Union Pacific 2009 Annual Report Download - page 91

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claims to be filed each year, average settlement costs, and insurance coverage issues, could cause the
actual costs and insurance recoveries to be higher or lower than the projected amounts. Estimates also
may vary in the future if strategies, activities, and outcomes of asbestos litigation materially change;
federal and state laws governing asbestos litigation increase or decrease the probability or amount of
compensation of claimants; and there are material changes with respect to payments made to claimants by
other defendants.
Environmental – We are subject to federal, state, and local environmental laws and regulations. We
identified 307 sites at which we are or may be liable for remediation costs associated with alleged
contamination or for violations of environmental requirements. This includes 32 sites that are the subject
of actions taken by the U.S. government, 17 of which are currently on the Superfund National Priorities
List. Certain federal legislation imposes joint and several liability for the remediation of identified sites;
consequently, our ultimate environmental liability may include costs relating to activities of other parties,
in addition to costs relating to our own activities at each site.
When we identify an environmental issue with respect to property owned, leased, or otherwise used in our
business, we and our consultants perform environmental assessments on the property. We expense the
cost of the assessments as incurred. We accrue the cost of remediation where our obligation is probable
and we can reasonably estimate such costs. We do not discount our environmental liabilities when the
timing of the anticipated cash payments is not fixed or readily determinable. At December 31, 2009,
approximately 12% of our environmental liability was discounted at 3.4%, while approximately 13% of
our environmental liability was discounted at 3.5% at December 31, 2008. Our environmental liability
activity was as follows:
Millions of Dollars 2009 2008 2007
Beginning balance $ 209 $ 209 $ 210
Accruals 49 46 41
Payments (41) (46) (42)
Ending balance at December 31 $ 217 $ 209 $ 209
Current portion, ending balance at December 31 $ 82 $ 58 $ 63
The liability includes future costs for remediation and restoration of sites, as well as ongoing monitoring
costs, but excludes any anticipated recoveries from third parties. Cost estimates are based on information
available for each site, financial viability of other potentially responsible parties, and existing technology,
laws, and regulations. The ultimate liability for remediation is difficult to determine because of the
number of potentially responsible parties, site-specific cost sharing arrangements with other potentially
responsible parties, the degree of contamination by various wastes, the scarcity and quality of volumetric
data related to many of the sites, and the speculative nature of remediation costs. Estimates of liability
may vary over time due to changes in federal, state, and local laws governing environmental remediation.
Current obligations are not expected to have a material adverse effect on our consolidated results of
operations, financial condition, or liquidity.
Guarantees – At December 31, 2009, we were contingently liable for $416 million in guarantees. We
have recorded a liability of $3 million and $4 million for the fair value of these obligations as of
December 31, 2009 and 2008, respectively. We entered into these contingent guarantees in the normal
course of business, and they include guaranteed obligations related to our headquarters building,
equipment financings, and affiliated operations. The final guarantee expires in 2022. We are not aware of
any existing event of default that would require us to satisfy these guarantees. We do not expect that these
guarantees will have a material adverse effect on our consolidated financial condition, results of
operations, or liquidity.