Union Pacific 2006 Annual Report Download - page 17

calcium oxide (lime). The criminal case was dismissed in the last quarter of 2003 and was subsequently refiled as a
civil action by several counties in the San Joaquin County Superior Court. The refiled suit sought civil penalties
against the Railroad in connection with the release of lime from an unidentified rail car between Chowchilla and
Sacramento, California, on December 27, 2001, and another incident in which lime leaked from a rail car between
Chowchilla and Stockton, California, on February 21, 2002. The suit contended that regulatory violations
occurred by virtue of the Railroad’s alleged failure to timely report the release of a “hazardous material,” its
alleged disposal of hazardous waste, and the alleged release of material into the waters of the State of California.
On September 20, 2004, the Court dismissed the suit with prejudice. The State of California appealed this
decision. On August 2, 2006, the Court of Appeals issued its decision, reversing the judgment and remanding the
case for further proceedings consistent with its opinion. The Court of Appeals held that the State of California’s
claims against the Railroad for civil penalties were preempted by the Hazardous Materials Transportation Act
(HMTA), with the exception of those claims that were based upon the Railroad’s alleged failure to timely report
the releases of calcium oxide to state and local authorities. With respect to these claims, the Court held that while
they were not preempted by the HMTA on their face, it remained possible that those claims might ultimately be
preempted once the trial court developed a record. The Railroad and the State of California requested that the
California Supreme Court review the decision of the Court of Appeals. The California Supreme Court denied
review, and the case has been remanded to the Superior Court.
As we reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, the Illinois
Attorney General’s office filed an Agreed Order and Complaint and a Complaint for Injunctive and Other Relief
on October 7, 2004, in the Circuit Court for the Twentieth Judicial Circuit (St. Clair County) against The Alton &
Southern Railway Company, a wholly-owned subsidiary of the Railroad, as a result of a collision and derailment
on September 21, 2004. The State of Illinois seeks to enjoin The Alton & Southern Railway Company from further
violations, as well as a monetary penalty. The amount of the proposed penalty is uncertain but could exceed
$100,000.
As we reported in our Annual Report on Form 10-K for 2005, we received information in 2001 indicating
EPA considered the Railroad a potentially responsible party for the Omaha Lead Site. The Omaha Lead Site
consists of approximately 12,800 acres of residential property in the eastern part of Omaha, Nebraska, allegedly
impacted by air emissions from two former lead smelters/refineries. One refinery was operated by ASARCO. EPA
identified the Railroad as a potentially responsible party because more than 60 years ago the Railroad owned land
that was leased to ASARCO. The Railroad disputes both the legal and technical base for EPA’s allegations. It has
nonetheless engaged in extensive negotiations with EPA. These negotiations have reached an apparent impasse.
EPA issued a Unilateral Administrative Order with an effective date of December 16, 2005, directing the Railroad
to implement an interim remedy at the site at an estimated cost of $50 million. Failure to comply with the order
without just cause could subject the Railroad to penalties of up to $32,500 per day and triple EPA’s costs in
performing the work. The Railroad believes it has just cause not to comply with the order, but it offered to
perform some of the work specified in the order as a compromise. EPA rejected this offer. The Railroad will
vigorously contest liability and the imposition of any penalties.
As we reported in our Annual Report on Form 10-K for 2005, the Illinois Attorney General’s office filed a
complaint in the Circuit Court for the Twenty-First Judicial Circuit (St. Clair County) seeking injunctive relief
and civil penalties against the Railroad relating to a collision between UPRR and Norfolk Southern Railway
Company (NS) trains near Momence, Illinois, on November 24, 2005. The collision derailed approximately five
locomotives and 30 railcars. Two of the UPRR locomotives and two of the NS locomotives caught fire and four of
the locomotives released approximately 16,000 gallons of diesel fuel. Other cars carrying food products derailed
and released an unknown amount of product. The Railroad promptly responded and remediation is ongoing. The
State of Illinois seeks a permanent injunction against the Railroad ordering UPRR to continue remediation. The
State of Illinois seeks to enjoin UPRR from further violations and a monetary penalty. The amount of the
proposed penalty is uncertain.
As we reported in our Annual Report on Form 10-K for 2005, the Illinois Attorney General’s office filed a
complaint in the Circuit Court for the Twentieth Judicial Circuit (St. Clair County) for injunctive and other relief
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