Mexico, through California, and connect to U.S. mainlines.

   'If the project goes ahead, and the government of Mexico issues (a competitive bidding process), Union Pacific and Hutchison will not bid on it together,' Robert W. Turner, senior vice president for UP corporate relations told the San Diego Tribune.

   While no comment was immediately forthcoming from Hutchison, it is possible that the Chinese port conglomerate could partner with another rail line to complete the project.

   The Colonet port project is being touted as an alternative destination for mainly Chinese imports as Southern California ports deal with capacity and infrastructure issues. Evolving versions of the Punta Colonet port plan have ranged in cost from as much a $1 billion to $9 billion, and varied in scale from smaller than the Port of San Diego to as large as the Port of Los Angeles and Port of Long Beach combined. A Mexican rival to the dominant U.S. West Coast Southern California ports has raised concerns in the American shipping industry about a major shift of cargo south of the U.S./Mexican border.

   A key component of any Colonet port project would be a connection to U.S. rail lines. The current plan calls for a company in Mexico to construct the longer portion of a new line that would run from Punta Colonet to the U.S. border. The U.S. portion of the proposed new line would need up to 30 miles of track in a largely agricultural area of Yuma County near the intersection of the California, Arizona, and Mexico borders.

   Christopher D. Peterson, Union Pacific director of government affairs, told the Yuma Sun that the railroad's decision carries so much weight that it could essentially end the Colonet project.

   'This almost certainly closed the door on a route in Yuma County,' Peterson told the newspaper. 'We understand that our decision to suspend our effort means it's almost certain — if not certain — that a few weeks from now there will be no opportunity to build a route.'

   While UP's decision may end plans for the firm to build the line on its own, the railroad line held open the possibility of a partnership.

   'If others bid and the project goes forward and someone approaches UP about being involved, we would look at it,' Turner told the San Diego Tribune.

   The Mexican government is expected to solicit proposals for Punta Colonet this spring and to pick successful bidders later this year, with port operations starting in 2012.