Union Pacific 2002 Annual Report Download - page 32

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cleanup or further assessment. Among other things, CERCLA authorizes the federal government either to clean up such
facilities itself or to order persons responsible for the situation to do so. The act created a multi-billion dollar fund to be
used by the federal government to pay for such cleanup efforts. In the event the federal government pays for such cleanup,
it will seek reimbursement from private parties upon which CERCLA imposes liability.
CERCLA imposes strict liability on the owners and operators of facilities in which hazardous waste and other hazardous
substances are deposited or from which they are released or are likely to be released into the environment. It also imposes
strict liability on the generators of such waste and the transporters of the waste who select the disposal or treatment sites.
Liability may include cleanup costs incurred by third persons and damage to publicly owned natural resources. The
Corporation is subject to potential liability under CERCLA as an owner or operator of facilities at which hazardous
substances have been disposed of or as a generator or a transporter of hazardous substances disposed of at other locations.
Some states have enacted, and other states are considering enacting, legislation similar to CERCLA. Certain provisions of
these acts are more stringent than CERCLA. States that have passed such legislation are currently active in designating more
facilities as requiring cleanup and further assessment.
The operations of the Corporation are subject to the requirements of the CAA. The 1990 amendments to the CAA include
a provision under Title V requiring that certain facilities obtain operating permits. EPA regulations require all states to develop
federally-approvable permit programs. Affected facilities must submit air operating permit applications to the respective states
within one year of the EPA’s approval of the state programs. Certain of the Corporation’s facilities may be required to obtain
such permits. In addition, in December 1997, the EPA issued final regulations which require that certain purchased and
remanufactured locomotives meet stringent emissions criteria. While the cost of meeting these requirements may be
significant, expenditures are not expected to materially affect the Corporation’s financial condition or results of operations.
The operations of the Corporation are also subject to other laws protecting the environment, including permit
requirements for wastewater discharges pursuant to the National Pollutant Discharge Elimination System and storm-water
runoff regulations under the Federal Water Pollution Control Act.
Information concerning environmental claims and contingencies and estimated remediation costs is set forth in
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Matters – Environmental
Costs, Item 7, and in note 10 to the Consolidated Financial Statements, Item 8.
RISK FACTORS
Competition – The Corporation is subject to price and service competition from other railroads, which operate parallel
routes in many of UPRR’s traffic corridors, in addition to operations providing other modes of transportation, including
motor carriers, ships, barges and pipelines. Competition is based primarily upon the rate charged and the transit time
required, as well as the quality and reliability of the service provided. While the Railroad must build or acquire and maintain
its rail system, trucks and barges are able to use public rights-of-way maintained by public entities. Any future improvements
or expenditures materially increasing the quality of these alternative modes of transportation in the locations in which the
Railroad operates, or legislation granting materially greater latitude for motor carriers with respect to size or weight
limitations, could have a material adverse effect on the results of operations, financial condition and liquidity.
Governmental Regulation – The Corporation is subject to governmental regulation by a significant number of federal, state
and local regulatory authorities with respect to both the railroad and trucking operations and a variety of health, safety,
labor, environmental and other matters. Failure to comply with applicable laws and regulations could have a material
adverse effect on the financial statements. Regulatory authorities may change the legislative framework within which the
Corporation operates without providing the Corporation any recourse for any adverse effects that the change may have on
the business. Also, some of the regulations require the Corporation to obtain and maintain various licenses, permits and
other authorizations, and the Corporation cannot assure that it will continue to be able to do so.
Environmental Laws and Regulations – The Corporation’s operations are subject to extensive federal, state and local
environmental laws and regulations concerning, among other things, emissions to the air, discharges to water and the
handling, storage, transportation and disposal of waste and other materials and cleanup of hazardous material or petroleum
releases. Environmental liability can extend to previously owned or operated properties, leased properties and properties
owned by third parties, as well as to properties currently owned and used. Environmental liabilities may also arise from
claims asserted by adjacent landowners or other third parties in toxic tort litigation. The Corporation may be subject to