Union Pacific 2002 Annual Report Download - page 55

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As of December 31, 2002 and 2001, the Corporation had a liability of $189 million and $172 million, respectively, accrued
for future environmental costs, of which $72 million and $71 million were recorded in current liabilities as accrued casualty
costs. The liability includes future costs for remediation and restoration of sites, as well as for 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 Corporation
believes that it has adequately accrued for its ultimate share of costs at sites subject to joint and several liability. However,
the ultimate liability for remediation is difficult to determine because of the number of potentially responsible parties
involved, 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/or the speculative nature of
remediation costs. The Corporation expects to pay out the majority of the December 31, 2002, environmental liability over
the next five years, funded by cash generated from operations.
Remediation of identified sites previously used in operations, used by tenants or contaminated by former owners
required cash spending of $68 million in 2002, $63 million in 2001, and $62 million in 2000. The Corporation is also
engaged in reducing emissions, spills and migration of hazardous materials, and spent cash of $6 million, $5 million and $8
million in 2002, 2001, and 2000, respectively, for control and prevention. In 2003, the Corporation anticipates spending $65
million for remediation and $9 million for control and prevention. The impact of current obligations is not expected to have
a material adverse effect on the liquidity of the Corporation.
Labor Matters
Rail – Approximately 87% of the Railroad’s nearly 47,000 employees are represented by 14 major rail unions. National
negotiations under the Railway Labor Act to revise the national labor agreements for all crafts began in late 1999. In May 2001,
the Brotherhood of Maintenance of Way Employees (BMWE) ratified a five-year agreement, which included provisions for
an annual wage increase (based on the consumer price index) and progressive health and welfare cost sharing. In August 2002,
the carriers reached a five year agreement with the United Transportation Union (UTU) for annual wage increases as follows:
4.0% July 2002, 2.5% July 2003, and 3.0% July 2004. The agreement also established a process for resolving the health and
welfare cost sharing issue through arbitration and also provided for the operation of remote control locomotives by trainmen.
The Brotherhood of Locomotive Engineers (BLE) challenged the remote control feature of the UTU Agreement and a recent
arbitration decision held that operation of remote control by UTU members in terminals does not violate the BLE agreement.
In November 2002, the International Brotherhood of Boilermakers and Blacksmiths (IBB) reached a five year agreement
following the UTU wage pattern. In January 2003, an arbitration award was rendered establishing wage increases and health
and welfare employee cost sharing for the Transportation Communications International Union (TCU). Contract discussions
with the remaining unions are either in negotiation or mediation. Also during 2002, the National Mediation Board ruled
against the UTU on its petition for a single operating craft on the Kansas City Southern Railroad. The BLE is now working
on a possible merger with the International Brotherhood of Teamsters (Teamsters).
Trucking – During 2002, OTC continued to oppose the efforts of the Teamsters to unionize OTC service centers. On
February 11, 2002, the United States Court of Appeals for the Fourth Circuit, sitting as a full panel, refused to enforce four
bargaining orders issued by the National Labor Relations Board (NLRB) that would have required OTC to bargain with the
Teamsters, even though the Teamsters lost secret ballot elections. Subsequently, the NLRB moved for a judgment against
itself to reverse the seven other bargaining orders it had issued, and the Fourth Circuit entered that judgment. On October
11, 2002, the NLRB’s General Counsel dismissed a charge the Teamsters had filed in August 2001 alleging that OTC had been
bargaining in bad faith. OTC has not reached any collective bargaining agreement with the Teamsters. On October 24, 2002,
the Teamsters ended the national strike they had called against OTC three years earlier.
The Teamsters’ eight-year campaign to organize OTC’s service centers has become almost entirely dormant, and since
October 2002, the Teamsters have lost rights to represent 41% of the approximately 2,100 employees they had organized. The
Teamsters had become the bargaining representative of the employees at 26 of OTC’s 170 service centers, but the employees
at 17 of these locations recently have voted to decertify the Teamsters, and the NLRB has officially approved the votes in 14
of those locations. Decertification petitions are pending at four other service centers. Only a single representation petition
currently is pending, but due to strike violence charges pending against the Teamsters, the NLRB has blocked the Teamsters’
efforts to precipitate an election. In all, the Teamsters currently represent approximately 10% of OTC’s 12,534 employees.
Employees at two Motor Cargo service centers located in North Salt Lake, Utah and Reno, Nevada, representing
approximately 11% of Motor Cargo’s total work force at 33 service centers, are covered by two separate collective bargaining