Union Pacific 2007 Annual Report Download - page 11

7
Environmental Regulation – We are subject to extensive federal and state environmental statutes and
regulations pertaining to public health and the environment. The statutes and regulations are administered
and monitored by the Environmental Protection Agency (EPA) and by various state environmental agencies.
The primary laws affecting our operations are the Resource Conservation and Recovery Act, regulating the
management and disposal of solid and hazardous wastes; the Comprehensive Environmental Response,
Compensation, and Liability Act, regulating the cleanup of contaminated properties; the Clean Air Act,
regulating air emissions; and the Clean Water Act, regulating waste water discharges.
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 – Critical
Accounting Policies – Environmental, Item 7.
Item 1A. Risk Factors
The information set forth in this Item 1A should be read in conjunction with the rest of the information
included in this report, including Item 7, Management’s Discussion and Analysis of Financial Condition and
Results of Operations, and Item 8, Financial Statements and Supplementary Data.
We Are Subject to Significant Governmental Regulation – We are subject to governmental regulation by a
significant number of federal, state, and local authorities covering a variety of health, safety, labor,
environmental (as discussed below), and other matters. Many laws and regulations require us to obtain and
maintain various licenses, permits, and other authorizations, and we cannot guarantee that we will continue to
be able to do so. Our failure to comply with applicable laws and regulations could have a material adverse
effect on us. Governments may change the legislative or regulatory frameworks within which we operate
without providing us any recourse to address any adverse effects on our business, including, without
limitation, regulatory determinations or rules regarding dispute resolution, business relationships with other
railroads, calculation of our cost of capital or other inputs relevant to determining or estimating our revenue
adequacy, and costs and expenses. Increased regulation of the rail industry likely would restrict our ability to
determine prices for certain rail services, affect our ability to control traffic volume, and reduce capital
spending on our rail network, facilities and equipment, resulting in a material adverse effect on our results of
operations, financial condition, and liquidity. Additionally, one or more consolidations of Class I railroads
could lead to increased regulation of the rail industry.
We May Be Affected by General Economic Conditions – Prolonged negative changes in domestic and global
economic conditions affecting the producers and consumers of the commodities we carry may have a material
adverse effect on our results of operations, financial condition, and liquidity.
We May Be Subject to Various Claims and Lawsuits That Could Result in Significant Expenditures – The nature
of our business exposes us to the potential for various claims and litigation related to labor and employment,
personal injury, property damage, environmental liability, and other matters. Any material changes to
litigation trends or a catastrophic rail accident or series of accidents involving any or all of property damage,
personal injury, and environmental liability could have a material adverse effect on our results of operations,
financial condition, and liquidity.
We Are Required to Transport Hazardous Materials – Federal laws require railroads, including us, to transport
hazardous materials regardless of risk or potential exposure of loss. Any rail accident or other incident or
accident on our network, at our facilities, or at the facilities of our customers involving the release of
hazardous materials, including toxic inhalation hazard (or TIH) materials such as certain chlorine
compounds, could involve significant costs and claims for personal injury, property damage, and
environmental penalties and remediation, which could have a material adverse effect on our results of
operations, financial condition, and liquidity.
We Must Manage Both Significant Demand for Our Services and Network Capacity – We may experience
network difficulties, including congestion and reduced velocity, which may compromise the level of service we